AIG Earnings, “Comfortable With U.S. Mortgage Market” (AIG)

By Douglas A. McIntyre Published Aug 8, 4:14PM EDT

American International Group, Inc. (NYSE:AIG) posted earnings ahead of estimates with $1.64 EPS on $31.15 Billion, which compares to First Call estimates of $1.61 EPS & $30.1 Billion revenues. On an adjusted basis, the DJIA component with a massive $172 Billion market cap posted $1.77 EPS and the listed net income for the quarter was $4.626 Billion on an adjusted basis. AIG’s shares closed up 1.4% at $66.48 in regular trading ahead of the report. In after-hours shares are up close to 2% at $67.75.

As the largest insurer in America, this was one to watch for malaise comments regarding the recent financial credit meltdown we have seen. The company assets now claims more than $1 Trillion all said and done. Its book value increased again, and generated an adjusted return on equity of 19.8 %. There is ONE KEY STATEMENT here that may be the crux for the entire case that the financial markets aren’t going to implode under the current scenario: "We continue to be very comfortable with our exposure to the U.S. residential mortgage market, both in our operations and our investment activities. However, in recognition of the significant investor interest in this topic, we will provide a presentation during our earnings call, which will be available in the investor information section of AIG’s website tomorrow morning at 7:30 a.m."

As long as we don’t have excessive catastrophic losses in the insurance sector, these comments about "being comfortable with exposure to the U.S. residential mortgage market" are key. After that, it’s all gravy as far as we are concerned. If this isn’t noticed by the financial sector and those who are worried about a total credit and liquidity crunch even with a ‘however’ thrown in as a caveat, then very little else will be able to calm the fears. AIG’s conference call will not be until tomorrow morning.

Jon C. Ogg
August 8, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

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A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.