AIG shares sink after warning of more losses

NEW YORK (CNNMoney.com) -- American International Group stock tumbled Monday after the insurance giant warned it may suffer further losses on its mortgage-related portfolio.

AIG (AIG, Fortune 500) shares plunged more than 11 percent in late morning trade on the New York Stock Exchange.

The company said it had learned of a "material weakness" in how it values its credit default swaps, which act as insurance against borrowers defaulting, related to collateralized debt obligations, or CDOs, according to a filing with the Securities and Exchange Commission.

CDOs are investment vehicles that buy and sell bonds that are sliced into so-called tranches with different levels of credit risk. They have become a source of many of the losses suffered by the financial services sector during the credit crisis.

AIG said it had not determined what impact the news would have on its annual results.

In December, AIG offered a similar warning, saying it lost somewhere between $1.05 billion to $1.15 billion during the fourth quarter as a result of the credit crisis.

And during the third quarter, the company reported it suffered an operating loss in its mortgage guaranty business, in part because of a writedown worth $352 million on its credit default swap portfolio.