AIG Sees Huge Profit Due to Accounting Gain
American International Group (AIG), the insurance company bailed out by the government in 2008, reportedly posted $19.8 billion in profits during the fourth quarter of last year. However, the report also revealed the majority of the profit was due to a tax-related accounting gain.
AIG Continues to Restructure after Bailout
AIG has seen its share of ups and downs over the past few years. After near collapse in 2008 thanks it its involvement inÂ credit default swaps and other actions directly resulting in the downfall of the financial sector, an AIG multi-billion dollar bailoutÂ from the government was issued to keep the company afloat as it was deemed “too big to fail.”
After quietly spending the next couple of years restructuring its company, which included selling many parts of its insurance business to raise money, the company began to find its footing again.
By 2010, it guaranteed the government that it would repay both the Federal Reserve and U.S. Treasury billions in bailout funds, which it continues to do.
Accounting Gain Boosts AIG’s Profits
It took a while for AIG to see any type of profit after receiving bailouts in 2008 and 2009, but finally in the first quarter of 2010 the company posted a profit that exceeded $1 billion. And in the fourth quarter of 2011, the company says it reported an even larger profit.
Excluding its tax-related accounting gain, the company had operating earnings of $1.6 billion, or 82 cents a share, compared with an operating loss of $2.2 billion, or $15.99 a share, a year earlier.
Additionally, AIG reported earnings of $17.8 billion for 2011, which is the second straight annual profit for the company.
But even after earning higher profits and making large repayments, the government still owns about 76 percent of the company, which means it has a way to go before becoming a completely independent company once again.