AIG takes a step out of the grave

American International Group (AIG) did something may people thought it would never do -- it made a quarterly profit. The company's stock was up about 13 percent to $25.15 in pre-market trade.

AIG, which has not made a dime in six quarters, reporting a net profit of $1.82 billion, or $2.30 a share. Revenue increased 48 percent to $29.53 billion. That is nice, but it may not give heart to the American taxpayers who have put $180 billion into the company.

General Insurance results in the second quarter 2009 included operating income before net realized capital gains of $1 billion, compared to $1.7 billion in the second quarter a year ago. The period's results reflect a decline in underwriting profit as the combined ratio increased six points to 98.2.

The most important news from the quarterly report is that AIG's financial services operations reported a $103 million operating loss before net realized capital gains (losses) and the effect of hedges not accounted for under FAS 133 in the second quarter of 2009, compared to a $5.9 billion operating loss in the second quarter of 2008. The massive write-offs against the firm's derivatives positions may be ending.

A great deal of credit for the results should go to Ed Liddy, the departing chairman and CEO. He came into the job out of retirement. He did not need the headaches of restructuring the firm or the small pay package he got. Congress beat on him for the extraordinarily high compensation of certain AIG employees -- compensation that was set before he came to the company. He was treated badly, but he did an extraordinary job.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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