AIG: shares drop sharply on disappointing earnings.

(CercleFinance.com) - AIG shares are down 9% on Wednesday after the US insurer reported a greater-than-expected fourth-quarter net loss of three billion dollars.


After-tax, American International Group posted an operating loss of 2.72 dollars per share, significantly below the consensus of a 1.18 dollar loss per share.

"Although we were expecting a reserve charge after the company announced that it had entered into a reinsurance deal with Berkshire Hathaway on its legacy insurance reserves, the size of the reserve charge was larger than expected," Credit Suisse reacts today.

In all, fourth-quarter included a 5.6 billion dollar (or 3.56 dollars per share), impact from previous year adverse changes in reserves, while the broker was just expecting just a two billion dollar reserve deficiency.

Following these numbers, Credit Suisse maintains an "outperform" rating on the stock, with a target price of 75 dollars.

In its press release, AIG explains that it had to respond to emerging severity trends that are materially impacting the overall US casualty market.

Going forward, AIG says it expects to see the results from its improved underwriting platform and a reduced expense base.

AIG shares are currently down 9.3% at 60.6 dollars.

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