Why AIG Is Rebounding This Morning
Jun 26th 2013 11:52AM
Updated Jun 26th 2013 11:54AM
After a big slide earlier in the week, it looks like financial firms are back on track to make some gains this morning. Yesterday proved to be a momentum-building exercise, but American International Group is firmly back in positive territory an hour into trading today with a 0.9% gain as of 10:30 a.m. EDT. After fears swept away any investors confidence last week, some good news for the insurer's reputation may be helping it out today.
Of course we all know that last week saw a huge drop in the market following the Fed's revelation that there's a timetable for its tapering of stimulus policy. Since financials were seen as some of the biggest benefactors of the current policy, it only made sense that investors would drop them first. AIG lost 3.3% following the Fed announcement on concerns that insurance companies' investment portfolios would lose value as interest rates rise.
Monday saw the insurer fall another 3%+ when central banking fears went global. With China appearing to be on the verge of a liquidity crisis, and its central bank telling the participating banks to sort it out themselves, there was little help to assuage investor concern. AIG took the brunt of the backlash on Monday because of its recent increases in investment within the People's Republic.
With a 10% return reported within the first quarter of operations for their joint venture with the PICC Group, AIG's participation was a big selling point for the insurer's drive for new growth and opportunities. But if the Chinese economy slows further, there is little chance the previous returns will be matched in the coming quarters.
Back to today
Remember that ridiculous lawsuit from former AIG CEO Hank Greenberg? He wanted AIG to participate in suing the federal government for bailing out the failing company during the financial crisis, but the Board of Directors wisely declined. Well, Mr. Greenberg is getting his day in court, though not for the same case.
Yesterday, an appeals court ruled against Mr. Greenberg's wishes to have a case against him and former CFO Howard Smith from the New York Attorney General's office dismissed. Though the case revolves around matters that precede the financial crisis and cannot seek damages from the duo, the NYAG is seeking to bar both Mr. Greenberg and Mr. Smith from the securities business and from participation as a director with any public firm based on the case's allegations of fraud.
So, why does this matter for AIG now? Just as the publicity of Greenberg's suit against the Fed brought negative attention to the insurer, this suit may give investors some good vibes even though the men in question don't work for the company anymore. Though today's climb out of the red may be spurred on by a larger market rebound from last week's fall, it doesn't hurt to have some feel-good news out there for investors to read.
Overall, AIG has endured some big losses before and the recent drops won't effect the insurer for long. Though investor fears about rising interest rates and slowing international economies do have merit, the insurer is not sitting idly by and allowing outside forces to drive its fate. As a long-term investor, look at these challenges as opportunities for your investment, and stand by the fundamentals of the company.
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The article Why AIG Is Rebounding This Morning originally appeared on Fool.com.Fool contributor Jessica Alling has no position in any stocks mentioned -- you can contact her here. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: Long Jan 2014 $25 Calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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