AIG Starts Talks to End Government Ownership

By | August 6, 2010

American International Group Inc. reported better-than-expected quarterly results Friday and said it had started talks on disentangling itself from the U.S. government, sending its shares up 3.6 percent in premarket trading.

The insurer, which is nearly 80 percent-owned by the government after a $182.3 billion bailout, said that in recent weeks it started discussions with Washington about a strategy to “allow the government to exit its owner relationship with AIG.”

AIG reported an adjusted profit of $1.3 billion, or $1.99 per share, for the second quarter, up from $1.1 billion, or $1.71 per share, a year earlier.

Analysts, on average, had expected 99 cents per share, according to Thomson Reuters I/B/E/S.

“Things were pretty stable,” Morningstar analyst Bill Bergman said. “Stabilization doesn’t mean growth and healthy growth, but it appears to be laying a basis for that.”

AIG reported a net loss to the company of $2.7 billion, or $3.96 per share, compared with a net profit of $1.8 billion, or $2.30 per share, a year earlier.

The net loss was primarily due to a $3.3 billion non-cash goodwill impairment charge related to the pending sale of its foreign life insurance unit, American Life Insurance Co.

AIG, once the world’s largest insurer, nearly collapsed in September 2008 from credit default swaps that left it on the hook for tens of billions of dollars in payouts to some of the biggest U.S. and European banks.

It was rescued by the government and has been selling assets to repay taxpayers, who are still owed more than $100 billion.

“Depending, of course, on market conditions, which could remain volatile, we expect to make meaningful progress in 2010 on repaying the Federal Reserve Bank of New York, and over time fully repaying all of our obligations to taxpayers,” AIG Chief Executive Officer Robert Benmosche said in a recorded message. “We are starting to see the light at the end of the tunnel.”

AIG shares are up 33 percent this year, outperforming the S&P Insurance Index, which is up 7 percent.

(Reporting by Paritosh Bansal; editing by John Wallace)

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