AIG shares fall amid reports of reserve shortfall

Associated Press
November 30, 2009

NEW YORK (AP) — Shares of American International Group Inc. tumbled nearly 15 percent Monday after an analyst stirred concerns that the troubled insurer doesn't have enough reserves to pay some potential claims.

AIG shares dropped $4.90, or 14.7 percent, to finish at $28.40 — their lowest close since August 19. The shares have more than quadrupled from a low of $6.60 in March.

Sanford Bernstein analyst Todd Bault said AIG is facing an $11 billion shortfall to cover potential claims in its property and casualty insurance business, according to media reports Monday. Bault declined to share the research note.

Covering that shortfall could cause problems for the New York-based insurer as it tries to repay a government bailout package it received to help stay in business.

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, which is based in New York, declined to comment on either report.

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. In return, the government received an 80 percent stake in AIG. As of Sept. 30, AIG owed the government about $85.66 billion in loans as part of the broader bailout package.

The Financial Times said AIG could be a step closer to selling a portion of the 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 posted two straight quarters of profits as credit and stock markets improved in recent months. Including the government's portion of the profit, AIG earned $455 million during its most recent quarter.

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