AIG Woes Could Spell Trouble for CEO

AIG's stock is now down 40% from where it stood at the end of 2005. Shares were recently trading down $3.47, or 7.9%, to $40.67, after the company reported disastrous results for its first quarter on late Thursday. The company wrote down $9.1 billion of its credit derivatives portfolio and lost an additional $6.1 billion in its investment portfolio. The stock is.

The insurer reported an overall loss for the period of $7.81 billion, or $3.09 a share, compared with earnings of $4.13 billion, or $1.58 a share, during the year-ago period. AIG's results caught Wall Street off guard again. Analysts, on average, had expected a loss of 76 cents a share, according to consensus estimates reported by Thomson Reuters. In the lead-up to the report on Thursday, Standard & Poor's analyst Catherine Seifert slashed her earnings estimate for the Dow component to an operating loss of $1.10 a share, down from her previous estimate for earnings of $1.22 a share.

The losses sent major stock indices tumbling on Friday as investors contemplated more rounds of heavy losses for the financial sector amid the downturn in the U.S. housing market and its fallout in the credit markets. AIG's predicament also raised the specter of financial pain spreading into the insurance industry, where mortgage-related losses have so far been relegated to monoline insurers like MBIA (MBI Quote - Cramer on MBI - Stock Picks) and Ambac (ABK Quote - Cramer on ABK - Stock Picks) and reinsurance giants like Swiss Re.

Problems have been widespread in the financial industry, where big banks like Citigroup(C Quote - Cramer on C - Stock Picks), Merrill Lynch(MER Quote - Cramer on MER - Stock Picks) and UBS(UBS Quote - Cramer on UBS - Stock Picks) posted big losses on derivative writedowns in the first quarter.