Has AIG Turned a Corner?
As American International Group (NYSE:AIG) waits for a federal panel to determine whether or not the insurer is worthy of a “systemically important financial institution” designation, the company contemplates its future.
Reuters reported on Monday that AIG is planning to sell its savings and loan business as “it’s a business that doesn’t makes sense to be in,” according to the company’s Chief Executive Officer Bob Benmosche.
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Currently, AIG is regulated by the Federal Reserve because it has a savings and loan business; however, even without it, the firm will likely come under the Fed’s permanent oversight if AIG is deemed by the Financial Stability Oversight Council to be “too big to fail.”
The Financial Stability Oversight Council, led by Treasury Secretary Timothy Geithner, is responsible for assessing which banks and non-bank institutions should be subject to increased Federal Reserve supervision. Measures taken by the council aim at preventing further government bailouts by ensuring that a firm’s failure would not jeopardize the American financial system.
With the bailout in the past, CNBC’s Jim Cramer believes that the insurance company has “righted itself in a major way.”
In support of his position, Cramer cited the company’s third quarter results, terming them a “big earnings beat.” Although the stock fell 7 percent after the results were released on November 2, the insurer beat analysts’ expectations and swung to a profit for the three-month period due to “improvements in every aspect of its business,” according to the Wall Street Journal.
Now AIG is considering expanding its mortgage business. “We are also now looking at ways we could become direct investors in mortgages,” Benmosche told Reuters. “We are going to do more of our own direct lending, both commercially and residentially.”
“There’s several things we could be doing and we are still exploring all of those possibilities,” he added.
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