Is AIG Painting Itself into a Corner?

American International Group Inc. (NYSE:AIG) posts a $4.11 billion third quarter loss causing its share price to take a major plunge and casting doubt upon whether or not the company can benefit from more than $25 billion in assets that can be used to decrease future tax bills.  Bloomberg cites the insurance company’s regulatory filing that was released yesterday as saying, “the fourth quarter will be ‘very important’ in determining whether AIG can lower a so-called valuation allowance that has restricted the company’s use of the tax assets.”

This quarter’s loss was so large that it actually negated all profits reported by the company in the first half of the year.  AIG (NYSE:AIG) released a statement yesterday saying that the losses were largely due to “impairments of aircraft in its plane-leasing unit and declines in mortgage-related investments and the value of its stake in a former Asian subsidiary,” per Bloomberg.  Bloomberg also reports the AIG CEO Robert Benmosche cited the tax assets as a “source of funds” in the company’s planned stock buyback.   The AIG board approved a $1 billion stock repurchase, the first since the 2008 bailout which made the US Treasury Department the majority shareholder.

Bloombery quotes Georgia Institute of Technology accounting professor, Charles Mulford, as saying, “If investors were having qualms about this and were stepping back a little, management is saying, basically, ‘You better step back a lot.’  The profit visibility is very murky.”

Here’s how AIG is trading:

  • American International Group, Inc. (NYSE:AIG): The shares recently traded at $23.80, down $0.83, or 3.37%. Its market capitalization is $45.17 billion. They have traded in a 52-week range of $19.18 to $62.87. Volume today was 6,239,458 shares versus a 3-month average volume of 8,106,710 shares. The company’s trailing P/E is 4.54, while trailing earnings are $5.24 per share. About the company: American International Group, Inc. is a holding company which, through its subsidiaries provides a varied range of insurance and insurance-related activities in the United States and abroad. The Company’s main activities include both general insurance and life insurance & retirement services operations as well as financial services and asset management. Get the most recent company news and stock data here >>

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