Shares of American International Group (NYSE:AIG) rose 4.5% to $58.15 Wednesday, following the company's better-than-expected earnings outlook and optimistic comments about its exposure to the U.S. housing market. At an investor presentation, CEO Martin Sullivan called AIG's exposure "manageable," and AIG's financial products unit head said the company doesn't expect to sell mortgage-related investments at a loss in a weak market. AIG said the value of some mortgage-related investments has decreased by $3.5B, or less than 0.5% of corporate assets. The company also said it doesn't plan to cut its dividend. AIG projected five-year adjusted EPS growth of 10% to 12% and ROE of 15% to 16%. Lehman Brothers analyst Jay Gelb, who is maintaining his Overweight rating and a $71/share target, was expecting EPS growth of 9% in 2008, and noted AIG's forecast was better than analyst estimates. AIG is a Dow component (NYSEARCA:DIA) and is a 23% holding of iShares Dow Jones US Insurance ETF (NYSEARCA:IAK) and an 8% holding of the KBW Insurance ETF (NYSEARCA:KIE).
Additional Reading: AIG Profits Skid on Housing Losses • Hank Greenberg Takes On AIG Management Via SEC Filing • Housing Market Tracker - Commercial Real Estate Review
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