investments, it says it has conducted an extensive analysis of the losses it could face, and thinks they will come in between $1.2 billion and $2.4 billion — not the $19.3 billion GAAP valuation loss.
But S&P said it believes AIG will "ultimately recover a meaningful portion of the 2007 unrealized market valuation loss, but the timing and the amount are difficult to estimate".
The bulk of the loss came from AIG's senior credit default swap portfolio which includes unrealized market valuation loss of $9.1 billion due to bad mortgage investments within the subprime realm.
It had to put money aside to cover valuation losses on its holdings in real estate, insurers like Meiji Yasuda Life Insurance and leisure facilities like golf courses.
The first is to warn the US to avoid policies that would lead to a crash of the dollar, and so inflict huge valuation losses on the dollar component – estimated at $1.2 trillionn – of China's foreign exchange reserves.
Loss at Daiwa Securities Daiwa Securities Group, Japan's No.2 brokerage firm, after Nomura, posted a bigger-than-expected quarterly loss Tuesday, its fourth in five quarters, as valuation losses on investments mounted after the earthquake last month, Reuters reported from Tokyo.
If the housing market deteriorates further, AIG could report additional valuation losses and impairment charges, Sullivan added.
One positive for banking stocks: if the Nikkei continues to rally, it could ease pressure on the banks to recognize valuation losses on their stock holdings.
"Although a certain degree of valuation losses have already been booked, substantial exposure remains" to equity holdings as well as credit derivatives among insurers, Okamoto noted.
Bloomberg has an interesting conundrum to discuss: why are investors still standing behind companies like Han's Laser Technology Industry Group Co., which have seen huge valuation losses over the slowdown in iPhone sales?
Surrendering earlier slight gains, Japan's Nikkei 225 shed 48.47, or 0.6%, to 7,825.51, even though the Bank of Japan said it would directly buy up to 1 trillion yen $11.1 billionn) worth of shares owned by financial institutions in an attempt to clean up balance sheets battered by valuation losses.
