Why AIG's 2nd-quarter earnings are up
Financial giant AIG is reporting its first profit since 2007. The troubled insurer says it made $1.8 billion in the second quarter. Mitchell Hartman reports on the company's crawl out of its bailout hole.
American International Group (AIG) offices in New York City. (Mario Tama/Getty Image)
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Steve Chiotakis: We got word just a few minutes ago that American International Group posted its first profit in seven quarters. The troubled insurer says it made $1.8 billion in the second quarter.
Now AIG received tens of billions of dollars in federal bailout money because it was hemorrhaging to the brink of oblivion. The government -- read: you and I -- own 80 percent of the company. Reporter Mitchell Hartman has more on its crawl out of the bailout hole.
MITCHELL HARTMAN: First a little history. AIG got into risky securities backed by shaky mortgages. It was losing billions on these so-called "toxic assets," until the government bailed it out last fall. Now, $182 billion in taxpayer money later, AIG appears to be doing fine. Its stock was up as much as 65 percent earlier this week.
Jeffrey Kleintop is chief market strategist at LPL Financial in Boston. He thinks what's happening, in part, is that AIG's troubled assets are starting to increase in value -- just a bit -- as financial markets recover.
JEFFREY KLEINTOP: Markets have gone from pricing in a Great Depression, to merely a typical recession, to now, a recovery.
But, Kleintop says, it's not like these assets have gone through a complete "detox" and are now high-quality investments.
KLEINTOP: Delinquencies continue to rise, defaults continue to rise, there are foreclosures taking place. So on a lot of those mortgage-backed assets, the fundamentals haven't gotten a whole lot better.
Still, he says, as investor confidence returns, companies like AIG will find a market for their troubled assets. And that'll help their bottom lines.
I'm Mitchell Hartman for Marketplace.
Comments
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From Riverview, FL, 08/07/2009
So, I guess it’s going to be bonus time at AIG.Where’s the American tax payer’s bonus?What makes these so called financial geniuses think they deserve to be rewarded?Did they save the company from financial ruin?No,the tax payer did.
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