American International Group, Inc., reported net premiums written decreased to $12.08 billion compared to $12.11 billion for the same quarter of 2007. First quarter net loss was $7.81 billion or $3.09 per diluted share compared with net income of $4.13 billion or $1.58 per share during the year-ago period.

Book value at the end of the quarter declined to $31.93 per share from $39.64 per share. AIG (AIG: chart) stock in the morning trading lost nearly 10% of its value and traded near 10-year low near $40.

AIG announced a plan to raise approximately $12.5 billion in capital to strengthen its balance sheet through a common stock offering and an equity-linked offering for an aggregate of approximately $7.5 billion.

Included in the first quarter 2008 net loss and adjusted net loss was a pre-tax charge of approximately $9.11 billion or $5.92 billion after tax. First quarter 2008 results included pre-tax net realized capital losses of $6.09 billion or $3.96 billion after tax primarily from other-than-temporary impairment charges in AIG's investment portfolio.

At March 31, 2008, AIG's consolidated assets were $1.051 trillion and shareholders' equity was $79.70 billion.

AIG President and chief executive officer Martin J Sullivan said, “While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations. Current market conditions also contributed to a significant decline in partnership income compared to a record level in the first quarter of 2007, as well as to declines in mutual fund income.”

General insurance operating income declined 46%

General Insurance first quarter 2008 operating income before net realized capital losses declined 45.9% to $1.61 billion compared to the first quarter of 2007. First quarter 2008 General Insurance net investment income declined 22.9% as increased interest and dividend income was more than offset by lower partnership and mutual fund investment income compared to the first quarter of 2007.

AIG commercial Insurance first quarter 2008 operating income was $958 million, a decline of 48.3% compared to the first quarter of 2007 on the decline in underwriting profit and net investment income. First quarter 2008 net premiums written declined 14.9% to $5.11 billion compared to the first quarter of 2007, primarily due to the return of $339 million in premiums related to loss sensitive policies and declines in workers' compensation premiums due to reductions in statutory rates and increased competition.

Personal Lines first quarter 2008 operating income was $7 million compared to $105 million in the first quarter of 2007. The loss ratio increased 8.53 points compared to the first quarter of 2007. Net premiums written increased 4.8% on continued growth in the private client group, while direct and agency auto premiums were virtually unchanged.

United Guaranty Corporation (UGC) which offers insurance on first and second liens businesses reported an operating loss of $352 million in the first quarter of 2008, compared to operating income of $7 million in the first quarter of 2007. First quarter 2008 net premiums written increased 14.3% compared to the first quarter of 2007.

General insurance business in the foreign markets operating income declined 6.4% to $818 million compared to the first quarter of 2007. The first quarter 2008 combined ratio increased to 81.94 from 79.22 in the first quarter of 2007. Net premiums written increased 10.5% in original currency compared to the first quarter of 2007. As new commercial lines business in Europe, accident & health production in multiple regions and growth in all lines in Latin America offset declining premiums in Lloyd's syndicate Ascot as well as in aviation and auto lines.

At March 31, 2008, General Insurance net loss and loss adjustment reserves totaled $70.51 billion, a $1.22 billion increase from December 31, 2007.

Life insurance and retirement services premiums rise

Life Insurance & Retirement Services first quarter 2008 operating income before net realized capital gains was $2.54 billion, essentially unchanged compared to the first quarter of 2007. Higher sales in variable universal life sales lifted premium sales in the quarter by 6.6%.

First quarter 2008 domestic life insurance operating income was $418 million, a 17.1% increase compared to the first quarter of 2007. Domestic retirement services operating income in the first quarter of 2008 was $663 million, essentially unchanged compared to the first quarter of 2007.

Foreign life insurance & retirement Services first quarter 2008 operating income was $1.46 billion, a 4.1% decline compared to the first quarter of 2007.

Premiums, deposits and other considerations increased 21.5 percent compared to the first quarter of 2007. Sales of investment-oriented life products remained strong in the first quarter of 2008, especially single premium production in Japan, Asia and the U.K.

Largest quarterly loss in the financial services unit

In the first quarter of 2008, Financial Services reported an $8.55 billion operating loss, before net realized capital gains or losses and the effect of hedging activities, compared to operating income of $444 million in the first quarter of 2007.