Bloomberg News

AIG May Post Loss on AIA, Mortgage Writedowns, Shanker Says

September 14, 2011

(Updates shares in the sixth paragraph.)

Sept. 14 (Bloomberg) -- American International Group Inc., the insurer majority owned by the U.S., may be unprofitable this quarter on declines in its stake in AIA Group Ltd. and mortgage- related investments, Deutsche Bank AG said.

AIG may post a loss of 24 cents a share, Joshua Shanker, a Deutsche Bank analyst, said yesterday in a note to clients. He had previously estimated that the New York-based insurer would earn 33 cents a share. AIA, the insurer one-third owned by AIG, fell 12 percent since June 30 in Hong Kong trading. Mortgage- linked investments held by Federal Reserve rescue vehicles may have also declined in the quarter, Shanker said.

Chief Executive Officer Robert Benmosche, 67, is seeking to show consistent profits at AIG’s remaining units as he attracts private investors to replace the U.S. Treasury Department’s 77 percent stake. Some investments tied to AIG’s bailout and repayment efforts expose the company’s earnings to changes in the market, said Shanker.

“AIG’s investment portfolio is more complicated than most of its peers,” Shanker said in the note. The holdings in AIA and the Fed’s so-called Maiden Lane vehicles are “open to mark- to-market fluctuations,” he said.

Shanker, who advises clients to buy AIG shares, estimated the insurer’s losses on AIA and the Maiden Lanes at about $2 billion. Pretax yields on the company’s fixed-income investments may be less than 4 percent “for the foreseeable future,” he said. Mark Herr, a spokesman for AIG, declined to comment.

The insurer advanced 33 cents to $24.49 at 4:01 p.m. in New York Stock Exchange composite trading. The company has plunged by almost half since Dec. 31.

AIG has been profitable in three straight quarters through June 30, rebounding from losses in the second and third period of 2010. AIG sold a majority stake in Hong Kong-based AIA last year to help repay its bailout.

--Editors: Dan Kraut, William Ahearn

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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