AIG, continuing its recovery from near-collapse, posts $455 million profit

Second straight quarterly gain for insurer

American International Group, the insurance giant whose near-collapse last year prompted a massive federal bailout, on Friday posted its second consecutive quarterly profit as some of its units continued to stabilize and improved financial markets boosted the company's bottom line.

The New York-based insurer reported a third-quarter profit of $455 million, or 68 cents a share, compared with a $24.47 billion loss, or $181.02 a share, during the same period last year, according to a regulatory filing.

For the second straight quarter, AIG elected not to hold an investor call to discuss its results. But in a statement, new chief executive Robert H. Benmosche was both optimistic and cautious in explaining Friday's numbers.

"Our results reflect continued stabilization in performance and market trends," he said, adding, "We continue to focus on stabilizing and strengthening our businesses, but expect continued volatility in reported results in the coming quarters, due in part to charges related to ongoing restructuring activities."

AIG said Friday that it continues to shrink the number of trades and the outstanding exposures at its troubled Financial Products unit, where complex credit derivatives contracts nearly destroyed the parent company last year and led to an unprecedented government intervention.

The much-maligned subsidiary reported operating income of $1.4 billion in the third quarter, compared to an $8.3 billion operating loss during the same period a year ago, in large part because improvements in the mortgage markets boosted the value of the firm's credit-default swaps, insurance-like contracts that AIG had written on mortgage-backed securities. It was that same type of deal that caused monumental losses for the company over the past two years.

Friday's disclosure showed that so far this year, AIG has sold or agreed to sell operations and assets expected to generate a total of approximately $5.6 billion in proceeds that could be used to repay its colossal debt to U.S. taxpayers. That debt is part of a total rescue package that stands at more than $180 billion, although the company's balance remains significantly lower.

The company said that it expects to record a $5 billion charge in the fourth quarter as it spins off two of its major life insurance businesses -- American International Assurance, or AIA, and American Life Insurance Co., known as Alico.

Analysts noted that premiums continued to fall at AIG's core insurance businesses during the third quarter, as the company struggled with a weak economy and lingering questions about AIG's viability.

"If they can hold the fort on that stuff and rebuild healthy premium growth, it's going to be key to their survival," said Bill Bergman, an analyst with Morningstar in Chicago. "There's been some stabilization, but they're not out of the woods yet. It's better, but it's not good."

Still, Friday's numbers marked a significant departure from March 2, when AIG reported a staggering $61.7 billion loss for the fourth quarter of 2008, the largest quarterly loss in U.S. corporate history. The company lost nearly $100 billion that year.

AIG lost another $4.35 billion during the first quarter of this year, but followed that up with its first profitable three-month period since 2007, posting a $1.82 billion profit for the second quarter.

Shares of AIG, which have fluctuated wildly this year, closed at $35.48, down 9.7 percent.