AIG’s First Half Showed Slump

September 21, 2008

American International Group Inc., which was bailed out by an $85 billion government loan last week, not only has posted billions of dollars in losses in its financial services operations but its more traditional insurance operations are not as profitable as they were a year ago.

Most problematic has been its financial services division, where operating losses topped $14 billion during the first half of the year. That steep decline was centered in its capital markets unit, which insures mortgage-backed securities and other risky debt against default.

Overall, AIG posted an operating loss of $20.02 billion from January to June. It earned $12.5 billion during the same six months a year ago.

Here is the breakdown in the operating income for its divisions:

General Insurance: Profits of $2.16 billion in the first half of 2008, compared with $6.07 billion a year ago.

Life Insurance and Retirement: Loss of $4.23 billion in the first half of 2008, compared with a profit of $4.9 billion a year ago.

Financial Services: Loss of $14.68 billion in the first half of 2008, compared with a profit of $339 million a year ago.

Asset Management: Loss of $1.56 billion in the first half of 2008, compared with a profit of $1.68 billion a year ago.

Despite the mounting losses, AIG reported that its shareholder equity totaled more than $78 billion at the end of June. That’s the difference between its $1.05 trillion in assets and $971.7 billion in liabilities listed on its June 30 balance sheet.

While those figures indicate that its assets could easily cover all its outstanding liabilities if the government were to completely liquidate AIG, turmoil in credit markets over the summer could have knocked down asset values dramatically. The company has yet to release its third-quarter results.

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