Tuesday, February 12, 2008

AIG Discloses Weakness in Derivative Accounting

Another company which Fairfax has bought credit protection against has visited the confessional:
American International Group Inc., the world's largest insurer by assets, said auditors found a ``material weakness'' in how the company values its credit- default swap portfolio. The stock fell the most in 20 years.

The contracts declined by about $4.88 billion in October and November, according to data in a regulatory filing today. The drop was confirmed by company spokesman Chris Winans. AIG had said in December that the value of the ``super senior credit derivatives'' fell by about $1.1 billion in those two months. The stock retreated 11 percent to $45.16 as of 10:19 a.m. in New York Stock Exchange composite trading...

And from another article:

Credit-default swaps tied to AIG's bonds soared 37 basis points to a record 207 basis points, according to CMA Datavision.
For those unfamiliar with Fairfax's CDS portfolio, see the previous post.

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