The US government is to provide troubled US insurance giant AIG with another $30 billion to help it overcome the current crisis. The money will be in exchange for preferred shares in AIG.
'Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high,' said a joint statement from the Treasury Department and Federal Reserve.
The news came as AIG reported a $61.7 billion loss for the fourth quarter of 2008, the largest in US corporate history. This was the company's fifth consecutive quarterly loss, bringing the total loss over that period to more than $100 billion.
Investment losses, writedowns and restructuring charges were the main factors in AIG's Q4 loss, more than wiping out operating profits posted by its insurance subsidiaries.
AIG, the recipient of $150 billion in US taxpayer aid last year, yesterday reached a deal that revises its government bail-out to give the company more financial flexibility.
Under the deal, AIG will receive more lenient terms on existing financing and will be able to significantly pay down an outstanding credit facility in a swap that will give the US government a preferred-share stake in two life insurance businesses. AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.
A spokesperson for AIG in Ireland said today's announcement had no impact on its Irish insurance business, which was ring-fenced from the global parent company. The spokesperson said AIG Ireland was 'financially strong' and 'trading well'.
