AIG Reports First Profit Since 3Q Of '07

The company, which gave taxpayers a 79.9 percent interest in the firm last year in order to secure government backing and keep it afloat, said it still owes the government $86.4 billion. The firm did not hold an analysts' conference call to discuss the results.

Mr. Liddy said the results were primarily driven by reductions in net realized capital losses and improved market conditions.

"While our insurance companies' operating results remain challenged, largely driven by weak economic conditions and the lingering effect of negative AIG events earlier in the year, performance trends stabilized from the first quarter," he continued.

While the company will focus on stabilizing and strengthening the business, "continued volatility" is expected in future quarters, he said.

The volatility, Mr. Liddy explained, will come from accounting charges to its restructuring activities, especially as it pays down its loan from the Federal Reserve Bank of New York with the spin-off of two of its life units that will result in substantially reducing AIG's debt to taxpayers.

The company had a second quarter net income of $1.85 billion, or $2.57 a share, compared to net loss of $5.4 billion, or net loss per share of $10.15.

AIG beat analysts' consensus estimate $1.67 a share.

For the first six months, AIG reported net loss of $3.3 billion, or loss per share of $6.61, compared to $13.13 billion, or $37.92 loss per share for the prior year.

On the property and casualty side of the ledger, AIG reported net premiums written of $7.9 billion, down 19 percent from $9.8 billion for the same period last year. Underwriting profit fell 80 percent, or $608 million, to $148 million as it reported a 5.99 point deterioration in its combined ratio to 98.16. Operating income for the segment was off 20 percent, or $241 million, to $971 million.

For the six months, net premiums written fell 19 percent, or $3.6 billion, to $15.7 billion. Underwriting profit fell 72 percent, or $1.1 billion, to $425 million, reporting a combined ratio increase of 5.65 points to 97.39. Operating income dropped 60 percent, or $1.6 billion, to $1.09 billion.

Insurance results for commercial insurance, that reported a combined ratio increase of 5.9 points to 99.8, reflected increased loss trends and the soft market environment, the company said.

General insurance combined ratio rose 6 points to 98.2 on declines in net investment income while foreign general rose 6.1 points to 95.5, which was primarily attributed to separation costs, restructuring charges, bad debt expenses and decreased earned premium.

General insurance net premiums written fell 19 percent in the quarter driven by the economic downturn affecting the volume of business and maintaining underwriting discipline across business lines. However, the line continues to retain the vast majority of its customers, AIG said.

Foreign general net premium written, which dropped 21 percent, was impacted by the effects of foreign currency exchange rates, the company reported.

As of June 30, AIG said the total balance outstanding to the Federal Reserved Bank of New York was $44.8 billion and it owes $41.6 billion to the U.S. Treasury under the Troubled Asset Relief Program.

AIG also announced that Harvey Golub was named non-executive chairman of AIG. Mr. Golub, 70, was chairman and CEO of American Express Co. from 1993 to 2001 and became a member of the AIG board earlier this year.

Mr. Golub and Robert H. Benmosche, who replaces Mr. Liddy as president and CEO, assume their new roles on Monday.