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Wednesday March 16, 08:35
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AIG drops 3% on probe into deal with General Re
(by Julia Jenson)
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Analysts still think AIG’s stock is a buy even though the company’s share price has plunged 13.7% since the announcement of the SEC and New York Attorney General Eliot Spitzer’s probe into the its accounting on Feb. 14.
"I’m in the camp that’s staying with the stock," said David Anthony at Argus Research. "We’ll watch [stock prices] go down for a while. We expect it to recover."
Analysts see long-term potential for the company that has retained sound operations and has been posting $3 billion after-tax quarterly profits.
The departure of the CEO Maurice «Hank» Greenberg may be good news for AIG after all. Now a lot will hinge on how quickly investors wil be able to assess the impact of what has happened.
The company said it would delay its annual 10-K report for about two weeks due to an internal investigation of accounting practices.
Yesterday, however, AIG stock lost 3% of its value, triggered by the investigation of the deal between AIG and General Re.
The transaction "was just another way for A.I.G. to manage earnings - it was not a true representation of what the operations of the I.L.F.C. were," said a former A.I.G. Executive.
The deal that allegedly boosted AIG’s income, is unlikely to have a major impact on Warren Buffett’s empire.
"Based on what we have read, if there is damage it might be limited to the insurance companies involved, without having a major impact on the Berkshire dynasty," said Ric Marshall, chief insurance analyst at the Corporate Library in Portland, Maine, a corporate governance research group. "What’s going on here won’t have a personal impact on Buffett in the way it did to Hank Greenberg. It’s a matter of personal style and involvement."
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