An $11 billion unrealized market valuation loss on credit default swaps and $2.6 billion in realized investment losses contributed to a $5.3 billion net loss at American International Group Inc. during the fourth quarter of 2007.
AIG, New York, is reporting the loss for the latest quarter on $18 billion in revenue, compared with $3.4 billion in net income on $30 billion in revenue for the fourth quarter of 2006.
The credit default swap losses and the investment losses, which include losses on residential mortgage-backed securities, contributed to the drop in revenue as well as in net income, AIG says.
AIG's life and retirement services unit is reporting $1.3 billion in operating income on $15 billion in revenue and $25 billion in premiums, deposits and other considerations, compared with $2.6 billion in operating income on $13 billion in revenue and $21 billion in premiums, deposits and other considerations for the fourth quarter of 2006.
The total for premiums, deposits and other considerations increased 19% at the domestic life operations, to $848 million, and 15% for payout annuities, to $616 million.
The premiums, deposits and other considerations total fell 17% for group life and health products, to $209 million, and 42% for individual fixed and runoff annuities, to $69 million.
Domestic life operating income before net realized capital losses increased to $348 million, from $80 million, AIG says.
Life results were better than analysts at the securities arm of Bank of America Corp., Charlotte, N.C., were expecting, but AIG's "decision to suspend share repurchases in the near-term highlights the lack of excess capital at AIG," Bank of America analysts write in a comment on the results.
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