Dow component American International Group saw its shares slide more than 3% in yesterday's trading as word hit the Street that the firm could take a substantial write-down due to its subprime mortgage-market exposure. Friedman, Billings & Ramsey analyst Bijan Moazami said Thursday that the damage could total $9.8 billion. Moazami noted that AIG has the greatest subprime exposure of any insurer that he covers, but added that a sizeable write-down would be manageable for the company, which has the ability to bank third-quarter earnings of $4.4 billion.
Considering the recent write-downs at Merrill Lynch, we believe it is appropriate to evaluate the potential charges that AIG could be facing in light of the continued meltdown in subprime, said Moazami. AIG spokesman Chris Winans stated that the company doesn't respond to rumors.
Investors, apparently, do respond to such rumors. The stock tagged a new annual low in yesterday's session, exacerbating the already notable gap between the equity and its overhead 10-day moving average. AIG also saw its near-term put interest swell in Thursday's trading; the equity's Schaeffer's put/call open interest ratio rose to 1.07 overnight from its reading yesterday at 1.04.