A round-up of today's other business news in brief
AIG reports first profit in seven quarters
AIG reported its first profit in seven quarters yesterday, helped by large accounting gains in a partial reversal of the huge mark-to-market losses that forced the US government to rescue the stricken insurer last year.
AIG’s $1.8 billion (€1.3 billion) profit in the second quarter, compared with a $5.4 billion loss in the same period last year, was driven by lower writedowns on toxic assets, caused by a recovery in some credit markets and recent changes to the accounting rules.
However, AIG chief executive Edward Liddy warned that a recent deal to reduce a credit line from the New York Federal Reserve would cost AIG $5 billion in future quarters – a sign its financial woes are far from over.
AIG’s gains on complex derivatives and mortgage- backed securities – two of the products that led to its near- collapse – are ironic as the company’s management repeatedly attacked mark- to-market accounting for exacerbating its problems.
AIG has spoken out against mark-to-market rules, saying they forced companies to write down assets to bargain prices even when they had no intention of selling them.
Pressure from financial groups persuaded accounting standard-setters to ease the rules in April, helping AIG and other institutions to cushion the blow of the crisis. – Copyright The Financial Times Limited 2009
Logica operating profit rises by 8%
IT services firm Logica posted a better-than- expected 8 per cent rise in adjusted operating profit for the first half, helped by cost savings, and said it would maintain operating margins for the year.
The company, which is listed in London and Amsterdam, reported an adjusted operating profit of £127 million (€149 million) for the six months to the end of June on revenue of £1.88 billion, up 6 per cent due to growth in outsourcing services.
Basic adjusted earnings per share (eps) were 5.5p against 5.4p a year earlier, while pretax profit was £24 million, up from £13 million, it said.
The company said there was still uncertainty in the consulting and professional services markets, but it had taken action in poorly performing countries.
“We expect these actions and the strength of our outsourcing business to allow us to maintain margin in line with last year,” Logica chief executive Andy Green said in a statement.
Shares in the company, which have risen 25 per cent in the past week after better- than-expected quarterly earnings from peer Capgemini and Fujitsu, closed up 2.4 per cent at 111.6p yesterday.
– (Reuters)
Allianz warns of ‘new normal’
Allianz yesterday warned investors to expect a “new normal” of lower profits as Germany’s biggest insurer reported lower-than- expected earnings from its main insurance business.
Allianz chief executive Michael Diekmann said Allianz was prepared for “an ongoing challenging market environment with structurally lower returns”. He said a target of €8 billion of under- lying operating profit was now out of reach for the next year.
Overall, operating profits for the second quarter fell by one-third, but Mr Diekmann said it had been a good result.
Allianz was helped by reduced impairments on its investments, boosting the non-operating result.
Profits from life and health insurance rose 41 per cent, unusually higher than the operating profits from property and casualty insurance. Allianz earned less than expected from property and casualty insurance, where recession- hit operating profits fell 47 per cent compared with the same quarter last year.
Mr Diekmann highlighted the double-digit growth in some of its biggest markets, including Germany and Italy. – Copyright The Financial Times Limited 2009
