AIG Raising $20 Billion

Shares of American International Group(AIG Quote - Cramer on AIG - Stock Picks) were slipping Tuesday morning, after the troubled insurer said it was raising more capital than it originally intended and selling businesses.

Speaking at a conference in London, CEO Martin Sullivan told investors that AIG planned to sell non-core assets and raise $20 billion through the sale of common stock, convertible and hybrid securities, far outpacing the $12.5 billion it originally had planned. The moves to shore up its balance sheet come on the heels of a $7.8 billion first-quarter loss tied to mortgage-related securities and credit derivatives.

Despite the loss, AIG increased its dividend, while suspending the share buyback program. In response, former CEO Maurice "Hank" Greenberg severely criticized the record losses and capital raising plans in a letter filed with the Securities and Exchange Commission.

Following the letter, Sullivan was under pressure to react and explain why no additional asset sales were planned, while shareholder value is diluted due to the capital raising tactics. Sullivan noted in the presentation that the effort to raise capital was to fortify the balance sheet and to withstand additional significant potential market volatility.

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Chris Winans, a spokesman at AIG, said strong demand allowed the company to raise more than it had planned. He said most of the sales had already taken place, including the sale of IPC in 2006. Another deal, to sell Allied World Assurance, has not yet closed.

AIG shares were falling 2.1% to $38.14 in recent trading.

Equity analysts did not react positively to the initial capital plan. David Anthony of Argus Research recently wrote the $12.5 billion plan "shows the severity of AIG's financial issues." He said Tuesday the higher amount did not change his opinion and kept a hold rating on the stock.

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