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CHARLOTTE, N.C. – Struggling insurer American International Group Inc. will receive up to $30 billion in additional federal assistance in the fourth government rescue of the company, a person familiar with the matter told The Associated Press on Sunday.

The new infusion is intended to prop up AIG — once the world’s largest insurer — as it is expected to announce $60 billion in quarterly losses early Monday, the source said on the condition of anonymity because the discussions are still ongoing.

The company, which is considered too large to fail, previously received about $150 billion in loans from the government, which now has an 80 percent stake in the company.

Under the new deal, the U.S. Treasury and the Federal Reserve would provide about $30 billion in fresh capital to AIG from the government’s Troubled Assets Relief Program, or TARP. The money would be provided as a standby line of equity that AIG could tap as its losses mount, the source said.

AIG has already received $40 billion from TARP.

In exchange for the latest infusion, the Federal Reserve would take stakes in two international units, the source said.

Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.

Under the plan, another $20 billion from a Federal Reserve credit line remains available for borrowing, the source said.

In order to strengthen the company, AIG also plans to combine its U.S. and foreign property-casualty insurance operations into a new unit, with a new name and separate management, the source said. About 20 percent of the property-casualty business would be taken public.

To further reduce its debt, AIG will turn $5 billion to $10 billion worth of debt into new securities backed by life insurance assets.

AIG spokesman Nick Ashooh declined to comment on the rescue package. The Federal Reserve Bank of New York, which is handling the government loan, did not return requests for comment Sunday evening. Treasury Department spokesman Isaac Baker also declined to comment.

The company’s board met Sunday to vote on the revised bailout plan.

Major credit rating agencies have already signed off on the deal, according to media reports. Without the support of the credit rating agencies, AIG would have faced crippling cuts to its ratings.

AIG has been forced to seek more help in part because the ongoing recession and its falling stock price, now well under $1.

Among its biggest problems: It can’t sell assets to pay back government loans because the credit crisis is preventing would-be buyers from getting financing to complete such deals.

As of Feb. 13, AIG had sold interests in nine businesses.

In November, the U.S. government restructured previous loans provided to AIG, giving the company about $150 billion in total as part of a rescue package to help the insurer remain in business amid the worsening credit crisis. That package replaced earlier loans, including the original $85 billion lent in September, after it became apparent the insurer needed more funds.

Problems at AIG did not come from its traditional insurance operations, but instead from its financial services units, and primarily its business insuring mortgage-backed securities and other risky debt against default.

Shares of AIG closed at 42 cents on Friday. The stock, which traded at $49.50 a year ago, has lost nearly all of its value since the market meltdown began in September.

The man considered by many to be the greatest investor of all time just had his worst year ever.  Berkshire Hathaway Inc., the large holding company steered by Warren Buffett, reported Saturday that its far-flung empire, ranging from insurance to ice cream to underwear, took some big hits from the sharp economic downturn in 2008.

A common metric Berkshire uses to track performance, book value per share, fell 9.6% in 2008, its biggest decline since Mr. Buffett took over the company in 1965 when it was a family-run East Coast textile maker.

Berkshire’s report was yet another stark sign of the severity of the financial crisis that continues to roil stock markets and businesses around the world. It was only the second year in more than 40 years that Berkshire’s book value per share fell; it was down 6.2% in 2001.

The company also reported its fifth year-over-year quarterly decline. The $117 million quarterly gain it eked out in the fourth quarter marked a 96% drop from last year’s $2.9 billion in fourth-quarter income.

Berkshire remains on solid footing with a large war chest of cash and diversified investments, in companies such as Wal-Mart Stores Inc., that are likely to weather the economic upheaval. What’s more, the company’s book-value performance in 2008 still far outpaced the Standard & Poor’s 500-stock index, which fell 37% last year, including dividends, as well as hedge funds, which last year averaged about an 18% decline, according to Hedge Fund Research.

Berkshire’s results “could have been a lot worse,” given the extreme economic conditions, said Morningstar’s analyst on the company, Bill Bergman. “It’s the worst economic environment in recent history, and despite that they’ve performed well.”

Mr. Buffett, in his annual letter closely read by shareholders and nonshareholders alike, said he didn’t expect an improved economy any time soon but did expect better times eventually.

“Our country has faced far worse travails in the past,” he said. “Without fail, however, we’ve overcome them.” He declined to draw a correlation between stocks and economics, saying that while he was certain the economy would be “in shambles for 2009″ that “does not tell us whether the stock market will rise or fall.”

In 2008, Berkshire’s Class A stock fell 32%. This year the shares are down about 19%, slightly better than the Dow Jones Industrial Average.

Mr. Buffett credited the federal government for stepping in with massive assistance last year, saying the intervention was “essential” to avoiding a total breakdown. But he cautioned there could be “unwelcome aftereffects,” such as inflation.

On oil, he said “odds are good that oil sells far higher in the future than the current $40 to $50 price. But so far I have been dead wrong.” And on Treasurys, he contended that the “investment world has gone from underpricing risk to overpricing it.” Future historians will comment on the Internet bubble of the 1990s and the housing bubble of the early 2000s, he said, but ” the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.”

Some highlights of the report:

Investments

Berkshire’s annual net income fell to $4.99 billion in 2008 from $13.21 billion the previous year amid poor results from the firm’s insurance holdings and big declines in stock holdings such as Coca-Cola Co. and America Express Co. Berkshire also owns See’s Candy, Fruit of the Loom and Benjamin Moore paint, which are privately held, but its insurance businesses generate the bulk of the parent company’s results.

Mr. Buffett conceded in his letter that he “did some dumb things” in the past year, such as boosting the company’s holdings of the oil giant Conoco Philips when oil prices were near their peak. Since then, oil prices have tumbled and shares of ConocoPhillips and many other energy outfits are down sharply.

He also said he made a $244 million investment in two Irish banks “that appeared cheap.” At year-end, Berkshire wrote the holdings down to their market value of $27 million, an 89% loss on the investment.

The letter also provided new details on some moves Mr. Buffett made in late 2008 as the credit crisis worsened. Berkshire invested $14.5 billion in fixed-income securities from companies such as General Electric Co. and Goldman Sachs Group Inc. To fund the purchases, the letter says, he sold part of his holdings in ConocoPhillips, Johnson and Johnson and Procter and Gamble Co.–”holdings I would have preferred to keep,” he said.

Derivatives

Also cutting into Berkshire’s bottom line: A loss of $5.1 billion incurred when several derivatives deals Berkshire entered into in recent years are marked to current market prices.

Berkshire sold what are essentially insurance policies against long-term declines in U.S. and foreign stocks in exchange for $4.9 billion. Mr. Buffett said the company sold contracts on the S&P 500, the FTSE 100 in the U.K., the Dow Jones Euro Stoxx 50 index in Europe and the Nikkei 225 Stock Average in Japan.

When the contracts expire in 15 or 20 years, Berkshire will have to pay out if the indexes are below where they stood when the deals were struck. Berkshire’s liabilities on the contracts have soared as global markets tumbled in the fourth quarter. At year-end, Berkshire’s liabilities — a mathematical estimate of its exposure to its counterparties on the deals — stood at $10 billion, up from $6.7 billion at the end of the third quarter. That figure was in line with some analysts’ expectations.

Continuing weakness in global markets in 2009 has dinged the contracts further, Mr. Buffett said. Shareholders’ equity, a measure of the company’s assets minus its liabilities, declined by an additional $8 billion so far this year, according to the company’s estimates, because of weakness in its stock holdings and increased liabilities from the derivatives contracts. At the end of 2008, shareholders’ equity stood at $109.3 billion.

Mr. Buffett said a small percentage of Berkshire’s derivatives contracts call for posting collateral if the market moves against the company. (Meeting costly collateral calls was one of the issues that felled America International Group Inc., the insurer bailed out last year by the federal government.)

Berkshire holds 251 derivatives contracts and expanded some of its positions last year, Mr. Buffett said, but most are of the type that don’t expose the company to counterparty risk, he said. (This figure doesn’t include those derivatives used for operational purposes at its utility outfit, MidAmerican Energy Holdings, and the few remaining at its reinsurance unit General Re.)

More broadly, he railed on derivatives as generally too complex and creating dangerous mutual dependence among financial institutions involved. “Auditors can’t audit these contracts, and regulators can’t regulate them,” Mr. Buffett said. He cited Fannie Mae, Freddie Mac and Bear Stearns — all of which suffered losses because of derivatives and last year either were sold or brought into government control — as examples of what can go wrong. He faulted the Office of Federal Housing Enterprise Oversight, or OFHEO, which had oversight of mortgage giants Fannie and Freddie. The firms’ regulators didn’t respond to requests for comment.

Insurance

Berkshire’s powerful insurance business also struggled in 2008 along with the sector. Underwriting profits at Geico, its car-insurance unit, fell 18%, although Mr. Buffett said market share rose to 7.7% from 7.2%. Earnings at General Re slid 38%.

Broadly, operating earnings in Berkshire’s insurance-underwriting units fell 17% from a year ago to $2.79 billion, hurt by last year’s heavy hurricane season. Hurricanes Gustav and Ike inflicted losses on Berkshire’s property- and casualty-reinsurance operations of about $900 million, Mr. Buffett said. Reinsurance firms provide financial backstops to other insurance companies.

Mr. Buffett also commented on the municipal-bond insurance business he entered in early 2008. He created Berkshire Hathaway Assurance Co. as other, monoline, bond insurers such as Ambac Financial Group Inc. and MBIAInc. struggled with huge losses amid the credit crisis.

Mr. Buffett seemed pleased with some of the deals the company has struck. It has written $15.6 billion of insurance, about 77% of it on bonds that were already insured, making Mr. Buffett’s insurer the second, third or fourth to pay, at rates averaging 3.3%. Before he did those deals, he said, he had offered to take over guarantees on $822 billion of bonds insured by the monolines for a lower rate — 1.5%. They turned him down, he says, which ended up working out in Berkshire’s favor because it later scored the better rates — often for the preferable position of not being first in line to pay.

Still, Mr. Buffett sounded a warning for the municipal-bond insurance business: the risk that local governments running short of cash may decide to default on bond payments if they carry bond insurance. Shortfalls in many city and state pension funds at the end of the year were “staggering,” he wrote, and could push some local governments to inflict pain on bond insurers.

“What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?” Mr. Buffett said.