American International Group Inc.
) sued the US Federal Reserve regarding net overpaid taxes and
interests in 1991 worth $30.2 million, according to the Associated
Press reports. The case has been filed in Federal Claims Court of
AIG not only wants the tax overpayment amount back, but also
demands interest that is accrued over the last 21 years. On the
other hand, the company itself under-paid taxes for the years 1997,
1998 and 1999, which the government is yet to extract from AIG.
Nevertheless, the company has already considered the amount of
under-paid taxes. Thus, the net amount including the overpaid tax
and interest, and deducting the under-payment, sums up to $30.2
Moreover, the lawsuit remains pending with Internal Revenue
Service (IRS) since 2007. However, since the law of limitations on
such amounts run for a six-year period at a time, the company has
accelerated its lawsuit proceedings, in an attempt to reach a final
settlement before time runs out.
The lawsuit appears at a time when AIG is already in the process
of paying back its bailout loan, which it took from the US
government during the peak of the financial crisis in September
2008. Even the IRS, which is supposed to deliver a resolution to
the case is a part of the US Treasury, which currently owns about
60% of AIG's common stock. This has been reduced from about 92% in
May last year, as AIG is making consistent efforts to repay the
government bailout loan. As a result, the company does not want to
turn down opportunities for more cash inflow.
Meanwhile, a steady de-leveraging of balance sheet and continued
focus on core operations over past several quarters have been
aiding AIG to maintain a modest cash position coupled with an
improved capital flexibility and credit profile. While the outcome
of the lawsuit remains uncertain, we believe the company has the
potential to uphold a steady and competitive business profile in
future, primarily against arch-rivals
Prudential Financial Inc.
According to the Zacks Consensus Estimate, AIG's earnings for
the second quarter of 2012 are pegged at 62 cents, down about 14%
from the year-ago quarter, given the interest rate and global
economic volatility. Currently, AIG carries a Zacks Rank #2
implying a short-term Buy rating.
AMER INTL GRP (AIG): Free Stock Analysis Report
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PRUDENTIAL FINL (PRU): Free Stock Analysis
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