All those who thought that AIG was out of the woods following its massive Federal Reserve bailout, may be in for a surprise.

(Bloomberg) -- American International Group Inc. posted a wider-than-expected loss after setting aside more reserves for insurance claims and paying down bailout debts. The shares fell 8.5 percent in New York trading.
The fourth-quarter net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or $458.99, a year earlier when AIG recorded the biggest loss in U.S. corporate history, the New York-based firm said today. Results included $6.7 billion in charges fueled by paying down AIG’s Federal Reserve credit line. It cost AIG $1.8 billion to add to property- casualty reserves as sales in the division slipped 2.2 percent.
“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. “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.”

"How hard they dig" is a question that should be examined closely.

AIG may have been “aggressive” in pricing its workers’ compensation and professional liability policies, Sanford C. Bernstein said in a research note in November estimating that the shortfall may be $11 billion.
Competitors including Chubb Corp. and Liberty Mutual Group Inc. have said that AIG, in an effort to keep customers, is slashing its prices to levels that may be inadequate to cover claims. Joel Ario, the Pennsylvania insurance regulator, said he expects to complete a “broad-scale examination” into AIG during the first half of this year, including whether the insurer is underpricing.

AIG, of course, doesn't have to worry about whether it underprices its claims since it is Too-Big-To-Fail. However, we might be getting set up for another round of taxpayer bailouts.