AIG Narrows Loss In First Quarter

American International Group yesterday announced a first-quarter loss of $4.35 billion, down from a $7.81 billion loss a year earlier -- a rare moment of good news for a company that has been beleaguered by poor performance and public outrage in recent months.

The insurance giant has posted red numbers for six straight quarters, but yesterday's announcement came with a silver lining: After being bailed out four times since September, during which time the government's total rescue package ballooned to more than $180 billion, AIG said it doesn't need additional taxpayer money. At least not for now.

"We are making good progress in stabilizing the business," chief executive Edward M. Liddy said in a conference call yesterday. "Today we are not announcing any new arrangement with the Federal Reserve or the U.S. Treasury. We are simply executing on what we've previously announced."

AIG owes the government about $45.5 billion that it has drawn from a $60 billion Federal Reserve credit line. Liddy has said repeatedly that the company intends to pay back "every penny."

AIG executives said the company's first-quarter losses were due largely to restructuring costs associated with winding down its Financial Products unit, whose faulty derivatives contracts had brought AIG to the brink of collapse, as well as costs connected to AIG's credit line with the Fed.

Yesterday's numbers were a far cry from March 2, when AIG reported a staggering $61.7 billion loss for the fourth quarter of 2008, the largest such loss in U.S. corporate history. The company lost nearly $100 billion that year.

That same day, the government announced yet another revised rescue package that involved a combination of cash investments, debt relief and guarantees from the Treasury Department and Fed. As part of the restructuring of its bailout, the government agreed to give AIG access to an additional $30 billion in public funds to stave off further downgrades of the company's credit rating. Even then, AIG and federal officials warned that the company might need even more taxpayer funds.

Since then, the company has managed to sell a handful of assets, including a private bank in Switzerland, auto insurance unit, equipment insurance arm and a Canadian life insurance company. The proceeds of those sales, according to company officials, are worth about $3.5 billion. That figure is nowhere close to repaying what AIG owes the government, but company officials nevertheless view it is a positive sign.

AIG also said last month that it plans to accelerate the separation of its global property and casualty insurance businesses from the parent company as part of an effort to restructure itself and rebrand its more profitable divisions. The new company, AIU holdings, would house some of AIG's most successful insurance operations and employ 44,000 people in scores of countries.

In the meantime, the company's stock price has more than quadrupled, from 42 cents a share on March 2 to $1.95 yesterday.

Even so, the past two months have posed serious obstacles for AIG. In mid-March, a public furor erupted when the company made more than $165 million in retention payments to employees at AIG Financial Products.

Ultimately, employees vowed to return more than $50 million, but not before the incident had dealt another blow to AIG's already battered reputation.

Staff writer Amit Paley contributed to this report.