AIG reports $7.8 billion loss

NEW YORK (CNNMoney.com) -- American International Group Inc., the nation's largest insurer, reported losses of nearly $7.81 billion for its fiscal first quarter and said it would seek to raise $12.5 billion in capital to shore up its balance sheet.

The company lost $3.09 per share, for the three months ended March 31. That's down 383% from the same period last year when AIG reported a net profit of $1.58 per share.

Excluding certain charges, AIG said it lost $3.56 billion, or $1.41 per share.

Analysts had expected a loss of 76 cents per share.

During the quarter, the insurer recorded an unrealized loss of $9.11 billion related to credit default swaps. And the company's investment portfolio, which includes securities backed by subprime mortgages, lost $6.09 billion.

Continued weakness in the housing market, the credit crunch and volatility in the stock market all contributed to AIG's poor first-quarter performance. But the company maintains that its core business is sound and that it is well positioned to withstand the difficult economic environment.

"The sizeable unrealized losses and decline in partnership income were among the key drivers impairing our overall net performance," said Martin Sullivan, AIG president and CEO.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," he added.

AIG also said it plans to raise $7.5 billion in a common stock offering and an equity-linked offering. The company also plans to offer an undisclosed amount of fixed-income securities at a later date.

"We believe that our businesses provide an attractive foundation for growth for AIG over the long-term," Sullivan said.

Separately, AIG's board of directors increased the company's dividend 10% to 22 cents per share.

The company will hold a conference call with investors to discuss its results on Friday morning at 8:30 a.m. EST.

Shares of AIG (AIG, Fortune 500), which is a Dow component, fell nearly 10% after hours. They were roughly 2% lower at the closing bell Thursday.