AIG shares fall almost 30 percent on mortgage worries (Reuters)
12.09.2008 21:45 Finance
The large global insurer, a component of the 30-stock Dow Jones Industrial Average index (.DJI), saw its shares fall as low as $12.40 in trading on the New York Stock Exchange, 29 percent off the prior's day close, before easing back to $12.53.
The stock has fallen more than 70 percent since it earlier this year warned investors that it could be hit by large, unrealized losses on credit default swaps it wrote to guarantee securities linked to subprime mortgages.
Since, the insurer has taken write-downs on these investments totaling about $25 billion, leaving it in the red by a cumulative $18 billion over the past three quarters.
"We attribute this (the share fall) to concerns about AIG's ability to shed its troubled mortgage-related assets and we expect the shares to remain volatile as investors await news from the company," said Standard & Poor's analyst Catherine Seifert, in a research note on Friday.
Citigroup analyst Joshua Shanker, in a research note, said he was cutting his target price for the stock to $25.50 a share from $40, citing marketplace fears over the insurer's financial condition.
AIG Chief Executive Robert Willumstad, who took over on June 15, is expected to unveil a turnaround plan for the company on September 25.
Some other financial services firms in their own straits from the credit crisis, such as Lehman Brothers Holdings Inc (LEH.N), have been forced to move more quickly than planned in disclosing plans to shareholders. So far, AIG has not moved up the date for its investor meeting.
But, the nosedive in the stock's value, now at a 13-year low, is increasing pressure on Willumstad to come up with a blueprint that will rid the company of its large mortgage exposure and shore up its balance sheet, potentially through asset sales.
(Reporting by Lilla Zuill, editing by Gerald E. McCormick)
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