AIG emerges from 'death spiral'

American International Group Inc., the troubled financial firm that threatened to bring down the U.S. economy, is showing stable revenue for its insurance units and improving its ability to repay taxpayers 17 months after a bailout that swelled to $182.3 billion.

AIG property-casualty businesses, contributing more than a third of the company's revenue, posted sales increases in three straight quarters last year after plunging 23 percent after AIG's near-death experience in September 2008. Life insurance and retirement-products sales, AIG's other main operations, rose for the first time since the bailout in the three months ended September 2009.

"There are clear signs that AIG has pulled out of what could have been a death spiral," said David Havens, managing director in credit trading at Nomura Securities International Inc., of New York. AIG's insurance results have been improving "after dropping off a cliff following the bailout," he said.

AIG must increase insurance profit to repay loans included in AIG's government rescue. Chief executive officer Robert Benmosche, 65, has said he will rebuild businesses damaged after AIG's derivatives unit, called an unregulated hedge fund by Federal Reserve Chairman Ben S. Bernanke, sapped the parent company of cash in the weeks leading up to the bailout.

"Things are stabilizing," said Pennsylvania Insurance Commissioner Joel Ario, AIG's lead U.S. regulator for commercial insurance, citing revenue figures as evidence.

Under Benmosche, AIG will focus on selling coverage to corporate customers worldwide, the company's core business for most of its four decades under former CEO Maurice "Hank" Greenberg. Greenberg, who ran AIG until 2005, added life insurance, asset management, derivatives, and a plane-leasing business to diversify revenue.

The New York company, once the world's largest insurer by assets, has shrunk by a fifth.

Surviving as a smaller, healthier insurer does not mean AIG will be able to repay all of its U.S. debts, which total more than $65 billion.

The Government Accountability Office said in December that taxpayers would probably lose $30.4 billion on the AIG bailout.