Friday, February 24, 2012

AIG Posts Huge Profit, Helped by Tax Benefit

American International Group reported its profit jumped 77 percent to $19.8 billion in the fourth quarter, helped by a big tax benefit after the bailed-out insurer determined that it was likely to post profits in the future.

AIG CEO Robert Benmosche said AIG is doing much better.

"Our reserves are in great shape," Benmosche told CNBC after the earnings release. "We’ve been saying that all year long. The fact is that our businesses are in great shape. People were worried about the AIG franchise ... People were waiting for a 'but.' There’s no 'buts' here, we’re doing well."

AIG had said during the previous quarter its fourth-quarter results would determine whether it could release a so-called valuation allowance against the tax assets. Having determined it's more likely than not to be consistently profitable in the future, it released most of the allowance in the quarter.

Essentially, that means AIG [AIG  Loading...      ()   ] will not pay tax on tens of billions of dollars of income in the coming years, thanks to benefits that stem from its financial crisis-era losses and the release of deferred tax assets.

Some of the allowance, related to the company's life-insurance business, was not released, a recognition that future profits are not as immediately certain there.

Net income shot up to $19.8 billion, or $10.43 per share, from $11.18 billion, or $16.60 per share, a year earlier. AIG's share count rose year over year, explaining the earnings-per-share discrepancy.

On an operating basis, the company earned 82 cents per share. Analysts had expected the company to earn 63 cents a share, according to Thomson Reuters.

Benmoshe told CNBC the company had $3.3 billion in catastrophe costs, "not outrageous" compared with other years.

He also said the U.S. Treasury Department, which still owns 77 percent of the insurer, wants to "get out as prudently and as quickly as they can." 

"Treasury wants to sell to make a profit for the American taxpayers. That's their goal, that's our goal and we're trying to achieve that," he said.

Benmoshe, who has cancer, said he is in no rush to have "a lot of idle time in my head" in retirement and so plans to stay on at AIG through this year and part of next year.

"I'm going to keep going until I can't," he said.

Following the release, the company's shares rose more than 5 percent. (Click here to get the latest quote for AIG.)

Reuters contributed to this report.

© 2012 CNBC, Inc. All Rights Reserved

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