AIG strikes upbeat tone as shares rise sharply

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(Global Markets) - AIG management struck an optimistic tone for analysts on Friday, as a net profit of nearly $20 billion helped push shares in the bailed-out insurance company to their highest level since last summer.

While the outsized fourth-quarter profit was a one-time event linked to a tax accounting change, underlying it was a long-term assumption that the company has stopped its multibillion dollar crisis-era losses.

"It signifies our view that we have returned to sustainable profitability," Chief Financial Officer David Herzog said on a conference call with analysts.

From the first quarter of 2008 through the third quarter of 2011, AIG lost a total of just over $106 billion. Over that 15-quarter stretch it lost more than $1 billion in 10 different periods. But management said it no longer expects such losses to be routine.

"The important thing to take into account here is, the reason they were able to take the deferred tax asset into the numbers is they believe and have confidence they can actually utilize those tax assets," said Gloria Vogel, senior insurance analyst at Drexel Hamilton.

"It's not the number ... it's just the thought that they can actually demonstrate profits," said Vogel, who started coverage on AIG last week with a "buy" rating.

AIG shares rose 4.8 percent to $29.32 in morning trade, their highest level since late July of last year. Over the last three months, the stock has gained more than 46 percent, nearly triple the gains for the broader insurance index.

At Friday's levels, AIG is also back above the U.S. Treasury's $28.73 breakeven point on its 77 percent stake in the company for the first time in months.

The company would not give any sort of forecast Friday on when Treasury might sell shares again, though it has said previously the government was waiting for a window where they could be sold profitably.

AIG also admitted for the first time on Friday that it has been buying mortgage-backed securities from the auctions the Federal Reserve has held of its Maiden Lane II portfolio.

That portfolio, comprised of bonds the government took off AIG's hands during the financial crisis, has been sold piecemeal since the Fed rejected an offer for the whole thing from AIG last March.

Since the Fed rejected that offer, AIG had steadfastly refused to say whether it was buying any of the bonds, either at the auctions or on the secondary market.

The Fed is expected to sell the last of the bonds soon, and AIG said Friday the proceeds from the sales are likely to exceed what the Fed is owed. As a result, AIG will get one-sixth of the excess funds, part of the original deal during the bailout.

Those funds will go toward paying down the Treasury's preferred interest in the entity that controls AIG's one-third stake in Asian insurer AIA Group.

(Reporting By Ben Berkowitz; Editing by Derek Caney, Dave Zimmerman)