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AIG shares up as 4Q beats Wall Street expectations

The Associated Press

AIG's stock jumped in trading Friday after the insurer reported operating profit that beat market expectations.

THE SPARK: American International Group Inc. said Thursday that it slid to a loss in the fourth quarter as it absorbed costs related to damage caused by Superstorm Sandy and the sale of its airplane leasing unit. Still, AIG posted an operating profit of 20 cents per share that was much better than the 7 cents per share loss that analysts polled by FactSet were expecting.

THE BIG PICTURE: It was the first financial report for the bailed-out insurer since the government sold off the last of its stake in the company in December.

The New York-based company became a household name after it received a $182 billion bailout package from the government. AIG nearly collapsed in the fall of 2008 after suffering massive losses from derivatives trading that also helped push the country into financial distress. IT sold billions of dollars of credit default swaps, guarantees on mortgage securities that ended up forcing the company to pay out billions after the subprime mortgage bubble burst in 2007.

AIG has since repaid the government's bailout funds. It has also undergone a massive restructuring that cut its size in half as it turned its focus to its core business of writing insurance.

THE ANALYSIS: A group of Sterne Agee analysts said in a research note Friday that they continue to believe in AIG's long-term turnaround, but said the company's shares are fairly valued at their current levels. Its stock price has jumped about 25 percent since November. The analysts downgrading their rating on the company to "Neutral" from "Buy."

SHARE ACTION: While AIG's share value has increased significantly in the past few months, shares had slipped in the week preceding the report, dropping 5 percent through Thursday since its peak on Feb. 11 at $39.45. Investors happily welcomed the fourth-quarter news though, sending shares up 99 cents, nearly 3 percent, to $38.27 by early afternoon.