AIG Jumps After Investor Talk

Shares of American International Group(AIG Quote - Cramer on AIG - Stock Picks) jumped nearly 7% Wednesday, after the insurance giant reassured investors about its exposure to exotic securities tied to subprime mortgages.

AIG "has little to no exposure" to asset-backed commercial paper, structured investment vehicles or collateralized debt obligations tied to residential mortgage-backed securities, troubled debt investments that have been at the center of the recent credit storm, AIG said in slides associated with its group investor meeting. The meeting is available as a Webcast on the company's Web site.

Although AIG has seen a decline in the value of its residential mortgage-backed securities as the market took a hit in the fourth quarter, its portfolio "is of very high quality," AIG said. By book value, 97% of the portfolio is rated AAA or AA, and AIG's holdings of 2006-vintage subprime-backed assets have experienced "substantially" fewer downgrades from the three major ratings agencies than the rest of the market, the company said.

Shares climbed as high as $59.39 midday Wednesday, a 6.7% gain. More recently, AIG stock was trading at $57.65.

AIG missed Wall Street's third-quarter expectations last month, posting a loss of $864 million to its investment portfolio. The loss included impairments of about $149 million related to AIG's residential mortgage-backed securities portfolio.

Writedowns to mortgage-related securities such as CDOs have led to departures of top executives at major Wall Street firms, including Citigroup(C Quote - Cramer on C - Stock Picks), Merrill Lynch(MER Quote - Cramer on MER - Stock Picks) and Morgan Stanley(MS Quote - Cramer on MS - Stock Picks).

Citi also is leading a consortium of banks including Bank of America(BAC Quote - Cramer on BAC - Stock Picks) and JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks) in setting up an industry-supported fund to avoid a fire sale of SIVs, off-balance-sheet investment vehicles which have become difficult to value in the jittery credit market.

The U.K.-based bank HSBC(HBC Quote - Cramer on HBC - Stock Picks) last week became the first bank to bail out its SIV portfolio, saying it would shut down two funds and take $45 billion onto its balance sheets.