AIG Posts $538-Million Loss for Second Quarter

Published: Fri 06 Aug 2010

Tiffany Strong

Insurance juggernaut AIG reported a $538-million second-quarter loss on Friday due to expenses associated with selling assets to pay back bailout money from the federal government.

The insurer's adjusted results excluding those expenses exceeded Wall Street's expectations, and the company's shares rose nearly three percent in pre-market trading. AIG's insurance business also seemed to improve.

American International Group, which the government rescued during the financial crisis, reported its net loss attributable to common shareholders totaled $3.96 per share. One year ago, it showed a profit of $311 million, or $2.30 per share.

The net loss attributable to the insurance company was a more substantial $2.66 billion. That is much larger than the $538-million loss attributed to shareholders because it accounts for the portion the government is carrying. Currently, 80 percent of AIG is owned by the government.

Removing the expenses, AIG had earnings of $1.99 per share, an increase from $1.71 one year ago. The increase reflected a strong performance in AIG's insurance business, in spite of many claims resulting from the Gulf of Mexico oil spill, flooding, and storms in the United States during the second quarter and the Icelandic volcano.

In a poll by Thomson Reuters, analysts predicted an average profit of 99 cents per share.

The insurer's overall loss was the result of $3.42 billion in charges associated with the sale of its American Life Insurance Co. division, or Alico, and the Nan Shan Life Insurance Co. Both are currently being sold to help repay part of the $180 billion in federal bailout money the company accepted in late 2008. The sale of Alico to MetLife should wrap up by the end of this year.

In July, AIG said it will do an initial public offering of AIA, the insurer's Asian life insurance division, on the Hong Kong Stock Exchange, once the sale of the unit to Britain's Prudential PLC failed.

AIG also announced $755 million in interest and other expenses on its emergency credit line from the New York Federal Reserve Bank. That figure is down from $1.4 billion one year ago, large because of a reduction in the loan's balance, which was $26.5 billion as of June 30.

The overall amount of outstanding government funds dropped slightly in the second quarter to $132.1 billion, which does not include the emergency credit line.

In a prerecorded statement, CEO and President Bob Benmosche said when the AIA IPO and Alico sale are complete, AIG will have repaid the majority of what it owes the Fed.