LevonP
11-08-2008, 12:59 PM
CHARLOTTE, N.C. -
American International Group Inc. is scheduled to report its third-quarter results Monday before the market opens. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Once one of the world's largest insurers, AIG (nyse: AIG - news - people ) found itself strapped for cash as it was hit hard by deterioration in the credit markets and concerns that the complex, structured investments it insures would increasingly default.
In mid-September, the Federal Reserve bailed out the New York-based insurer, providing a two-year, $85 billion loan. The Fed then said it would loan the company an additional $37.8 billion, and last week AIG tapped $20.9 billion more via an additional Fed credit line. AIG continues to face a liquidity crunch greater than was anticipated.
In total, the government has put about $144 billion at AIG's disposal.
Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.
AIG's traditional insurance subsidiaries, however, have widely been viewed as safe. AIG operates an insurance and financial services businesses ranging from property, casualty, auto and life insurance to annuity and investment services.
On Oct. 3, AIG said it would sell off certain business units to pay off the $85 billion loan. The company, however, said it plans to retain its U.S. property and casualty and foreign general insurance businesses. It also plans to keep an ownership interest in its foreign life-insurance operations.
Since then, no deals have been announced.
BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect AIG to report a third-quarter loss of 90 cents per share on revenue of $18 billion. In the year-ago period, AIG posted operating earnings of $1.53 per share on revenue of $29.84 billion.
ANALYST TAKE: AIG is widely expected to announce a significant loss for the third quarter.
While the initial liquidity squeeze at AIG was caused by collateral tied to its financial products unit, the company is now also facing liquidity issues related to its securities lending program, CreditSights analyst Rob Haines wrote in a recent note to clients.
"Like many insurance companies, AIG earns extra fees on its investment portfolio by lending out securities," Haines wrote. "The problem now is that with the collapse in the credit markets the value of the collateral invested by AIG has fallen significantly."
Haines said he believes the current existing Federal funding facilities "should be adequate to address liquidity needs," but went on to say "we cannot be certain."
WHAT'S AHEAD: Analysts will be looking for any update on AIG's outstanding loans, as well as details surrounding any sales of the company's business units.
STOCK PERFORMANCE: Shares lost more than 87 percent during the quarter to close at $3.33.
American International Group Inc. is scheduled to report its third-quarter results Monday before the market opens. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Once one of the world's largest insurers, AIG (nyse: AIG - news - people ) found itself strapped for cash as it was hit hard by deterioration in the credit markets and concerns that the complex, structured investments it insures would increasingly default.
In mid-September, the Federal Reserve bailed out the New York-based insurer, providing a two-year, $85 billion loan. The Fed then said it would loan the company an additional $37.8 billion, and last week AIG tapped $20.9 billion more via an additional Fed credit line. AIG continues to face a liquidity crunch greater than was anticipated.
In total, the government has put about $144 billion at AIG's disposal.
Problems at AIG did not come from its traditional insurance subsidiaries, but instead from its financial services operations, and primarily its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.
AIG's traditional insurance subsidiaries, however, have widely been viewed as safe. AIG operates an insurance and financial services businesses ranging from property, casualty, auto and life insurance to annuity and investment services.
On Oct. 3, AIG said it would sell off certain business units to pay off the $85 billion loan. The company, however, said it plans to retain its U.S. property and casualty and foreign general insurance businesses. It also plans to keep an ownership interest in its foreign life-insurance operations.
Since then, no deals have been announced.
BY THE NUMBERS: Analysts polled by Thomson Reuters, on average, expect AIG to report a third-quarter loss of 90 cents per share on revenue of $18 billion. In the year-ago period, AIG posted operating earnings of $1.53 per share on revenue of $29.84 billion.
ANALYST TAKE: AIG is widely expected to announce a significant loss for the third quarter.
While the initial liquidity squeeze at AIG was caused by collateral tied to its financial products unit, the company is now also facing liquidity issues related to its securities lending program, CreditSights analyst Rob Haines wrote in a recent note to clients.
"Like many insurance companies, AIG earns extra fees on its investment portfolio by lending out securities," Haines wrote. "The problem now is that with the collapse in the credit markets the value of the collateral invested by AIG has fallen significantly."
Haines said he believes the current existing Federal funding facilities "should be adequate to address liquidity needs," but went on to say "we cannot be certain."
WHAT'S AHEAD: Analysts will be looking for any update on AIG's outstanding loans, as well as details surrounding any sales of the company's business units.
STOCK PERFORMANCE: Shares lost more than 87 percent during the quarter to close at $3.33.