After Quarters of Earnings Pain, AIG is Back in Black

Look up the PowerRating of AIG and see how it has performed over the past week as well as the current proprietary PowerRating. NEW YORK, Aug 07, 2009 (A. M. Best via COMTEX) — AIG | Quote | Chart | News | PowerRating — American International Group Inc. the insurance giant that nearly stumbled into bankruptcy under the weight of losses related to the subprime mortgage market last year, has posted its first quarterly profit since the third quarter of 2007. Stock of AIG, which traded at below $1 a share earlier this year–before a reverse stock split– soared on the news, jumping 19% to $26.80 in early-morning trading on Aug. 7. AIG posted net income of $1.8 billion compared to a loss of $5.4 billion for the same quarter a year ago. With the U.S. government bailout — now totaling up to $182.5 billion — the government owns 79.9% of the company through Series C Preferred Stock. With the company splitting the earnings between the government-owned shares vs. the common shares, net income attributable to the common shares is $311 million, or $2.30 a share, up from a net loss of $5.4 billion, or a loss of $41.13 a share, for the same period last year. Adjusted net income improved to $2.0 billion, or $2.57 a share, from a net loss of $1.3 billion, or a loss of $10.15 a share. Total revenue rose 48% to $29.5 billion from $19.9 billion. Premiums fell 17% to $17.8 billion. Total net realized capital losses narrowed to $1.3 billion from $6.1 billion. “Our results reflect stabilization in certain of our businesses,” AIG Chairman and Chief Executive Officer Edward M. Liddy said in a statement. This week, the company named Robert H. Benmosche, the retired chairman of MetLife Inc., as its new chief executive?the fourth in a little more than a year (BestWire, Aug. 3, 2009). Benmosche will succeed Liddy. Liddy said the primary drivers of the positive results were: — Reductions in net realized capital losses, primarily due to the decline in other than temporary impairments resulting from the adoption of new accounting guidance and improved market conditions; — Positive valuation changes for the company’s Maiden Lane interests on a net basis (Maiden Lane III was established to buy back mortgage-backed securities from AIG’s securities lending program and collateralized debt obligations on which it wrote credit default swap guaranties); — Continued reductions in the risk profile of the AIG Financial Products Corp. portfolio; — A reduction in the allowance for recoverability of deferred tax assets, reflecting the effect of recently announced transactions; and — Gains on hedges not accounted for under FAS 133. ?While our insurance companies? operating results remain challenged, largely driven by weak economic conditions and the lingering effect of negative AIG events earlier in the year, performance trends stabilized from the first quarter,” Liddy said. “We continue to focus on stabilizing and strengthening our businesses, but expect continued volatility in reported results in the coming quarters, due in part to accounting charges related to ongoing restructuring activities. In particular, we expect that permanent reductions in the Federal Reserve Bank of New York credit facility related to the issuance of the preferred interests in the ALICO and AIA special purpose vehicles, which upon closing will substantially reduce our debt to the FRBNY, will result in accelerated amortization of a portion of the prepaid commitment asset approximating $5 billion before tax.” AIG reported a first-quarter net loss of $4.35 billion, a little more than half the loss it reported for the same period a year ago and a fraction of the record-setting loss it posted for the last quarter of 2008 (BestWire, May 8, 2009). Most AIG insurance companies currently have a Best’s Financial Strength Rating of A (Excellent) with a negative outlook. (By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)
For full details on American Internat Group (AIG) click here. American Internat Group (AIG) has Short Term PowerRatings of 1. Details on American Internat Group (AIG) Short Term PowerRatings is available at This Link.
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