American International Group Inc posted a record $61.7 billion quarterly loss on Monday and got a new but not necessarily final government bailout after officials concluded again that letting the insurer fail would threaten the world financial system.

AIG will get access to up to $30 billion of new capital, after getting a commitment for $150 billion in aid last year that gave the government a stake of nearly 80 percent.

The latest bailout avoids for now any crippling credit rating downgrades that could force AIG to come up with billions of dollars it might not have.

The new rescue agreement increases the government's commitment to keeping AIG on life support.

The deal was announced just three days after the government announced a new bailout for Citigroup Inc, which like AIG has struggled to sell businesses and raise cash to pay back bailout funds. Both companies are based in New York.

The market is a pretty crummy place right now, AIG Chief Executive Edward Liddy lamented on a conference call. He said fixing AIG could take several years.

In agreeing to a new AIG bailout, the Treasury Department and the Federal Reserve cited AIG's operations in more than 130 countries, its role as an insurer for more than 100,000 entities including operations that employ more than 100 million Americans, and its more than 30 million U.S. policyholders.

The government also acknowledged that Monday's bailout might not be AIG's last. 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 government said in a statement.

It said fixing the insurer will take time and possibly further government support if markets do not stabilize and improve.

ANNUAL LOSS NEARS $100 BLN

The quarterly loss, AIG's fifth in a row, equaled $22.95 per share, and compared with a year-earlier loss of $5.29 billion, or $2.08 per share.

AIG's latest loss, a record for a U.S. company, equaled about $465,000 a minute.

For all of 2008, AIG lost $99.29 billion, wiping out profit dating back to the early 1990s.

The new bailout gives AIG more lenient terms on existing financing. It will convert some debt into a preferred equity stake for the government in two units, American International Assurance and American Life Insurance Co, which each have significant Asian operations.

AIG also announced plans to spin off part of its property-casualty business, to be renamed AIU Holdings.

The company said it believes it has adequate liquidity to keep operating for the next year.

In morning trading, AIG shares were up 7 cents at 49 cents. The cost of insuring AIG debt fell, suggesting that investors see a lower risk of default.

AIG TOO COMPLICATED, UNWIELDY

The government appointed Liddy, a former chief executive of Allstate Corp, to run AIG in September after losses from credit default swaps threatened to collapse the company.

AIG built this exposure earlier this decade, when Maurice Hank Greenberg and then Martin Sullivan ran the company.

On the conference call, Liddy said AIG had become too complicated, unwieldy and opaque to keep operating as a conglomerate, and plans over several years to break itself into separate businesses.

We need no new cash right now after the latest bailout, Liddy said. Who knows what happens in the future, but when things improve our company and taxpayers will be well served.

Paula Rosput Reynolds, AIG's chief restructuring officer, said on the call that there had been significant interest from potential buyers of the company's International Lease Finance Corp aircraft leasing arm.

Major credit rating agencies affirmed AIG's ratings, which fall in the single-A category, a medium investment grade.

Moody's Investors Service analyst Bruce Ballentine said he expected the government will provide incremental support as needed to ensure that AIG can meet its obligations through this period of severe economic recession and market turmoil.

(Additional reporting by Walden Siew in New York and Glenn Somerville in Washington, Editing by Ted Kerr)

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