The shares climbed Friday after the insurance giant announced a sharp rise in quarterly profit
Investors bought shares in American International Group (AIG) on Mar. 2, after the New York insurance giant said its quarterly profit surged, announced a share buyback for 2007, and increased its dividend.
Late last year AIG had to pay for losses related to Hurricane Katrina at the same time it continued cleaning up the mess from its accounting scandal. But those troubles didn't hit AIG's net income for the fourth quarter of 2006, which amounted to $3.44 billion, or $1.31 per diluted share compared to $444 million, or 17 cents per diluted share for the fourth quarter of 2005.
"Results for the year and the fourth quarter were led by our worldwide General Insurance businesses and improved performance in Foreign Life Insurance," CEO Martin J. Sullivan said in a press release late Mar. 1.
AIG had a 7.2% rise in net written premiums during the year, compared to 5% for the entire industry in 2006, according to Standard & Poor's Equity Research Services. Analyst Cathy Seifert kept a buy opinion on the stock. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)
The company announced a new plan to increase its common stock dividend by around 20% per year, starting May, 2007. AIG had raised its quarterly cash dividend by 10% in May 2006 to its current dividend of 16.5 cents per share.
Meanwhile the company authorized the repurchase of up to $8 billion in its common stock. AIG is planning to repurchase $5 billion in common stock during 2007.
"AIG has emerged from a tumultuous period as a stronger, more disciplined and more transparent company," Bank of America analyst Tamara Kravec said in a research note Mar. 2. "With the issue of regulatory settlements behind the company, we believe investors can now focus on improving fundamentals across AIG's businesses, particularly in its foreign life operation." Kravec made AIG the firm's top pick in the sector for 2007, replacing MetLife. (Bank of America does business with companies covered in its research reports.)
Investors bid up the stock 3.2% to $69.54 per share in late trading on the New York Stock Exchange Mar. 2.