American International Group (AIG), the insurer that survived the credit crunch thanks to a $121 billion Government bailout, reported a second consecutive quarterly profit after writing back up the value of some assets.

The company made a $455 million net profit in the third quarter, compared to a $24.4 billion loss in the same period last year, when AIG came close to collapse.

The net profit attributable to common shareholders was $92 million. AIG made $1.8 billion in capital losses, compared to $15.6 billion last year, as the value of previously written-down assets recovered.

AIG said that it was making progress on its disposal plan, which involves selling non-core operations in order to repay its Government borrowings. The company recently announced the sales of its investment advisory and asset management business for $300 million and its Taiwan insurance company for $2.1 billion.

It is also unwinding its AIG Financial Products (AIG FP) division, which was blamed for causing the company’s near-downfall after selling insurance on billions of dollars’ worth of high-risk credit-backed derivatives.

Faced with huge defaults on the derivates, AIG was forced to take a $38.8 billion loan from the Government and provide $44 billion in financing to buy impaired assets from AIG’s books. Taxpayers also hold a $44.8 billion stake in the company. In total, AIG can call on $182.3 billion in assistance from the Government, of which it has used $120.7 billion.

AIG said today that AIG PF’s derivatives portfolio had been cut down to $1.1 trillion by the end of September, from $1.3 trillion in the previous quarter.

Its trading positions were reduced by 12 per cent to 20,000.

Rob Haines, an analyst at CreditSights, said that despite signs of stabilisation, AIG still faced an uphill battle to recover.

“It’s going to take a while before the company is going to be operating near its historic norms,” he said.

Robert Benmosche, the former Metropolitan Life boss, came out of retirement to take as president and chief executive of AIG in August, after Government-appointed chief executive Edward Liddy asked to leave.

Mr Liddy, who was working for no pay, was attached by lawmakers in April for allowing the payment of $165 million in retention bonuses to AIG FP workers.

Kenneth Feinberg, the Government’s Pay Czar, said last month that the highest-earning executives at AIG, and six other companies that received extraordinary Government aid, could not be paid more than $500,000 in cash every year.

AIG’s top dozen earners will see their cash payments fall by 91 per cent under the compensation chief’s rules. He also rejected AIG’s plan to pay other types of compensation worth more than $1.5 million to some AIG executives.

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