Dr. Weeks Comment: I s0 am confused. Does crime pay or not? Net income of $1.8 BILLION says it does….
.I.G. Reports Profit, Saying Business Is Stabilizing
The company’s net income for the second quarter was $1.8 billion, compared with a $5.3 billion loss in the second quarter of 2008. The federal government’s share of the profit was $1.5 billion, since the government became the company’s biggest shareholder after bailing out A.I.G. last fall.
That leaves a profit of $311 million, or $2.30 a share, for A.I.G.’s common shareholders.
Shares in A.I.G. were up 14 percent, to $25.70, in morning trading Friday, and are up 90 percent from their close of $13.52 on Tuesday.
“Our results reflect stabilization in certain of our businesses,” said Edward M. Liddy, the chairman and chief executive installed by the government during A.I.G.’s rescue last fall. He said one of the primary drivers of the second-quarter profit was a slowdown in investment losses, part of which resulted from an accounting change and part from a general improvement in market conditions.
On an operating level, A.I.G. had a loss of about $1 billion, larger than its $745 million operating loss in the second quarter of 2008. The company said the operating loss increased mainly because of the interest it had to pay on its debt to the Fed, and restructuring costs. It said these costs were partly offset by interest income on loans between its subsidiaries.
In a statement Friday morning, Mr. Liddy said the company’s insurance businesses “remain challenged” because of “weak economic conditions and the lingering effect of negative A.I.G. events earlier in the year,” a reference to the public outrage that boiled over when the company paid bonuses shortly after reporting the biggest losses in corporate history.
Mr. Liddy said at the time that the A.I.G. name brand had been ruined. The company has been marketing its insurance products under different names since then.
He warned that there would be more earnings volatility in the coming months, as the company continued its process of restructuring and selling its businesses to pay off its debts to the Federal Reserve Bank of New York.
The earnings report concluded Mr. Liddy’s 10-month tenure in a role he took on at a salary of $1 a year. He will be succeeded on Monday by Harvey Golub, a former head of American Express, as chairman, and by Robert H. Benmosche, a former chief of MetLife, as chief executive.