Tags: AIG | businesses | strengthen | bailout

AIG Insurance Businesses Strengthen After Bailout

By    |   Monday, 26 March 2012 08:46 AM

U.S. insurance giant American International Group (AIG) is leaving behind bad memories of the 2008 credit crisis and ensuing taxpayer bailout, reporting healthy profits as businesses strengthen in its many insurance units.

The company's net income in the fourth quarter of 2011 hit $19.8 billion, up 77 percent from the $11.2 billion in the prior year quarter, with tax benefits accounting for the bulk of earnings.

For the full year 2011, net income attributable to AIG came to $17.8 billion, more than double the $7.8 billion reported for all of 2010.

The company's aircraft leasing division turned a $119 operating profit during the fourth quarter after losing $606 million during the fourth quarter of 2010, while income from Asian insurer AIA and MetLife also reported strong sales as well.

AIG executives say the insurer has come a long way since the government intervention in 2008, withstanding natural disasters such as the floods in Thailand and an uncertain global economy in general.

"Two years ago, skeptics — and even some supporters — thought it inconceivable that we would be in a position to post our second consecutive annual profit," Robert H. Benmosche, AIG's president and CEO says in an earnings statement.

"During 2011, we completely repaid the Federal Reserve Bank of New York Credit Facility and restructured the U.S. government ownership to provide the U.S. Department of the Treasury a clear exit path."

The U.S. government is preparing to divest part of its stake in the company, and Wall Street banks are keeping a positive, albeit cautious, eye on AIG.

In January, William Blair initiated coverage at market perform while Stifel Nicolaus initiated coverage at hold.

Treasury divests

The Treasury Department has said it plans to sell 207 million shares in American International Group common stock at $29 per share, which would pump $6 billion into government coffers.

As part of Treasury’s common stock offering, AIG has agreed to purchase a little over 103.4 million shares at the offering price of $29 per share, representing $3 billion of Treasury’s expected proceeds from the sale.

The move aims to pay back taxpayer money used to rescue financial institutions under the auspices of the 2008 Troubled Asset Relief Program (TARP).

"We’re continuing to move forward to wind down TARP and exit our stakes in private companies as soon as practicable," Treasury Assistant Secretary for Financial Stability Tim Massad says in a statement.

"Today is another important step in our efforts to recover the taxpayer’s investment in AIG."

The company will issue first quarter earnings on May 24.

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Monday, 26 March 2012 08:46 AM
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