By Hugh Son Bloomberg
May 7 (Bloomberg) -- American International Group Inc., the insurer rescued by the U.S., posted profit for the third time in the past four quarters as writedowns narrowed and investment income climbed. The stock advanced in early trading.
First-quarter net income of $1.45 billion, or $2.16 a share, compares with a loss of $4.35 billion, or $39.67 a year earlier, AIG said today in a statement. Profit excluding some investment results was $1.21 a share, beating the average 48- cent estimate of two analysts surveyed by Bloomberg. AIG opted for the time in four quarters against extending the period in which it is committed to supporting plane-leasing and consumer- lending units, citing their renewed access to private funding.
Chief Executive Officer Robert Benmosche has said AIG is “now on a path” to repaying loans in the insurer’s $182.3 billion rescue after announcing deals in March to sell two life divisions for about $51 billion. Results have stabilized at remaining insurance units and the company may recover by year- end from junk status assigned to its stand-alone credit, Standard & Poor’s said last month.
“The underlying fundamentals are improving,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “There’s a little more confidence in their public message, which is worth respecting.”
LBO, Hedge Funds
Writedowns on securities narrowed to $309 million from about $3.7 billion a year earlier, the company said in a regulatory filing. Investment income surged as alternative assets, including private-equity and hedge-fund investments generated $384 million, compared with a loss of about $1 billion a year earlier.
The insurer advanced 3.4 percent to $38 at 7:35 a.m. in New York. AIG climbed about 23 percent this year through yesterday on the New York Stock Exchange, rewarding investors betting on a rebound, including Bruce Berkowitz, who runs Fairholme Capital Management. Fairholme owned about 15 million shares as of March 31, the biggest stake after the U.S. government. The insurer slipped 4.5 percent in 2009 and plunged 97 percent in 2008.
AIG said today it “intends to provide support” to plane lessor International Lease Finance Corp. and consumer lender American General Finance Corp. through Feb. 28, 2011, the same date the company gave in its annual report 10 weeks ago. “At the current time AIG believes that any further extension of such support will not be necessary,” the insurer said in the regulatory filing.
Bailed Out
AIG, once the world’s largest insurer by assets, needed a bailout in 2008 after losses from soured housing bets sapped the parent company of cash. The rescue includes a $60 billion Federal Reserve credit line, a Treasury Department investment of as much as $69.8 billion and up to $52.5 billion to buy mortgage-linked assets owned or backed by the company.
Treasury is considering a plan to convert AIG preferred shares into common stock and sell the holdings on the open market over two years, a person with knowledge of talks with the insurer said last month. If AIG consents to the strategy and there is sufficient investor demand, the sales could be announced as early as the fourth quarter, the person said.
Donald H. Layton, the former CEO of E*Trade Financial Corp., and Ronald A. Rittenmeyer, the retired chairman and CEO of Electronic Data Systems Corp., were named to AIG’s board last month. Treasury selected the directors after AIG missed four dividend payments. Henry Miller, co-founder of investment bank Miller Buckfire & Co., was elected to the board after Dennis Dammerman resigned for health reasons.
AIG is under the jurisdiction of Kenneth Feinberg, the Obama administration’s special master for executive compensation, who instituted a $500,000 salary cap for most managers. Feinberg may have put AIG at a “competitive disadvantage,” by shifting more executive compensation to stock rather than cash, the insurer said last month in a regulatory filing.
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