American International Group Inc. posted huge loss as shares fell 10% in New York trading. AIG set aside more reserves for insurance claims and paying down bailout debts.

The fourth-quarter net loss of $8.87 Billion, narrowed from $61.7 Billion year earlier.

Shareholders’ equity, a measure of assets minus liabilities, fell 4% to $69.8 Billion from $72.7 Billion. Unrealized gains on bonds available for sale were $1.06 Billion, compared with $143 Million last year.

Gross unrealized losses narrowed for residential mortgage-backed securities and widened for municipal bonds. The figures, monitored by investors and rating firms, reflected that the market fluctuations weren’t counted toward earnings.

“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. The reserve boost is a little red flag, as the industry is seeing largely favorable trends in reserve development”, said Bill Bergman, an Analyst at Morningstar Inc. in Chicago.

"I think it's fair to say that we made substantial progress in refocusing our business on growth and profitability, and we set in place the framework for repaying the U. S. taxpayers for their support of our company during its darkest days", AIG Chief Executive Robert Benmosche said.

It is estimated that Benmosche would increase insurance profits to repay loans in AIG’s $182.3 Billion bailout.