AIG reports big investment gains, premium profits down

Thu Nov 1, 2012 6:18pm EDT
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By Lauren Tara LaCapra

(Reuters) - American International Group Inc (AIG.N: Quote) earned a larger-than-expected profit during the third quarter, due in part to big gains on its investment holdings.

Questions about the sustainability of those profits, and uncertainty about the timing and structure of the U.S. Treasury Department selling its remaining 16 percent stake in the insurance giant, contributed to a drop in AIG shares in after-hours trading, analysts said.

"One of the biggest questions that people ask is the timing of the next offering of the U.S. government and whether AIG will participate in that offering," said Paul Newsome, an analyst who covers the firm for Sandler O'Neill Partners.

AIG had received $182.5 billion in bailout money from U.S. taxpayers at the height of the financial crisis, and has been working to repay the government for the past few years.

The remaining stake pertains to AIG shares the Treasury Department owns in exchange for capital it infused. Last quarter, the Treasury Department sold $26.5 billion worth of AIG shares, including approximately $8 billion purchased by AIG.

The government still holds 234.2 million common shares. The timing of future sales, and whether AIG will repurchase stock, is unclear.

AIG reported an overall profit of $1.9 billion, or $1.13 per share, for the period, compared with a loss of nearly $3 billion, or $2.10 per share, in the year-ago quarter.

Analysts had expected AIG to earn 86 cents per share, on average, according to Thomson Reuters I/B/E/S.   Continued...

A banner for American International Group Inc (AIG) hangs on the facade of the New York Stock Exchange, Ocotber 16, 2012. REUTERS/Brendan McDermid