AIG posts first profit since 2007

The insurer has received government loans and aid

Insurer AIG has seen its first quarterly profit since 2007, as its business improved during the period.

It made a $1.82bn (£1.09bn) profit in the three months to June, after a loss of $5.4bn in the same period of 2008.

AIG was bailed out by the US government in 2008 and is now 80% state-owned. In total, the firm has received $182.5bn of government funding.

Its earnings were boosted by investment gains but the company's insurance operations remained weak.

Shares in the insurer jumped sharply on the news to close almost 22% higher.

'Financial success'

AIG said it was closer to unwinding AIG Financial Products, the arm responsible for nearly 50% of its $99bn losses in 2008.

"Our results reflect stabilisation in certain of our businesses," Ed Liddy, chief executive said.

Other operations, he said, "remained challenged largely driven by weak economic conditions and the lingering effect of the negative AIG events earlier in the year".

Analysts welcomed the report.

"The reality is that the numbers are getting better and as a result it could be viewed as a potentially constructive first step towards financial success," said Michael Holland, a money manager with Holland & Co.

Mr Liddy, appointed after AIG's near-collapse, is to step down after eleven months in the job. His appointment was always meant to be temporary. Robert Benmosche will replace him.