Insurance giant AIG posts $2.4B loss for 3Q

Insurance giant AIG is reporting a $2.4 billion loss for the third quarter, dragged down by hefty charges tied to selling off some assets.   

But American International Group Inc., which is 80 percent-owned
by the U.S. government, remains confident in its core operations,
which include its property and casualty and life and retirement
services business.

“AIG’s continuing insurance operating results remain solid,”
president and chief executive Robert H. Benmosche said in a statement.

“Despite soft market conditions in the property casualty market
and a low interest rate environment, these businesses have
demonstrated their market leadership and are maintaining their
discipline.”

New York-based AIG is in the process of repaying more than $100
billion still outstanding from a government bailout it received two
years ago during the credit crisis. It is selling off assets to
help repay taxpayers.

AIG was one of the hardest hit financial companies by the credit
crisis. Its bailout package enabled it to tap as much as $180
billion in aid.

AIG lost $2.4 billion, or $17.62 per share, in the third quarter, compared with earnings of $92 million, or 68 cents per share, a year ago.

Restructuring-related charges amounted to $4.5 billion, mostly tied to the assets sales. The pending sale of AIG’s 80 percent stake in consumer credit business American General Finance Inc. weighed heavily on the quarter, as AIG incurred a $1.9 loss related to the transaction.

American General Finance provides loans, retail financing and
other credit-related products to consumers in the U.S., Puerto
Rico, the Virgin Islands, and the U.K. AIG agreed in August to sell
it to hedge fund manager Fortress Investment Group LLC for $125
million.

AIG also recorded a $1.3 billion goodwill impairment charge related to its pending sale of AIG Star Life Insurance Co. Ltd. and
AIG Edison Life Insurance Co.

Removing the charges, AIG lost $1.47 per share. The insurance company said the charges were somewhat offset by a $1.4 billion tax benefit.   

Revenue for the three months ended Sept. 30 dipped 3 percent to
$19.09 billion from $19.6 billion, the New York-based company said Friday.

Net written premiums climbed 7 percent to $8.6 billion from $8.07 billion, a sign of some stabilization. AIG quickly lost customers after its bailout because of uncertainty over its survival.

AIG announced in late September definitive plans about how it
would repay the government bailout.

Earlier this week, the company said it raised nearly $37 billion through the initial public offering of its Asian insurance business AIA Group Ltd. and the sale of American Life Insurance Co. That
money will go directly to repaying the government.

Most of the rest of the outstanding debt AIG owes will be converted to common stock by the end of the first quarter in 2011. That will give the government a 92.1 percent stake in the company. The government will then start selling those shares to private investors to recoup its money, similar to what it is currently doing with Citigroup Inc. shares.

Based on current prices, the government would make a big profit
on AIG shares it will receive in the coming months. But if AIG cannot prove to be consistently profitable, its stock price could go down and hurt the government’s ability to unload the shares.