Earnings Preview: AIG expected to post 2Q profit

AP News - 556 days ago
Insurer AIG expected to post 2Q profit; investors will listen for word on future of Asian unit

Insurer American International Group Inc. reports its second-quarter results before the market opens Friday.

WHAT TO WATCH FOR: AIG, which received more than $180 billion in aid from the government during the financial crisis as bad bets on mortgage-backed securities and other toxic assets threatened the company, returned to a profit in the first quarter and has been selling off assets.

But a deal to sell its Asia-based life insurer, AIA Group, to Britain's Prudential PLC for $35.5 billion, fell apart in June. Investors will be listening for some hints about what might happen to the unit, with many expecting the company to spin it off in an initial public offering in the fall.

Also a key issue is how much AIG still owes the U.S. government under the emergency line of credit granted in 2008 as the company threatened to melt down. The figure stood at $34.2 million at the end of the first quarter, and investors will be listening for an updated value.

Standard & Poor's equity analyst Catherine A. Seifert, who has a "Hold" rating on the stock, is concerned about the company's ability to sell enough assets to restructure and repay the government while leaving enough resources for shareholders. The collapse of the AIA sale is an example of the risk, she wrote in a recent note.

Also of concern are sliding insurance sales, the foundation of AIG's business, though they showed some signs of rebound during the first quarter.

WHY IT MATTERS: AIG was the poster child for "too-big-to-fail." So its results take on extra meaning amid claims from government officials that the bailouts helped the economy. Seifert said the preferred stock the government holds represents about 78 percent of shareholder voting power for the company.

WHAT'S EXPECTED: Analysts surveyed by Thomson Reuters expect AIG to post a profit of 99 cents per share, on revenue of $19.18 billion.

LAST YEAR'S QUARTER: In the second quarter of last year, AIG posted its first profit attributable to common shareholders since 2007: $311 million, or $2.30 per share.