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

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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; he does not own securities in the companies he covers.