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Subprime Debt May cost Insurer $2.3 billion U.S.
AIG's Lack of Disclosure on U.S. Mortgage Fiasco Prompts Analyst Reports
Bloomberg News
August 2, 2007

American International Group Inc., the world's biggest insurer, may be sitting on losses of as much as $2.3 billion (U.S.) from its holdings of securities linked to subprime mortgages, analysts say.

In a "worst-case scenario," AIG may lose that amount from its holdings of securities linked to the mortgages given to borrowers with poor or limited credit, A.G. Edwards Inc. analysts of St. Louis said yesterday. Analysts at Goldman Sachs Group Inc. issued their own report estimating losses of as much as $1.4 billion.

New York-based AIG, which hasn't formally disclosed its holdings, owned about $33 billion of securities linked to U.S. subprime mortgages at the end of March, spokesperson Chris Winans said in a July 23 statement to Bloomberg News.

Shares of New York-based AIG have tumbled 10 per cent since the end of June on subprime concerns. That drop, and AIG's lack of disclosure, prompted the analysts to release their estimates of possible losses.

Meanwhile, two Bear Stearns Cos. hedge funds heavily exposed to the flagging mortgage industry have filed for bankruptcy protection.

The late-Tuesday filings for the High-Grade Structured Credit Strategies Master Fund Ltd. and High-Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd. came two weeks after Bear Stearns told investors one was essentially worthless and the other had lost more than 90 per cent of its value.

Yesterday, Bear Stearns was slapped with an arbitration claim for allegedly misleading investors about its exposure to subprime mortgages.

Lawyer Jacob Zamansky, acting on behalf of a 73-year-old investor, said numerous investors had contacted him. "We expect to file claims in excess of $100 million in losses," he said.

AIG shares closed down 39 cents at $64.57 on the New York Stock Exchange yesterday.

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