American International Group lost $5.29 billion in its fourth-quarter late Thursday as the insurance company took a charge related to credit derivatives.

The net loss was $5.29 billion, or $2.08 a share the company said, making that makes the biggest lost ever for the company.

AIG, a multi-line insurer offering property, commercial and life insurance worldwide, said its adjusted fourth-quarter loss was $3.2 billion, or $1.25 a share, widely missing expectations.

Analysts, on average, expected a loss of 15 cents, according to Thomson Financial. In the year-ago quarter, New York-based AIG earned $3.85 billion, or $1.47 a share, from operations.

AIG's results in 2007 were clearly unsatisfactory, Chief Executive Martin Sullivan said in a statement. This was a challenging year in which the deterioration of both the U.S. residential mortgage and credit markets significantly affected several of our operations and investments.

During 2008, we expect the U.S. housing market to remain weak and credit market uncertainty will likely persist, he added. Continuing market deterioration would cause AIG to report additional unrealized market valuation losses and impairment charges.

The fourth-quarter results included a pretax charge of $11.12 billion for a net unrealized market valuation loss related to its credit default swap portfolio.

The insurer said it expects the bulk of its write-down to be recouped over time, but a small portion was more seriously impaired, leading the company to record it as a loss.

AIG shares fell 2.9% to $48.70 during late trading after the results