AIG Surprises With First Quarterly Profit in Two Years

AIG, which almost single-handedly brought down the U.S. financial system last year, reported a $1.82 billion profit.
AIG Surprises With First Quarterly Profit in Two Years
8/10/2009
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/gag86733910.jpg" alt="AIG, after repeated bail-outs and rescues, is now hugely profitable, and is planning more employee bonuses. (Yoshikazu Tsuno/AFP/Getty Images)" title="AIG, after repeated bail-outs and rescues, is now hugely profitable, and is planning more employee bonuses. (Yoshikazu Tsuno/AFP/Getty Images)" width="320" class="size-medium wp-image-1826863"/></a>
AIG, after repeated bail-outs and rescues, is now hugely profitable, and is planning more employee bonuses. (Yoshikazu Tsuno/AFP/Getty Images)
NEW YORK—American International Group, Inc., the troubled insurance firm that almost single-handedly brought down the U.S. financial system last year, reported a $1.82 billion profit—its first quarterly profit since 2007.

After receiving multiple bailouts from U.S. taxpayers, AIG saw the recent market stabilization help its bottom line, as its battered financial products business regained its footing.

But the company continued to lose insurance customers to its rivals as customers sought to distance themselves from the AIG name even as the company cut insurance premiums.

AIG, which is now 80 percent U.S. government-owned, reported a $5.4 billion loss last year during the three months ended June 30, 2008.

“While our insurance companies’ operating results remain challenged, largely driven by weak economic conditions and the lingering effect of negative AIG events earlier in the year, performance trends stabilized from the first quarter,” AIG Chairman Edward Liddy said in a statement.

But the company warned that solid earnings might not be the norm. AIG expects “continued volatility in reported results in the coming quarters, due in part to accounting charges related to ongoing restructuring activities,” Liddy said.

AIG’s shares rose significantly last Friday, gaining $4.61 (20.5 percent) to $27.14.

Overbearing Debt

Owing U.S. taxpayers up to $182 billion—which the U.S. government gave the insurance giant in multiple federal bailouts in efforts to prop up the nation’s financial system—AIG has become a target of public and populist scorn in recent months.

Saddled with such debt, AIG’s near-term goal is to repay the giant sum, which Liddy said the company has made modest headway.

In recent months AIG has divested numerous assets and businesses, including its consumer finance business, its auto insurance arm, and numerous real estate assets. It also plans to relocate its global headquarters from New York City to San Antonio, Texas.

“The time frame and path for achieving this goal [of repaying taxpayers] will continue to be highly dependent on market conditions,” said Liddy.

AIG still owes $87.6 billion to the U.S. government.

A History of Controversy

AIG has been mired in controversy in recent years, dating before the recent financial crisis.

In 2004, then New York State Attorney General Eliot Spitzer accused AIG of accounting fraud. The company settled with authorities for $1.6 billion, and former Chairman Maurice “Hank” Greenberg took the fall and resigned in March 2005.

In March, after rounds of federal bailouts, AIG again stirred controversy after the company announced that it would pay out $165 million in contractual executive bonuses, most of which were negotiated prior to the current CEO’s tenure.

The announcement elicited fury from politicians. Federal Reserve Chairman Ben Bernanke told reporters earlier this year, “It makes me angry. I slammed the phone more than a few times on discussing AIG.” Most of the bonuses went to employees of its London-based Financial Products Company, which issued the derivatives that led to AIG’s near-collapse last year.

Last Friday, AIG said that it would spend another $1.1 billion in bonuses until 2011 to retain key staff members while the company unwinds its financial positions and sells off businesses.

Some analysts believe that the bonuses are justified, as the company must retain high-performing employees to oversee the successful winding down of AIG’s assets.