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American International Group is a conglomerate operating as it says in 'international' markets or about 135 country's. AIG has some divisions that are still profitable,but they entered this mortgage market trying to wring out an extra percent or so return and it has bitten them in the buttocks as it has many others. The main hit came from "credit default swaps" and AIG seems to have gotten away from their core business-insurance.
If you look at AIGs quarterly report and all the others involved in this mortgage mess you will continue to see "unrealized losses" and I think this may be the basis for buying into AIG. All these companies are completely writing off these investments which will eventually prove to have some value. The Wall Street Journal had an article the other day which said that less than 1% of home loans are in serious trouble,so to write them all down to zero can't be realistic. These mortgage instruments are so complicated apparently the people who wrote them don't understand them fully. But,again remember these instruments aren't worthless and eventually they will be written back up to some degree.
As I stated earlier all of these companies got away from their core businesses as AIG has and now even their core businesses are suffering. AIGs life insurance and retirement income fell by 10% in their latest quarter. Meanwhile their aircraft leasing division had a 85% increase in revenue. AIGs premiums,deposits and other revenues were up over 16% to over $25 billion.
As AIG reduces their exposure to these mortgage related instruments and returns to their core business,insurance,the quicker they will turn the ship around. As it stands now,they have so much international exposure and some divisions that are still profitable that I think they will rebound soon. As I said earlier these mortgage instruments have been completely written off and somewhere down the road a true value will be established.
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