Tax benefits help AIG to get back on track

City A.M. Reporter
AMERICAN International Group (AIG) reported a larger profit for the second quarter yesterday, as tax benefits boosted results and operating income grew across the company’s varied insurance businesses.

The company also reported more than $11bn (£7bn) in liquidity at the parent company level, a cash pile most people expect it will use to buy down some of the government’s remaining stake.

Net profit rose to $2.33bn, or $1.33 per share, from $1.84bn or $1 a share a year earlier. Operating income was $1.06 per share. Net income was boosted by a tax allowance release of some $1.28bn, the latest in a series of tax benefits the company has been able to recognize as it returned to profitability. It was partially offset by a tax expense of $331m and an increase to legal reserves of $450m.

The company, still 61 per cent-owned by the US Treasury after its $182bn bailout, ended the quarter with roughly $11.5bn in parent company liquidity. Analysts and investors expect the company will use a large chunk of this to buy back some of the Treasury’s stake.

In recent quarters the Treasury has launched a share sale the day after results.

Some of that capital came from the sale of assets in Maiden Lane III, the crisis-era bailout vehicle set up by the Federal Reserve Bank of New York. AIG has already received $6.1bn in proceeds from MLIII asset sales and expects to receive another $1.9bn this month.