[B]AIG in freefallShares of American International Group fall 31% as investors worry it may not have sufficient funds to cover losses. [/B]
CHARLOTTE, N.C. (AP) -- Shares of American International Group Inc. declined further Friday over continuing concerns about whether the world's largest insurer has adequate capital reserves.
Also dogging the stock were worries over the soundness of Lehman Brothers Holdings Inc. (LEH, Fortune 500) as financial stocks also saw declines.
AIG (AIG, Fortune 500) plummeted $5.41, or 31%, to $12.14 by the time the market closed, its lowest point in 15 years.
Worries about AIG's financial position intensified after being hit hard by deterioration in the credit markets amid worries that complex, structured investments it insures will increasingly default.
Citi Investment Research analyst Joshua Shanker on Friday lowered his price target on the insurer to $25.50 from $40 to reflect current market conditions.
"Marketplace fear of financial institution collapse is rampant," Shanker wrote in a note to clients. "This is causing severe anxiety over the financial condition of AIG, whose stock is under pressure." The stock has lost nearly 50% of its value in the past week alone.
Credit-ratings agency Standard & Poor's Ratings Services put ratings of AIG on CreditWatch with negative implications, saying the action follows a "significant" decline in AIG's share price and an increase in credit spreads on the company's debt.
Investors remain concerned about whether AIG has adequate capital reserves. Some on Wall Street have called for AIG, which operates a wide range of businesses across 130 countries, to break up its substantial assets, either through sales or by creating third-party investment vehicles.
Over the past three quarters, AIG has lost about $25 billion in the value of credit default swaps - or default protection for bondholders - and about $15 billion on other investments.
Executives say they believe actual, realized losses will end up being much smaller.
Since the company reported earnings on Aug. 6, the stock has fallen 58%.
"We believe that AIG has sufficient capital and liquidity to meet its policy obligations and potential collateral requirements, which are significantly greater than the expected cash losses on the mortgage-related assets," said S&P credit analyst Rodney Clark. "However, additional market value losses will place some strain on the company's resources."
S&P said that after discussions with executives, the agency could affirm the current ratings or lower them by one to three notches.
The New York-based insurer is currently rated "AA-."
Late Thursday, attorneys for a Louisiana pension fund reached a $115 million settlement in a shareholder lawsuit against former executives of the New York-based insurance giant.
The settlement was reached just days before a trial was to begin in a lawsuit challenging hundreds of millions of dollars in commissions paid by AIG to C.V. Starr & Co., a privately held affiliate controlled by former AIG Chairman Maurice "Hank" Greenberg and other AIG directors.
First Published: September 12, 2008: 1:23 PM EDT
CHARLOTTE, N.C. (AP) -- Shares of American International Group Inc. declined further Friday over continuing concerns about whether the world's largest insurer has adequate capital reserves.
Also dogging the stock were worries over the soundness of Lehman Brothers Holdings Inc. (LEH, Fortune 500) as financial stocks also saw declines.
AIG (AIG, Fortune 500) plummeted $5.41, or 31%, to $12.14 by the time the market closed, its lowest point in 15 years.
Worries about AIG's financial position intensified after being hit hard by deterioration in the credit markets amid worries that complex, structured investments it insures will increasingly default.
Citi Investment Research analyst Joshua Shanker on Friday lowered his price target on the insurer to $25.50 from $40 to reflect current market conditions.
"Marketplace fear of financial institution collapse is rampant," Shanker wrote in a note to clients. "This is causing severe anxiety over the financial condition of AIG, whose stock is under pressure." The stock has lost nearly 50% of its value in the past week alone.
Credit-ratings agency Standard & Poor's Ratings Services put ratings of AIG on CreditWatch with negative implications, saying the action follows a "significant" decline in AIG's share price and an increase in credit spreads on the company's debt.
Investors remain concerned about whether AIG has adequate capital reserves. Some on Wall Street have called for AIG, which operates a wide range of businesses across 130 countries, to break up its substantial assets, either through sales or by creating third-party investment vehicles.
Over the past three quarters, AIG has lost about $25 billion in the value of credit default swaps - or default protection for bondholders - and about $15 billion on other investments.
Executives say they believe actual, realized losses will end up being much smaller.
Since the company reported earnings on Aug. 6, the stock has fallen 58%.
"We believe that AIG has sufficient capital and liquidity to meet its policy obligations and potential collateral requirements, which are significantly greater than the expected cash losses on the mortgage-related assets," said S&P credit analyst Rodney Clark. "However, additional market value losses will place some strain on the company's resources."
S&P said that after discussions with executives, the agency could affirm the current ratings or lower them by one to three notches.
The New York-based insurer is currently rated "AA-."
Late Thursday, attorneys for a Louisiana pension fund reached a $115 million settlement in a shareholder lawsuit against former executives of the New York-based insurance giant.
The settlement was reached just days before a trial was to begin in a lawsuit challenging hundreds of millions of dollars in commissions paid by AIG to C.V. Starr & Co., a privately held affiliate controlled by former AIG Chairman Maurice "Hank" Greenberg and other AIG directors.
First Published: September 12, 2008: 1:23 PM EDT
