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AIG shares at 17-month low after earnings

NEW YORK (Reuters) - Shares in bailed-out insurer American International Group Inc hit a 17-month low on Friday, as analysts said that the company's earnings were still complicated and that it warranted a discount to peers.

AIG reported a profit of $1.8 billion for the second quarter on Thursday, driven by its one-third stake in Asian insurer AIA and a tax benefit. Without those items, it would have posted a net loss, as operating income declined across all of its businesses.

AIG shares fell 2.4 percent to $25.76 in early trading. At one point the stock dropped as far as $25.14, its lowest point since early March 2010; it was the largest decliner among Standard & Poor's insurance shares.

The stock has lost half its value this year, amid challenges including a huge charge to increase reserves for asbestos and other exposures, as well as short-selling pressure. The U.S. government still owns three-quarters of the company after its 2008 bailout.

S&P Equity Research kept a "buy" rating on the stock but said "there is still a lot of 'noise' in these results."

Analyst Cathy Seifert cut her price target to $32, which assumes the stock trades at a discount to other insurers.

AIG shares are now more than $3 below the U.S. government's break-even point on the stock. The government sold part of its stake in May and is expected to sell more later this year.

(Reporting by Ben Berkowitz, editing by Gerald E. McCormick)

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