Bailed-out insurer American International Group reported a profit for the second quarter Thursday, as tax benefits and its one-third stake in Asian insurer AIA offset a decline in operating income at its main businesses.
While the underlying results at all of AIG's units were lower than a year earlier, its core insurance performance improved. Most of the decline was attributed to investment results and catastrophe losses.
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Shares were flat in after-hours trading following a sharp decline in regular trading, on what was the market's worst day in nearly three years.
The company received a $182 billion bailout during the financial crisis, and the U.S. Treasury still owns three-quarters of the company, a position it is expected to sell down in stages by mid-2012.
AIG reported a net profit of $1.84 billion, or $1 per share, compared with a year-earlier loss of $2.66 billion, or $19.57 per share.
On an operating basis, AIG earned 69 cents per share. Analysts polled by Thomson Reuters I/B/E/S on average expected earnings of 92 cents per share.
Two items bolstered the quarter: a $570 million tax benefit, and $1.52 billion in fair value income from AIA , the Asian insurer it took public last year.
AIG has said it would like to keep its roughly 33 percent AIA stake, which would require selling assets to pay off a preferred interest held by the U.S. Treasury in the entity that holds the AIA shares.
SunAmerica, AIG's U.S. life insurance business, reported a 13 percent decline in operating income, as lower investment income offset slight growth in new business.
After stagnating during the crisis, the company has recently improved its distribution for annuities and other products and started to show improved results. The company has now returned to all of the distribution channels it had before the credit crisis and AIG's near-bankruptcy.
Chartis, AIG's property and casualty business, was hurt by disaster losses, which totaled $539 million. Operating income fell 17 percent, even though business grew substantially. Pricing for insurance products in the United States improved, while it was generally flat elsewhere.
Operating income at aircraft leasing business ILFC fell by more than half to $86 million on charges to retire debt and dispose of older planes.
The unit, which has been hurt by writedowns for older planes and increasing rates of customer delinquency, is expected to be sold in an IPO later this year.
AIG also said it has completed the planned wind-down of AIG Financial Products, the unit whose risky ventures into derivatives was responsible for the company's downfall. The unit is still operating, but with a much smaller portfolio. (Reporting by Ben Berkowitz, editing by Bernard Orr)