Another day, another loser in the global game of subprime hide and seek. As the Group of Seven finance leaders said over the weekend, there could be $400bn of losses in the financial system linked to US subprime mortgages. Yet only $120bn has been revealed so far. American International Group's confession yesterday reveals where some more of the losses were hiding.

In December, the US insurer announced a $1.05bn to $1.15bn charge for October and November for credit default swap (CDS) insurance it wrote against collateralised debt obligations backed by subprime mortgages. Now, alongside PwC's conclusion that AIG had a "material weakness" in its reporting, that charge has been increased to $4.9bn. That is largely the result of a change in methodology. Last time AIG did not mark its exposure to where the cash bonds were trading - instead it made an adjustment for where it believed the CDS should trade. Now, it has effectively acknowledged there are not good enough market data on the CDS, so it has reverted to pricing off the cash bonds. That is the good news. The latest valuation should provide a better basis for worst case scenarios.