NEW YORK (Reuters) - The shares of battered insurer AIG rose strongly on Wednesday ahead of the release of second quarter earnings, which are expected to stabilize for the first time in five quarters.
The shares surged nearly 40 percent in midday trading on the New York Stock Exchange.
American International Group Inc, scheduled to report its quarterly results on Friday morning, is seen on average earning an operating profit of $1.31 a share, according to a Reuters poll of analysts.
There is also optimism around the company's appointment of a new chief executive. Next Monday, Robert Benmosche becomes the fourth person in the last 14 months to assume the insurer's leadership. In doing so, Benmosche, a seasoned veteran who retired from No. 1 U.S. life insurer MetLife three years ago, takes on the daunting task of running a company now 80 percent owned by taxpayers, many angry at the $180 billion price tag of the AIG rescue.
AIG, once the world's largest insurer, recorded $99 billion in net losses in 2008 and last reported a profit in the third quarter of 2007.
To be sure, even if AIG reports an operating profit in the latest quarter, it may still remain in the red. Operating earnings exclude realized gains and losses, and none of the analysts polled by Reuters expect the company to emerge with a net profit in the second quarter.
AIG's problems have stemmed largely from guarantees it wrote on derivatives linked to subprime mortgages and it would have collapsed were it not for federal support.
While the company's future is still a long way from assured, it is expected to benefit in the latest quarter from significant unrealized investment gains, as the value of assets it wrote down in previous periods improve.
Todd Bault, an analyst with Bernstein Research, has forecast such gains could boost AIG's net worth, or the book value of its equity, by as much as 55 percent.
However, AIG's investors may put more stock in any steps the new chief takes to turn the company around. Outgoing chief Executive Ed Liddy warned investors at the company's annual meeting in June that the value of the stock may never recover and it may also never completely emerge from government ownership.
The U.S. government took a nearly 80 percent ownership stake in AIG in exchange for putting up as much as $180 billion for its rescue, including more than $80 billion in loans.
The company's stock, which has lost more than 90 percent of its value in the past year, rose to $18.77 at midday. The stock price reflects a 1-for-20 reverse stock split last month.
(Reporting by Lilla Zuill; editing by Andre Grenon)
