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February 22, 2012 9:19 AM EST
Bailed-out insurance giant American International Group Inc. (NYSE:AIG), boosted by a one-time accounting gain, is expected to return to profitability when it reports its fourth-quarter earnings after markets close Thursday. Favorable stock market conditions and less reserve charges may also have helped offset large losses stemming from Thailand floods.
The New York-based insurer may post earnings per share of 61 cents, a swing from a net loss of $16.20 per share in the year-ago period, based on the average estimate of analysts surveyed by Thomson Reuters. Analysts are forecasting a decline of 37.4 percent in revenue from the year-earlier quarter to $13.19 billion.
"Net income may be substantially higher than operating earnings per share this quarter if AIG removes a portion of its deferred tax asset valuation allowance," Credit Suisse analyst Thomas Gallagher said in a January note. He is calling for higher-than-consensus earnings per share of 67 cents.
For the year, analysts are projecting profit of 77 cents per share, reversing a loss of $6.57 in 2010.
"Without a really big reserve loss or a really big Thailand loss, I think AIG will likely report decent earnings," said Josh Stirling, senior analyst at Sanford C. Bernstein & Co.
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Favorable Stock Market
"The one thing that kind of worked against AIG is the low interest rate environment," said Jim Ryan, an ananalyst at Morningstar Inc. "On the other hand, that's offset by a pretty good stock market in the fourth quarter."
Shares of AIA Group Ltd., AIG's Asia life insurance unit, appreciated 8.3 percent in the last quarter of 2011.
Under mark-to-market accounting, AIG records substantial profits when AIA shares rise. But when the stock falls it also generates great losses. At the end of the third quarter, AIA was valued at $11.3 billion.
As part of AIG's efforts to repay the government bailout, AIG took AIA public in Hong Kong in 2010 but retained a one-third stake.
Thailand Floods
"Thailand losses in their Chartis business have the possibility of being material for the earnings in the fourth quarter," Stirling said.
AIG said it expects additional catastrophe losses emerging in Chartis' international operations from the Thailand floods.
AIG has a 2.6 percent in the Thailand property and casualty market and potentially even more exposure from global accounts.
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