AIG shares plunge on analyst’s report of $11B reserve shortfall
American International Group Inc. shares fell sharply Monday as a Sanford Bernstein analyst reportedly said the embattled insurer doesn't have enough reserves to pay some potential claims.
American International Group Inc. shares fell sharply Monday as a Sanford Bernstein analyst reportedly said the embattled insurer doesn’t have enough reserves to pay some potential claims.
Separately, the Financial Times reported AIG may soon get a bid for a part of its aircraft leasing unit from a group that includes the head of that business.
A spokeswoman for AIG declined to comment on either report.
Shares of AIG fell $4.02, or 12 percent, to $29.28 in midday trading. Shares have traded between $6.60 and $55.90 during the past year.
Todd Bault, an analyst from Sanford Bernstein, said AIG is facing an $11 billion shortfall to cover potential claims in its property and casualty insurance business, according to CNBC.
Covering that shortfall could cause problems for the insurer based in New York as it tries to repay a government bailout package it received to help stay in business.
Bault declined to share the research note.
AIG is trying to sell assets and raise capital to help repay the government, which bailed it out last year with a loan package worth more than $180 billion. The government received an 80 percent stake in AIG as part of the bailout.
As of Sept. 30, AIG owed the government about $85.66 billion in loans as part of the broader bailout package.
Meanwhile, the Financial Times said AIG could be a step closer to selling a portion of its aircraft leasing business, International Lease Finance Corp., to a group of private investors and the unit’s chief executive, Steven Udvar-Hazy. The sale of a piece of ILFC, among AIG’s profitable units, could help relieve some of its debt burden.
AIG’s aircraft leasing unit generated operating income of $365 million during the third quarter, a 19 percent jump from the same quarter a year earlier and a 9 percent increase from the previous quarter.
The prospective buyers would acquire about half of ILFC’s business, which buys airplanes and then leases them to major airlines, for more than $2 billion, according to the Financial Times.
AIG has returned to profitability as credit and stock markets improved in recent months. The insurer has recorded two straight profitable quarters, including net income available to common shareholders of $92 million in the three months ended Sept. 30. Including the government’s portion of the profit, AIG earned $455 million during its most recent quarter.
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