Why American International Group Inc (AIG) Is Headed Higher This Morning

The first three days of this week have not been kind to American International Group Inc (NYSE:AIG). As the company continues to manage expectations for a deal gone slightly askew, investors are left wondering if the insurer will be left with more risk on its hands. Plus the entire market is waiting on pins and needles for the Federal Open Markets Committee announcement and subsequent speech from Fed Chairman Ben Bernanke this afternoon. So what is propping up American International Group Inc (NYSE:AIG) this morning? Just an hour into trading, the company is up 0.93%.

Fed first
With so much riding on the announcement from Bernanke and the FOMC, there are sure to be big swings in the market later today. If the current QE plan stays intact, then there may be a huge sigh of relief from investors who jump further into the market; if there are cuts to the policy, shares will probably fall. For American International Group Inc (NYSE:AIG) investors, these swings aren’t something you have to participate in — it will happen marketwide, and if you’re keeping your eye on the long term, the effects of a cut to the stimulus policy will benefit the market (and American International Group Inc (NYSE:AIG)) later on.

Dead deal?
American International Group Inc (NYSE:AIG) has been in the process of selling off non-core businesses and refocusing its efforts on the fundamentals of insurance. As part of the sales, the insurer has been working with a consortium on Chinese financial firms to sell its aircraft leasing operations. The deal, however, has fallen on some tenuous ground, with delays pushing back closing and causing some concerns for investors. Right now, American International Group Inc (NYSE:AIG) has given the Chinese firms until the end of July to close the deal, but it has expressed an openness to new offers. And should the deal fall through, the world’s second largest leasing business will likely go IPO.

As an AIG investor, or someone interested in the company, the current state of the sale should not be causing as much panic as the headlines are suggesting. The original deal was for far less than management had originally wanted to sell the operations for, leaving room for new offers to better the current $4.2 billion price tag. And if there are no new offers and an IPO is the final route, AIG is well qualified to handle that situation and come out on top.