AIG logs first quarterly profit since 2007

Troubled insurer's second-quarter revenue declines 18%, but company earns $1.8 billion after six consecutive losing quarters.

AIG on Friday reported its first quarterly profit in nearly two years, though revenue continued to slide.

The insurer said its second-quarter net income was $1.8 billion, or $2.30 per share, after six straight losing quarters. A year ago, it lost $5.4 billion, or $41.13 per share.

The last time the troubled insurer reported a profit was in the third quarter of 2007, when it earned $3.1 billion. AIG lost $99 billion last year and $4.4 billion in the first quarter of 2009.

Sales slipped 18% to $17.8 billion in the second quarter, down from $21.7 billion a year ago.

Shares of AIG (AIG, Fortune 500) soared 12.1% in premarket trading, after rocketing higher this week, nearly doubling in anticipation that the company may turn a profit.

The upbeat quarter appears to back AIG's claim that its insurance companies are healthy. The company is working to stand on its own two feet again as it winds down the financial products division that brought it to the brink of collapse in September.

Not out of the woods yet. AIG is still a far way away from reaching stability. The company owes U.S. taxpayers $82.2 billion, which it plans to pay down by selling off non-core assets and stakes in three huge subsidiaries.

So far, AIG has sold just 25 assets for a total of at least $7.3 billion (some of the sales' terms weren't disclosed). The company will also sell stakes in two of its foreign life insurance subsidiaries to the government this quarter. In exchange, the Fed will forgive $25 billion of its $42.2 billion loan to the insurer.

AIG has also failed to pay dividend payments on its $40 billion TARP loan last quarter.

Unlike most of the preferred shares issued under TARP, the AIG series E shares are "noncumulative" -- meaning that the company can skip dividend payments without the obligation to make up the difference later. If they miss three more payments, the U.S. government can assign two more handpicked directors to the company's board.

AIG's board of directors on Monday selected former MetLife (MET, Fortune 500) CEO Bob Benmosche to replace retiring chief Edward Liddy. Former American Express (AXP, Fortune 500) CEO and current AIG board member Harvey Golub was named non-executive chairman late Thursday. Benmosche and Golub will take the reins on Monday. Liddy had jointly held the CEO-chairman roles. link.....