AIG's profits don't erase its problems
The troubled insurer will likely report its second profitable quarter in a row Friday but the company still has a sizeable debt to repay.
NEW YORK (CNNMoney.com) -- AIG is expected to report its second profitable quarter in a row early Friday, but the troubled insurer still faces a large uphill battle in its attempt to return to solid footing.
Analysts surveyed by Thomson Reuters expect AIG to have earned $254 million, or $1.20 per share, for the third quarter ended Sept. 30. Analysts are forecasting AIG's revenue will total $23 billion. In August, AIG reported that it had returned to profitability after six straight losing quarters, logging a profit of $1.8 billion, or $2.30 per share, on revenue of $29.5 billion.
Another quarter in the black would be an encouraging sign for AIG, which will likely show some hefty restructuring charges for the past three months as it continued to sell off its assets to pay back the almost $90 billion it owes taxpayers.
Insurance experts say a profitable quarter would be partly a result of the housing market recovery that started during the past few months. As the mortgage market comes back, the value of the volatile credit-default swap insurance that AIG' wrote on mortgage-backed securities will continue to increase.
AIG's financial products division, which still holds more than $1 trillion in credit-default swaps, stands to gain about $2.5 billion from the recent housing market upturn, wrote Credit Suisse analyst Thomas Gallagher in a recent note to clients. With asset sales still slow-moving, that gain would likely more than offset the restructuring charges AIG faced in the quarter, he argued.
AIG isn't out of the water yet. The company has yet to follow through with its commitment to break off two enormous foreign life insurance units, which it said would be spun off before the end of the year. In the first half of the year, AIG sold just $2.6 billion worth of assets to pay down its sizeable debt to the government.
To get the ball rolling a bit faster, the company has agreed to sell stakes in the two subsidiaries to the government. In exchange, the Fed will forgive $25 billion of its roughly $45 billion loan to the insurer. AIG also still owes the Treasury $44.8 billion. |
Thread abonnieren
