AIG Stock Dips and Recoups over Sub-prime Effect on Profits
The world’s largest insurer, American International Group (AIG), caused a market scare on Thursday as investors worried about its sub-prime exposure and debt exposure, but bounced back later in the day and on Friday when analysts quelled concerns.
"The speculation that AIG had overexposure to sub-prime loans really drove us down hard," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "When it turned out to be a rumor, we recovered. This shows that the market is trading on pins and needles."
"We believe the market is likely overreacting," Goldman Sachs insurance analyst Thomas Cholnoky said in a research note.
Investors feared AIG could face a write-down of up to $10 billion after Merrill Lynch & Co. Inc. announced on Wednesday an $8.4 billion write-down, largely due to bad investments related to risky sub-prime mortgages. AIG shares fell 3.2% Thursday, trading as much as 8.4% lower.
Published on October 29, 2007
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