AIG stock is surging in after-hours trading after the company said it would resume paying a dividend and launched a stock buyback.

The insurer announced a 10-cent-per-share dividend and a $1 billion share buyback, a sign that the company has rebounded from the lows of the financial crisis.

"Clearly a dividend is important," CEO Robert Benmosche told CNBC. "It opens up new shareholders for our company."

AIG also reported stronger-than-anticipated earnings for the second quarter, helped by strength in its core insurance business. AIG's net income rose to $2.73 billion, or $1.84 per share, from $2.33 billion, or $1.33 per share, a year earlier.

AIG's CEO: 'Our businesses are producing good earnings across the board'
Bob Benmosche, CEO of AIG, breaks down his company's Q2 earnings. "Dividend is important; it opens up new shareholders to our company," he says. "We had to rewrite part of the 10-Q; we will release it Monday or Tuesday."
Excluding items, AIG posted earnings per share of $1.12, up from 96 cents per share a year earlier, helped by a strong performance in its insurance businesses.
Insurance operating income rose 21 percent to $2.3 billion.

"Our property casualty, life and retirement, and mortgage insurance businesses all posted strong operating results," Benmosche said in a statement.
Revenue fell 5.4 percent to $8.35 billion, missing Street forecasts for $8.62 billion.

"All of our businesses are fundamentally producing good earnings, good revenues for this quarter," Benmosche told CNBC. "So it's really, it's a full story about—it's not just our investments. It's not just our property casualty business, it's not just life and retirement, not just mortgages. We're doing good across the board."
AIG also said that it has not yet closed on the sale of its International Lease Finance Corp. unit, but Benmosche told CNBC that it is continuing to have talks with the Chinese consortium that agreed to buy 80.1 percent of the airplane leasing business in December 2012.

"There's always a chance it won't go through," Benmosche added.

American International Group Inc. on Thursday reported better-than-expected earnings in the first quarter, partly boosted by improvement in commercial insurance underwriting.

The New York-based insurance conglomerate said it earned $2.47 billion, or $1.78 per share. Earnings, adjusted for non-recurring gains, came to $1.22 per share. A year ago the company reported net income of $1.61 billion, or $1.09 per share.

The results surpassed Wall Street expectations. The average analyst estimate according to Zacks Investment Research was for earnings of $1.18 per share.

AIG repurchased $1.4 billion in stock during the first quarter, and it said its board has approved the buyback of up to $3.5 billion more in shares. The company also declared a dividend of 12.5 cents per share, payable on June 25 to shareholders of record as of June 11.

AIG posted revenue of $5.96 billion in the January-March period.

American International Group shares have risen slightly since the beginning of the year, while the Standard & Poor's 500 index has risen slightly more than 1 percent. Shares closed regular trading Thursday at $56.29, a climb of nearly 6 percent in the last 12 months, and added 34 cents to $56.63 in late trading after the earnings announcement.

The U.S. set illegal terms in demanding American International Group Inc. stock for an $85 billion bailout during the financial crisis, but that doesn’t mean AIG investors deserve compensation, a court ruled.

What began as a long-shot lawsuit by Hank Greenberg’s Starr International Co. gained credibility over years of failed government attempts to dismiss it. During an eight-week trial, Starr’s lawyer David Boies grilled Ben Bernanke, Hank Paulson and Timothy Geithner, and U.S. Court of Claims Judge Thomas Wheeler repeatedly ruled in Greenberg’s favor.

But in the end, Greenberg -- who had sought at least $25 billion in damages for shareholders -- got nothing. Though the absence of an award may temper the judge’s dramatic rebuke of the government handling of the bailout, the ruling may still limit the Federal Reserve’s ability to deal with the next crisis.

The case is Starr International Co. v. U.S., 11-cv-779, U.S. Court of Federal Claims (Washington)

American International Group Inc. more than doubled its dividend and increased its share buyback by $5 billion after asset sales helped build up cash, even as results slumped at some of the main insurance operations.

Net income slipped to $1.8 billion, or $1.32 a share, from $3.07 billion, or $2.10, a year earlier, New York-based AIG said in a statement Monday. Operating profit, which excludes some investing results, was $1.39 a share, beating the $1.21 average estimate of 21 analysts surveyed by Bloomberg.

AIG has been selling non-insurance assets and returning cash to shareholders as the company focuses on strengthening units that provide property-casualty and life coverage. Peter Hancock, who became chief executive officer last year, is also seeking to cut costs to help boost margins. The company trades for less than its net-asset value, even after a 15 percent rally this year.

“The benefit of AIG is that it still trades below book value and still has self-help and capital-management dynamics,” Randy Binner, an analyst with FBR Capital Markets, said in a phone interview prior to the results.

AIG said Monday that it got about $410 million in the quarter through the sale of stock in consumer-finance company Springleaf Holdings Inc. Hancock in June raised about $3.7 billion in cash with the sale of most of its stake in AerCap Holdings NV.

The dividend was raised to 28 cents a share from 12.5 cents. The company restored a quarterly payout two years ago after suspending a dividend in 2008, the year the company received a U.S. bailout. AIG has been reshaping management after repaying the rescue. Hancock promoted Brian Schreiber to the chief strategy officer post to oversee acquisitions and divestitures and added Doug Dachille to manage investments.

Book value, a measure of assets minus liabilities, fell to $79.74 from $80.16 as of March 31. Insurers including MetLife Inc. reported declines in the value of fixed-income holdings for the period as interest rates climbed.

AIG slipped 10 cents to $64.05 in extended trading at 4:21 p.m in New York.

Pretax operating income at the commercial-insurance operation led by John Doyle declined 7.7 percent from a year earlier to $1.5 billion.

Property Casualty
Doyle’s property-casualty operation contributed $1.19 billion, down 4.3 percent from a year earlier. The combined ratio at the property-casualty segment worsened to 98.8 from 96.5, meaning the business had an underwriting profit of 1.2 cents for every premium dollar after paying claims and expenses.

P&C margins were hurt by an increase in catastrophe costs and higher-than-expected costs tied to commercial auto policies from prior years. Premium revenue dipped 3.2 percent to $5.1 billion, fueled by currency fluctuations.

At the mortgage-insurance unit, which guards lenders against borrower defaults, profit fell 25 percent to $157 million from a year earlier, when the segment had a benefit tied to reserves. Premium revenue was flat. Profit at the institutional-markets segment declined 11 percent to $151 million.

Retirement Operations
At Kevin Hogan’s consumer business, operating income declined 8.6 percent to $1.02 billion. The contribution from retirement operations increased on improved investment results, while life insurance fell because of claims costs.

The insurer maintained a stake in American General Finance Corp. after agreeing in 2010 to sell the business to Fortress Investment Group LLC. The buyer subsequently rebranded the business as Springleaf.

Hancock’s company got the AerCap stake as part of AIG’s sale last year of International Lease Finance Corp. to the company for about $7.6 billion in cash and stock.

Fannie Mae, the state-sponsored U.S. mortgage backer, is at risk of needing a government bailout that could shake confidence in the housing finance market, senior officials have warned.Fannie Mae's chief executive and its regulator are sounding the alarm on a decline in the institution's capital cushion, which is on course to vanish in 2018, when it would have to ask the US Treasury for emergency funds.Their warnings highlight Washington's inaction on housing policy and its failure to reform the institution, which guarantees nearly $3 trillion of securities and enables 30-year fixed rate loans, following the last financial crisis.

It is through such alchemy that the wizards of structured finance are able to take a package of $400 million of loans rated at BBB- or below (junk) and generate $240 million worth of AAA-rated securities, along with $160 million of lower-rated instruments — a tranche to satisfy every risk appetite.

Investors Rev Up the Risk in Subprime Auto Deals

Some analysts say that if the economy takes a turn delinquencies could lead to a wave of closures among auto lending firms

Dec. 1, 2018 11:00 a.m. ET

Investors are gobbling up auto loans extended to the riskiest borrowers, looking past market warning signs as they reach further for returns.

This year, they have been buying subprime auto securitization deals that offer slices with single-B credit ratings, well into junk territory and the lowest grade offered when such bonds are sold. Auto lenders have issued $318 million worth of single-B debt in 2018, more than all prior years combined, according to data from Finsight.



Subprime auto deals, often bought by large money managers and other institutional investors, are typically backed by loans to borrowers with FICO scores below the mid-600s. Because these borrowers are at higher risk of default, the bonds tied to their loans can offer higher yields. Typically such bonds are subdivided into various layers, each with a different level of risk and return based on the order in which they receive payments.

The single-B tranches, sold in recent months by lenders including American Credit Acceptance and United Auto Credit, are the last rated bondholders in line. In exchange for rates of more than 6%, roughly twice what 10-year Treasurys pay, they are the first bondholders to suffer losses if the underlying loan payments aren’t sufficient to cover all that is owed. It is a trade-off not all investors are willing to make.

“It would be one thing if it was year two of the recovery and performance was rock solid and we were off to the races,” said Evan Shay, an asset-backed securities analyst at money manager T. Rowe Price, which hasn’t been buying single-B debt. The issuance late in the economic cycle appears to be “raising some eyebrows,” he said.

Still, issuers are finding willing buyers in investors hunting for returns. Sometimes, the single-B portions of these deals have later been upgraded. In essence, investors are wagering on the health of U.S. consumers, who have once again built up record stockpiles of household debt but haven’t shown much trouble repaying it.

For securities backed by subprime auto loans, the outlook is mixed. Borrowers are getting slightly more creditworthy, with average credit scores in this year’s securitization pools rising to 588 from 577 last year, according to a Fitch Ratings report from August. But more borrowers—roughly 80%—are taking out loans that have terms of more than five years, which are more prone to default. Delinquencies of greater than 90 days have been trending higher for all auto loans since 2012, according to the Federal Reserve Bank of New York.

There have been some recent signs of trouble in the subprime market. Auto lender Honor Finance LLC closed over the summer and a slug of bonds backed by the firm’s loans was downgraded to a bottom of the barrel double-C rating this month by S&P. The Evanston, Ill., company, owned by private-equity firm CIVC Partners, has since transferred its loans to another servicer. CIVC didn’t respond to requests for comment.

While investors are largely treating Honor as a one-off event, they are on high alert for signs the bonds issued by other auto lenders aren’t as solid as they appear. Auto lenders were criticized for lax underwriting on loans issued in 2015 and 2016.

At Honor, borrower delinquencies started rising last year. Because many received payment extensions, the loans weren’t immediately written off as losses.

After a series of executive departures that started late last year, cumulative net losses on the loans backing the bonds began rising. That has left bondholders in the double-C tranche bracing for losses. Westlake Financial Services, which took over servicing of the loans, hopes to avoid bondholder losses by aggressively pursuing borrowers who are in the early stage of delinquency, the firm’s president said.

Despite risks, bond buyers have grown comfortable with subprime auto bonds in recent years, partly because these deals performed well through the financial crisis. Borrowers largely continued to pay their loans because they needed vehicles to get to work, even as they defaulted on mortgages. Companies have issued about $29.7 billion of asset-backed securities made up of subprime auto loans this year, including single-B debt, already topping the full-year record of $24.5 billion from 2017, according to S&P.



The broad auto market has cooled in recent months. Interest rates are going up, which makes it more costly to borrow. Some analysts say that if the economy takes a turn for the worse and the unemployment rate rises, delinquencies on risky auto loans could lead to a wave of closures among auto lending firms.

“In some ways it feels like 2006, which was one year before the great recession started,” said Amy Martin, an analyst at S&P, on a webcast this fall.