American International Group Inc.'s (NYSE:AIG) stock has been hot lately, jumping 132% since its reverse stock split on July 1, and the insurer is up again nearly 13% in late morning Friday trading. Friday's rally, analysts say, is pointed to market optimism. But the stock could fall back to reality with volatility on the downside almost a certainty in the near future if a New York Times story about some potential land mines on the horizon for the insurer come to fruition.
AIG still owns big blocks of complex asset-backed securities that could certainly go from bad to worse. Additionally, former CEO Edward M. Liddy pointed out that if AIG is able to repay the government debt through its potential various divestments, the repayment could result in an accounting treatment that could produce a $5 billion pretax hit to earnings, notes the Times story. Ouch!
One potential deal, a sale of AIG's international life insurance business to MetLife Inc. (NYSE:MET), which
the market initially thought would come closer to fruition with the
recent hiring of former MetLife executive Robert Benmosche as AIG CEO, has yet to come. In fact, Benmosche's hiring may have actually slowed the deal because AIG
said in a regulatory filing that it had taken steps "to ensure that Mr.
Benmosche is not inappropriately involved in any transaction between
A.I.G. and MetLife." - Gerald Magpily
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