November 5, 2010

AIG Posts $2.4 Billion Loss for Q3

Charges incurred on sale, goodwill offset general insurance growth

The bailout of AIG (AIG.N) was costly not just to the taxpayer but also to the company itself, reflected in the $2.4 billion loss AIG reported Friday for the third quarter. This amounted to a loss of $17.62 per share, compared to net income of $455 million, or $0.68 per share, in Q3 of 2009.

The loss, according to AIG, was due in part to restructuring costs of $4.5 billion that included the sale of its American General Finance division to Fortress Investment Group (FIG.N) (a loss of $1.9 billion, previously announced) and goodwill (also previously announced) and tax items at $1.3 billion each. In addition, there was a $1.2 billion amortization of the prepaid commitment fee asset related to bailout funds, as well as other factors.

The company reported that income from continuing insurance operations, at $2.1 billion, was stable.

Thanks to the federal bailout, AIG is 80% owned by the governement, and is still paying back on the $100 billion debt still outstanding. Its original bailout package totaled $182 billion, part of which was never used. AIG was one of the most endangered financial companies before federal funds came to the rescue; the company received the single largest bailout.

Although other companies have paid down TARP debt to varying degrees, the amount of AIG that is federally owned will actually rise once the money from the sales of AIA and ALICO bring in some $37 billion; that money will be used for a restructuring plan that was announced Sept. 30, and will bring the government’s stake in the troubled company to 92.1%. As of June 30, it still owed $132.1 billion, and its recent repayment efforts have been primarily through a combination of division sales and stock swaps, and according to several reports, is not any closer to repaying its debt.

Read more about AIG at AdvisorOne.com.

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