AIG has 2nd quarterly profit in a row

By STEPHEN BERNARD THE ASSOCIATED PRESS

NEW YORK — AIG said Friday that it was profitable for the second straight quarter as its core insurance operations continue to stabilize after the company’s bailout by the government last year.

American International Group Inc. also said the amount of its government financial assistance dropped by 4 percent during the third quarter.

Its results got a lift from the increasing value of investments it still holds that soured last year and helped drive it to the brink of collapse.

While new insurance business stabilized compared with the second quarter, it is still sharply below year-ago figuresas the economy remains weak and AIG struggles with its image after being bailed out by the government. A recovery in its core insurance operations is considered vital to AIG repaying the government.

CEO Robert Benmosche warned earnings will remain choppy as the company executes its restructuring plan.

“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 charges related to ongoing restructuring activities,” Benmosche said in a statement.

AIG said it plans to record a $5 billion charge in the fourth quarter as it proceeds withspinning off two of its major life insurance businesses. The insurer is shedding American International Assurance Co., or AIA, and American Life Insurance Co., also known as ALICO, as it looks to repay the government.

Shares of AIG fell $3.80, or 9.7 percent, to close at $35.48.

Len Blum, a managing partner at investment bank Westwood Capital, said, “There is still tremendous risk.”

AIG is still on very shaky footing, Blum said, because of the many changes it is undergoing and continued uncertainty about exactly how much it will be able to raise from selling assets.

Blum said the market for selling big businesses like AIGis attempting remains weak because of the struggling economy.

AIG share prices have been volatile since the company was bailed out last year. Shares hit a low of $6.60 in March, rose as high as $55.90 in late August, helped in part by a reverse stock split, and then slipped again.

“It’s a casino gamble,” Blum said of the stock.

AIG was bailed out in September 2008 by the government as the financial crisis spiraled out of control. The insurer has received aid packages with a total value of more than $182 billion from the government. In return for that financial support, the government received an 80 percent stake in AIG.

Business, Pages 32 on 11/07/2009