AIG’s loss narrows in fourth quarter

American International Group Inc. posted a wider-than-expected loss after setting aside more reserves for insurance claims and paying down bailout debts. The shares fell 10%.

The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history, the New York firm said Friday. Results included $6.7 billion in charges fueled by paying down AIG’s Federal Reserve credit line. It cost AIG $1.8 billion to add to property-casualty reserves as sales in the division slipped 2.2%.

“It was a messy quarter, and overall it shows you how deep a hole they’ve dug and how hard it is for them to dig out,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. The operating loss, which excludes some investment results, was $53.23 a share, missing the $3.94 average loss estimate of three analysts surveyed by Bloomberg.

The insurer’s shares declined $2.74 to $24.77.

The insurer’s consumer lender, American General Finance Corp., posted an operating loss of $309 million in the quarter, compared with a $248 million loss a year earlier. AIG’s Century City plane-leasing business, International Lease Finance Corp., posted a $344 million operating profit, a gain of 66% from a year earlier after the unit expanded its fleet and borrowing costs fell.

ILFC and American General have been downgraded by rating firms and lost access to their usual funding sources. AIG said it would support the units through February 2011, which is more than three months longer than the insurer’s previous commitment.