AIG raising more capital than expected

American International Group Inc. plans to raise $20 billion in fresh capital, reduce noncore operations and expand its foreign operations after losing billions of dollars on weak credit markets, the insurer said Tuesday.

Speaking at an investor conference in London hosted by Lehman Brothers, AIG's chief executive, Martin Sullivan, said the company will raise about $20 billion in new capital, more than the initial $12.5 billion it said it would raise earlier this month.

On Friday, AIG closed on raising about $13.5 billion in capital, Sullivan said during the presentation. The rest of the capital raising effort is still ongoing, he added.

"AIG's total capital raise will be about $20 billion, which will roughly offset lost shareholder equity over past six months," Lehman Brothers analyst Jay Gelb wrote in a research note.

The new money will help spur foreign expansion and shore up a capital base that was weakened by deterioration in the mortgage markets.

Shares of AIG fell 86 cents, or 2.2 percent, to $38.09 in early afternoon trading. Earlier in the session, shares fell as far as $37.76 _ their lowest point since 1998.

AIG lost $7.81 billion, or $3.09 per share, during the quarter ended March 31. Nearly all the losses were tied to bad bets on the mortgage market and the ensuing fallout in the credit markets.

As defaults sharply increased on mortgages beginning in the middle of 2007, investors shied away from purchasing all but the safest debt. Because of the lack of liquidity in the credit markets the value of risky debt has plummeted, forcing firms like AIG to reduce the value of their investments in products such as credit default swaps and mortgage-backed securities.

Aside from the capital raising, AIG is ditching some of its noncore businesses and aiming to build its foreign life and retirement operations.

"We will continue to expand our global footprint and brand by introducing more of AIG's products into new and existing markets," Sullivan said during the conference.

AIG has also begun to "pare" its noncore businesses, restructuring some operations and allowing others to enter runoff _ a scenario where no new business is generated and instead revenue only comes from existing business, Sullivan said.