AIG announced plans to raise $12.5 billion of extra cash after the world’s largest insurance group unveiled a record loss of $7.81 billion (£4 billion) for its first quarter.

The group’s shares fell by 7 per cent in after-hours trading as the group took a higher-than-expected $9.11 billion writedown on the value of bond insurance contracts, known as credit default swaps (CDS), that require AIG to pay out in the event of a default on the underwritten securities.

It lost a further $6.82 billion on investments, including sub-prime mortgage-related assets, taking the group’s total credit crunch-related losses to more than $30 billion in the last year.

AIG immediately launched a $7.5 billion offering of common stock and plans to issue a further $5 billion of bonds in the future.

AIG’s second consecutive quarterly loss will put further pressure on Martin Sullivan, its chief executive, as last night’s after-hours slump brought the decline in the group’s share price in the past 12 months to nearly 40 per cent as sub-prime related losses have snowballed.

The insurer dropped by $3.08 to $41.07 in after-hours trading.

AIG’s latest setback puts it alongside Citigroup, Merrill Lynch and UBS as among the top losers in the credit crunch.

It emerged hours after Brian Clarkson, the man behind the push by Moody’s Investors Service into high-risk mortgage-backed securities, became the second top executive to leave a leading ratings agency in the wake of the credit crunch.

Mr Clarkson, 52, whose departure is described as a voluntary retirement, will be succeeded by Michel Madelain, also 52, who runs Moody’s corporate and government bonds unit. Mr Clarkson will retire at the end of July.

Like its key competitors, Standard & Poor’s (S&P) and Fitch, Moody’s is the subject of numerous investigations into whether it fuelled the housing boom – and the credit crunch that resulted when it bust – by assigning ratings that were too high to mortgage-backed bonds.

The agencies stand accused of lulling investors into a false sense of security and perpetuating the housing boom by giving AAA rating to collateralised debt obligations (CDOs) – often high-risk and unfathomable pools of mortgage-backed assets.

Hundreds of these securities have been downgraded in recent months, often by several notches, as many slumped to less than 10 per cent of their value.

As the head of the Moody’s unit that oversaw mortgages and other so-called structured finance products, Mr Clarkson changed the methodology for rating some mortgage bonds, leading to higher ratings and helping Moody’s to increase its share of the market.

Mr Clarkson, a lawyer who joined the group in 1991 as an analyst, was promoted last year to president and chief operating officer of Moody’s Investors Service, which makes up most of the organisation.

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