American International Group
plunged more than 11% Monday, after the insurer said hits to its credit derivative portfolio last year could be worse than it initially anticipated.
AIG said the gross cumulative decline to the value of its portfolio of super senior credit default swaps, contracts that shift risk of credit default on securities like collateralized debt obligations to the buyer, was nearly $6 billion through Nov. 30, vs. the $1.6 billion it previously had disclosed. It said it is still analyzing data to determine the loss in value to the portfolio through Dec. 31.
The insurer's auditor, PricewaterhouseCoopers, blamed the heavier-than-expected losses on a "material weakness in
AIG's internal control." In a filing with the
Securities and Exchange Commission
, AIG said the methodology it uses to value the credit default swaps did not properly take into account ratings of the underlying securities when determining the risk of their default.
Shares recently were losing $5.84 to $44.84.
This article was written by a staff member of TheStreet.com.