American International Group
issued an explanation of how
made the single largest quarterly loss in history.
reported a $62 billion loss in the fourth quarter -- on its way to a $99.3 billion loss for the year - that appears almost understandable.
details significant items (losses) totaling $64.1 billion. These are the top 10 significant items:
$1.2 billion in foreign-exchange and other realized capital losses. Which is about the same amount that: a.) North Carolina said it would need in the next two years to keep the state's health plan from collapsing; and b.)
said it would cost in fees if the carmaker went into bankruptcy.
$2.2 billion in derivatives losses on economic hedges not qualifying for hedge accounting. That's the same amount that: a.)
Fifth Third Bancorp
lost in 2008; and b.) the amount New Jersey will receive in additional Medicaid aid.
$2.8 billion in unrealized market valuation losses. That's the same amount that: a.) The Palestinians have asked to rebuild Gaza after the recent Israeli incursion; and b.) the amount that
spent on purchasing Lasik company
Advanced Medical Optics
$3.3 billion related to securities lending. That's the same amount that: a.) The Navy is paying for the first 14,500-ton Zumwalt DDG1000 class, next-generation multi-mission destroyer; and b.) Maryland expects to receive in the federal stimulus plan.
$3.4 billion in unrealized market valuation losses for setting up Maiden Lane III, one of the two companies that the Federal Reserve funded in November to separate AIG's risk from the group to ensure that it survived. That's the same amount as: the record-breaking value of the minerals that Alaska's mining industry produced in 2007; and b.) as
received in TARP money that it said it didn't need.
$3.6 billion in goodwill impairments. That's the same amount that: a.)
paid in bonuses the night before
Bank of America
took control; and b.) the increase that veterans groups have called for in health care.
$4.4 billion as a result of a credit valuation adjustment. That's the same amount that: a.) Vietnam has invested in overseas development; and b.) Medicare is owed in overpayments by insurance companies.
$6.9 billion paid in interest and amortization on credit lines provided by the Fed. That's the same amount that: Fannie Mae and Freddie Mac reportedly owned in foreclosed homes a year ago; and b.) the total sales of the world's largest diamond corporation, De Beers Group, in 2008.
$13 billion in other-than-temporary impairment charges (losses on the value of investment assets). That's the same amount as: Nigeria's bilateral trade with India in 2008; and b.) bailout funding the government provided to automakers in December.
$21 billion in lost tax benefits. That's the same amount as: a.) sales that the entire video gaming industry booked in 2008; b.) the estimated value of the Bollywood film industry; and c.) of course, the commercial paper credit line that AIG received last year when $1 billion still meant something.
Oh, there was another $2.3 billion in the "other" category, bringing the total to $64.1 billion.
This is how a $62 billion loss can appear reasonable.
Gavin Magor joined TheStreet.com Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.