AIG record losses drag Dow to 12-year low

US markets slid in early trading on Monday after AIG announced the largest ever corporate loss of over $60bn.

The huge losses caused the main Wall Street index to open below 7,000 points for the first time since 1997. Shortly after 2.30pm, the Dow Jones had shed 133.25 points (1.89%) to 6,929.68.

Despite its troubles, AIG's shares rose 14% in early trading as the Federal Reserve announced a new bail-out plan.

However, regulators warned the problems at AIG posed a system risk for the entire financial system, and bank shares were hit by the news.

AIG's loss of $61.7bn during 2008, announced today, is the largest annual slump in corporate history. As a result of the disastrous figures, the world's largest insurer will receive a further $30bn in US government aid.

It has already received $150bn in bail-out cash, the most of any US company, and the latest rescue plan brings the US government's investment to $180bn.

AIG will give up stakes in two of its international unit in exchange for reduced debt and lower interest payments on money owed to the Federal Reserve.

Elsewhere, the Bank of America dropped 9.87% and JPMorgan Chase dipped 5.47%. However, Citigroup share rose slightly, up 2.67% to $1.54 per share.

After a bad start the FTSE100 failed to revive as the day wore on, and the main index was down more than 132 points (3.46%) to 3,697.58, a six-year low.

HSBC shares tumbled 17.91% to 403p after the bank announced it will seek £12bn from shareholders, while Lloyds Banking Group shares were also hit, down 10.46%, but troubled Royal Bank of Scotland climbed 2.59% to 23.8p.

Investors started selling shares in land owners, with British Land down 11.8% and Land Securities down 8.56% over fears the recession will lead to reduced rents and empty commercial premises.

Contact: John Bakie, Tel: 020 7484 9805, e-mail: John.Bakie@incisivemedia.com