Sifting through the quarterly earnings release from American International Group, Inc. (NYSE: AIG) is like searching for a smaller needle in an ever-shrinking haystack. As the company continues to jettison more of its holdings, its market cap falls and the stuff someone else might want to buy gets harder and harder to find.
For the second quarter, AIG reported diluted EPS of $1.99, excluding items, on revenue of $19.19 billion. Adjusted net income totaled $1.34 billion. In the second quarter of 2009, the company reported adjusted net EPS of $1.71 on adjusted net income of $1.14 billion. Analysts were expecting EPS of $0.99 on revenue of $19.18 billion.
AIG’s earnings excluded payments to US taxpayers and a $3.3 billion impairment charge related to goodwill for discontinued operations. AIG also gained $228 million from the termination fee paid by British insurer Prudential PLC when Prudential backed out of the deal to buy AIG’s American International Assurance, AIA, segment.
President and CEO Robert Benmosche noted that the sale of AIG’s American Life Insurance Company, ALICO, to MetLife, Inc. (NYSE: MET) should be completed by the fourth quarter. AIG will also proceed with a plan to take AIA public on the Hong Kong Stock Exchange. Benmoche said that these two transactions should “allow the company to substantially reduce its obligations to the Federal Reserve Bank of New York (FRBNY) and take significant steps toward a sustainable capital structure.” Had the sale of AIA gone as planned, AIG would have realized about $50 billion in from the two transactions. The sale of Alico is expected to bring in $15.5 billion to AIG.
AIG’s remaining businesses posted pre-tax operating earnings of $2.2 billion in the second quarter. The company’s foreign life insurance and retirement services segment generated $604 million in pre-tax operating earnings, the “vast majority” of which came from AIA.
AIG had expected to sell AIA for about $35 billion. When Prudential revised its offer down to about $30 billion, AIG walked away. US taxpayers, who own 80% of AIG, might have been happy with that $30 billion. That’s a lot more than an IPO will generate.
AIG shares are trading up nearly 5% on the strength of the earnings report. AIG’s report even put a charge into Fannie Mae shares (OTC: FNMA), which are up nearly 8% to $0.39.
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