Ailing US insurance giant AIG on Friday said it swung to a 2.66-billion-dollar loss in the second quarter, hurt mostly by the impending sale of a key foreign business unit.
American International Group, which was rescued from collapse by the government during the financial crisis, said the loss was primarily due to a 3.3-billion dollar “non-cash goodwill impairment charge” linked to the sale of Alico, AIG’s second-largest foreign life-insurance business.
AIG had agreed to sell Alico to MetLife, the largest US life insurer, for about 15.5 billion dollars earlier this year as part of a major restructuring exercise aimed at repaying the taxpayer bailout. Excluding the writedown, AIG said it made a better-than-expected adjusted net income of 1.34 billion dollars or 1.99 dollars per share, from 1.14 billion dollars or 1.17 dollars per share a year earlier.
Most analysts had expected a net income of 99 cents per share. AIG shares on Wall Street rose 1.30 percent to 40.42 dollars. Company president and chief executive Robert Benmosche said its “continuing insurance operating results remain solid” as the company forged ahead with its
restructuring plans and prepared for separation from the US government.
AIG notched an operating income of 2.2 billion dollars from its insurance operations in the second quarter. “Our overall strategy remains unchanged. We remain focused on monetizing AIA and Alico as quickly as possible in order to repay taxpayers, at values reflecting the unique strengths of these highly attractive franchises.” AIG, once the world’s largest insurer, is nearly 80 percent owned by the government.
The authorities pumped more than 180 billion dollars into the company during the financial crisis as it crumbled under the weight of bad bets on mortgage-backed securities and other toxic assets. The financial crisis, which climaxed in September 2008 and stemmed from a home mortgage meltdown, plunged the US economy into a brutal recession.
Benmosche said Friday that talks had begun in recent weeks with the Federal Reserve Bank of New York, the Treasury Department and trustees on a proposed strategy to repay the bank and “allow the government to exit its owner relationship with AIG.” As of end June, AIG claimed it had outstanding net borrowings under the Federal Reserve credit facility of 20.5 billion dollars as well as interest and fees of 6.0 billion dollars.
Benmosche said Alico’s sale to be firmed up by the fourth quarter and plans to take AIG’s Asian insurance unit AIA public were expected to “substantially reduce” its debt to the authorities and “take significant steps toward a sustainable capital structure.” “Our focus is on continuing to strengthen our core operations by maintaining or improving their financial strength, improving efficiency and transparency, and better balancing risk and return.”
He said AIA’s business fundamentals, market leadership, financial position, and profitability “remain strong.”AIA plans to list more than half its equity in Hong Kong by October or November with the goal of raising as much as 23 billion dollars, reports have said. British insurer Prudential’s 35.5-billion-dollar (27.5-billion-euro) takeover bid for AIA collapsed in June.
Washington, Aug 6, 2010 (AFP)
