Tax benefit causes AIG profits to skyrocket

AIG InsuranceAmerican International Group Inc. (AIG) has announced a fourth quarter 2011 profit of $19.8 billion following a large tax benefit that it received after it submitted its predictions regarding its ability to maintain the generation of profits over the upcoming years.

The bailed-out insurance company received tax benefits worth $17.7 billion within the last three months of last year. This was a sum that was significantly greater than the $1.6 billion operating income that it received from its insurance businesses and other branches throughout that same time. Equally, though, the operating profit of $0.82 per share surpassed the agreed upon estimates of analysts, which had predicted $0.63 per share.

Ahead of the release of the results last Thursday, the shares at the New York Stock Exchange closed at $27.99, which was the highest point that they’d reached in more than half a year. However, after trading hours saw a jump in the shares, reaching $29.

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This was the level the shares had reached in May 2011, when the U.S. Treasury sold the final portion of its AIG majority stake. AIG is still 77 percent owned by the Treasury, though that is expected to fade over time as the market conditions permit it.

The tax boost that the insurer received was the result of a write-downs reversal that it took in order to decrease its deferred tax assets value, which are tax credits and deductions that go unused but that can be utilized for defraying tax bills at some point in the future.

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