American International Group Inc. (AIG) on Thursday posted a third-quarter profit of nearly $2 billion thanks to strength in its core insurance operations and healthy investment returns. In the same period last year, it lost $4 billion.
We are seeing continued momentum, and we’re building for the future by creating a more streamlined, efficient and nimble company,” AIG President and CEO Robert Benmosche said in a statement.
AIG became a household name after it received $182.5 billion in federal aid following the 2008 financial meltdown. It was the biggest bailout of the crisis.
The company has since repaid its debt with the Federal Reserve, and stock sales by the Treasury Department mean that as of September the government is no longer AIG’s majority owner.
New York-based AIG posted net income of $1.86 billion, or $1.13 per share, in the July-September quarter. That compares with a net loss of $4 billion, or $2.10 per share, in the third quarter of 2011.
Its operating income amounted to $1 a share. Wall Street had been expecting 87 cents a share, according to a survey by FactSet.
Operating income in AIG’s property casualty insurance business jumped nearly 60 percent in the third quarter, to $786 million from $492 million a year earlier. The increase resulted from lower losses from disasters, a boost in investment income on securities and improved underwriting.
AIG nearly collapsed in the fall of 2008 after suffering massive losses from derivatives trading that also helped push the country into financial distress.
AIG sold billions of dollars of credit default swaps, guarantees on mortgage securities that ended up forcing the company to pay out billions after the subprime mortgage bubble burst in 2007.
In the years since the crisis, AIG has been selling off divisions and raising money to repay the government loans. Today it is about half the size of its former self. It has been profitable the last two years.
AIG has spent about $13 billion this year buying back its own shares. The government now owns about 16 percent of its stock, down from the original 92 percent.
The government has recouped a total of $197.4 billion from AIG. That’s all of the $182.5 billion initially invested as well as a profit of $15.1 billion.
Later this month, both its Chartis property and casualty insurance unit and its SunAmerica Financial Group life insurance and retirement division will assume the AIG brand name.
After it had to be bailed out, the AIG name became almost synonymous with the kind of reckless corporate behavior cited as one of the root causes of the financial crisis.
The renaming marks “an extraordinary comeback” for AIG, Benmosche said.
AIG’s shares slipped 40 cents, or about 1 percent, to $34.80 in after-hours trading following the release of the earnings report.