Charge leads AIG to its biggest loss

American International Group Inc., the world’s largest insurer, posted its largest quarterly loss Thursday and said it would raise $12.5 billion to strengthen its balance sheet.

The result marked the second consecutive quarter AIG posted record losses, hurt by a write-down of derivatives stemming in part from bad mortgage investments.

AIG said the first-quarter loss was $7.81 billion, or $3.09 a share, compared with net income of $4.13 billion, or $1.58, a year earlier.

Included in AIG’s red ink was a $9.11-billion charge for unrealized market valuation losses on credit swaps. AIG also recorded capital losses of $6.09 billion, primarily from impairment charges in its investment portfolio.

AIG said that it expected to raise $7.5 billion of the target amount through a common stock and equity-linked offering and that it increased its quarterly dividend.

Excluding all one-time items, AIG would have made a per-share profit of 93 cents, below the $1.48 that analysts, on average, expected, according to Reuters Estimates.

AIG raised its quarterly dividend 10% to 22 cents per common share, which puzzled some analysts.

“Why would you dilute your shareholders and raise your dividend?” said William Smith, chief executive of Smith Asset Management. “This could be one of the craziest things I’ve ever seen in my life.”

The shares dropped 5.8% in after-hours trading following the earnings news, after closing down 93 cents, or 2.1%, in the regular session at $44.15.