August 7, 2008 / 2:16 PM / 11 years ago

AIG sees up to $8.5 billion in cash losses from CDS

A sign on an office building for AIG, American International Group, is pictured in Los Angeles, May 8, 2008. REUTERS/Fred Prouser

NEW YORK (Reuters) - American International Group Inc (AIG.N) said on Thursday potential cash losses on its portfolio of credit default swaps tied to risky mortgage debt could be as high as $8.5 billion, much more than previously disclosed.

Under two revised ways of assessing risk, losses were estimated at $5 billion to $8.5 billion, finance executive Steven Bensinger said.

The estimates are much higher than the $2.4 billion worst-case scenario disclosed by AIG, the world’s largest insurance company, in the first quarter.

Losses on CDS, which guarantee underlying debt in the event of default, drove AIG to a second-quarter net loss of $5.36 billion.

On Wednesday the company disclosed its third consecutive quarterly loss greater than $5 billion. It has recorded nearly $25 billion in unrealized losses from writing down the value of its CDS portfolio, held by a financial products unit.

Reporting by Lilla Zuill; editing by John Wallace

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below