Tough Times at AIG

Posted by: Diane Brady on November 7, 2007

American International Group just reported a 27% drop in net income for the third quarter, to $3.09 billion from $4.22 billion. A major culprit? Subprime mortgages, of course.

CEO Martin Sullivan said the mortgage guaranty business suffered a loss “resulting from the continued deterioration in the U.S. housing market.” Investors have been anticipating as much, driving down the stock from $72.97 in May to $57.90 after the announcement. There was a brief period of optimism earlier this week when it looked like ex-chief Hank Greenberg might be able to force a break-up or even a takeover. But that looks unlikely, though some are starting to share Greenberg’s sentiment that not enough has been done to grow the company since Sullivan took over.

AIG remains a powerhouse in the financial services industry and its diversity has helped minimize damage from the housing fallout. But I wonder if the investor unrest of recent months might prompt Sullivan to get out there more. The company has a distinctly lower profile than it did under Greenberg and Sullivan himself remains an enigma. What better time to address a jittery market and share his vision for where AIG is going to go?

 

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