Wellington, March 3 AFP NZPA - The United States government has unveiled a fresh rescue plan worth $US30 billion ($NZ61.31 billion) to help American International Group (AIG), which includes a New Zealand arm, stave off collapse as the ailing insurer revealed the biggest loss in American corporate history.

The revamped bailout came as American International Group announced a quarterly loss of $US61.7 billion -- the biggest ever for a US firm in one quarter -- pushing up its net loss for 2008 to $US99.3 billion.

AIG also announced the restructuring of its financial arrangements and the intended creation of a general insurance holding company (AIU Holdings), comprising all of AIG's US and non-US general, property and casualty businesses. It will include AIG New Zealand.

The creation of AIU Holdings was excellent news for AIG New Zealand and a positive step towards protecting the key businesses, said AIG New Zealand chief executive Matt Harris.

"This means that our policyholders and other stakeholders can have continued confidence in AIG New Zealand's ability to support their interests. Policyholders are protected, and their policies are safe."

Meanwhile, the US government, which had already pumped some $US150 billion into AIG, said the restructured aid package sought to avert a potentially catastrophic collapse of what had been the world's biggest insurer.

Officials said a failure at AIG could send new shockwaves through an economy already ravaged by recession.

"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the US Treasury and the Federal Reserve said in a joint statement.

"The additional resources will help stabilise the company, and in doing so help to stabilise the financial system."

David Kotok at Cumberland Advisors said the new bailout was an effort to avert the kind of collapse that occurred at Lehman Brothers that deepened the financial crisis.

"The policy behind this federal support seems clearly focused on avoiding a second Lehman-type failure and, subsequent, market meltdown," Mr Kotok said.

"There are no limits to the amount of federal credit that can be extended in support of this new policy. The federal government is now committed to do whatever it takes, in whatever amount is necessary and with whatever tools are needed."

In addition to the extra $US30 billion, the new plan restructures the existing aid to AIG by reducing the hefty dividend payments required under the original bailout.

Under the new plan, the government will convert its preferred shares -- which are akin to a loan with high dividend payments -- to a form of common stock, which puts the taxpayer funds at more risk if AIG fails.

Robert Brusca at FAO Economics said the new government rescue is "a bid to bolster the battered insurer, but its plan will expose US taxpayers to more financial risk. The new deal, the government's fourth for AIG, represents a nearly complete reversal from the one first laid out in mid-September."

It provides the US government with a 77.9 percent stake in the company and reduces the financial burden on AIG from the dividend payments on its preferred shares.

AIG's $US60 billion credit line will be reduced in exchange for stakes in American Life Insurance Company (ALICO) and American International Assurance Company Ltd. (AIA), two life insurance subsidiaries for which AIG has been unable to find a buyer.

The Treasury statement noted that "public ownership of financial institutions is not a policy goal and ... it will work to replace government resources with those from the private sector to create a more focused, restructured and viable economic entity as rapidly as possible".

The bailout highlighted the ongoing turmoil in financial markets that has roiled AIG, which suffered massive losses in guaranteeing mortgage securities hammered by the meltdown in the real estate market.

But chairman and chief executive Edward Liddy said AIG "is executing one of the most extensive corporate restructuring programs in history at a time when the global economy and capital markets are in turmoil".

Fitch Ratings said the new actions are positive because they "enhance the company's liquidity and reduce the company's annual preferred dividend requirements and financial leverage".

But Fitch added that "there is a high potential for future losses from various exposures" at AIG.

Similar comments came from Standard & Poor's, which maintained its credit rating on AIG debt along with a negative outlook.

"The ratings reflect a combination of the extraordinary external support from the US government in light of AIG's status as a highly systemically important financial institution," said S&P analyst Kevin Ahern.

"We expect this support to be ongoing during AIG's period of stress."

The Treasury said the latest moves were aimed at an "orderly restructuring" of AIG, which operates in over 130 countries and was heavily exposed to the financial crisis with its array of insurance on assets linked in some form to the US mortgage market.

NZPA AFP dw nb