life insurance
American International Group Inc.'s third-quarter profit was driven by higher investment income and gains in the market value of its invested assets, while its core insurance operations struggled with a weak economy and lingering negative perceptions in the marketplace.
But after two consecutive quarterly profits, the company suggested that turning a profit in the fourth quarter might be tough, with an expected $5 billion charge connected with its special-purpose vehicles and a $1.4 billion after-tax loss from its sale of Nan Shan Life Insurance.
AIG's derivatives trading unit swung to a profit. The unit has made progress in unwinding its portfolio.
The scant signs of progress helped push AIG shares down 9.8% to $35.44 recently. The stock, which has risen nearly sixfold from an all-time low in March, is up 13% year to date.
AIG is still leaning on the government for assistance. In the third quarter, AIG drew down $2.1 billion from its Treasury commitment and reported that interest and fees on its New York Fed facility totaled $5.2 billion.
Standard & Poor's Equity Research maintained its hold rating on the stock. Analyst Catherine Seifert noted that the company's earnings beat "was largely due to favorable credit spreads."
The mortgage, credit and stock markets have all improved significantly in the year since AIG's government bailout.
AIG posted a profit of $455 million, or 68 cents a share, compared with a year-earlier loss of $24.47 billion, or $181.02 a share. The latest results included $1.8 billion in capital losses, while the previous year's results included billions in write-downs from credit-default swaps and $15.06 billion in capital losses.
Excluding capital losses and hedging activities that don't qualify for hedge-accounting treatment, the profit was $2.85 in the latest quarter. A survey of analysts by Thomson Reuters predicted $1.98.
AIG Financial Products reported an operating profit of $1.4 billion for the quarter, up from an $8.2 billion operating loss last year. The unit has made progress in unwinding its derivatives portfolio, though notional value still stood at $1.1 trillion. It reported an unrealized market value gain of $959 million on its troubled credit-default swap portfolio
"I think the most important takeaway is that the swap book did not blow up," CreditSights analyst Rob Haines said. "If that happens, then all this could be moot."
AIG's general and life and retirement insurance businesses both were affected by the weak economic environment and lingering negative perceptions of AIG.
General Insurance reported operating income of $722 million, up from $105 million in the quarter last year, driven mostly by investment income, as premiums fell 13%.
Profit at the life-insurance division more than doubled to $2.2 billion as assets under management rose in an improving market. Premiums, deposits and other considerations dropped 38.6% from last year, to $13.7 billion.
The company expects to take a $5 billion charge in the fourth quarter as it closes on the special-purpose vehicles connected to its foreign life insurance businesses AIA and ALICO, which will pay off $25 billion of its New York Fed credit line.
The outstanding balance of AIG's government bailout, including government support of all types, stood at $120.6 billion at the beginning of September, out of total authorized assistance of $182 billion.
American International Group Inc.'s third-quarter profit was driven by higher investment income and gains in the market value of its invested assets, while its core insurance operations struggled with a weak economy and lingering negative perceptions in the marketplace.
But after two consecutive quarterly profits, the company suggested that turning a profit in the fourth quarter might be tough, with an expected $5 billion charge connected with its special-purpose vehicles and a $1.4 billion after-tax loss from its sale of Nan Shan Life Insurance.
AIG's derivatives trading unit swung to a profit. The unit has made progress in unwinding its portfolio.
The scant signs of progress helped push AIG shares down 9.8% to $35.44 recently. The stock, which has risen nearly sixfold from an all-time low in March, is up 13% year to date.
AIG is still leaning on the government for assistance. In the third quarter, AIG drew down $2.1 billion from its Treasury commitment and reported that interest and fees on its New York Fed facility totaled $5.2 billion.
Standard & Poor's Equity Research maintained its hold rating on the stock. Analyst Catherine Seifert noted that the company's earnings beat "was largely due to favorable credit spreads."
The mortgage, credit and stock markets have all improved significantly in the year since AIG's government bailout.
AIG posted a profit of $455 million, or 68 cents a share, compared with a year-earlier loss of $24.47 billion, or $181.02 a share. The latest results included $1.8 billion in capital losses, while the previous year's results included billions in write-downs from credit-default swaps and $15.06 billion in capital losses.
Excluding capital losses and hedging activities that don't qualify for hedge-accounting treatment, the profit was $2.85 in the latest quarter. A survey of analysts by Thomson Reuters predicted $1.98.
AIG Financial Products reported an operating profit of $1.4 billion for the quarter, up from an $8.2 billion operating loss last year. The unit has made progress in unwinding its derivatives portfolio, though notional value still stood at $1.1 trillion. It reported an unrealized market value gain of $959 million on its troubled credit-default swap portfolio
"I think the most important takeaway is that the swap book did not blow up," CreditSights analyst Rob Haines said. "If that happens, then all this could be moot."
AIG's general and life and retirement insurance businesses both were affected by the weak economic environment and lingering negative perceptions of AIG.
General Insurance reported operating income of $722 million, up from $105 million in the quarter last year, driven mostly by investment income, as premiums fell 13%.
Profit at the life-insurance division more than doubled to $2.2 billion as assets under management rose in an improving market. Premiums, deposits and other considerations dropped 38.6% from last year, to $13.7 billion.
The company expects to take a $5 billion charge in the fourth quarter as it closes on the special-purpose vehicles connected to its foreign life insurance businesses AIA and ALICO, which will pay off $25 billion of its New York Fed credit line.
The outstanding balance of AIG's government bailout, including government support of all types, stood at $120.6 billion at the beginning of September, out of total authorized assistance of $182 billion.
