AIG: Financial Winners and Losers

( Updated with stock price moves.)

NEW YORK ( TheStreet) -- American International Group ( AIG) was among the winners of the financial sector Tuesday on comments from a ratings agency that the insurer is moving towards repaying bailout funds.

AIG shares jumped Tuesday after Moody's Investor Services said the insurer will likely be able to repay the government's loan and much of its preferred equity stake.

Last week, AIG reported a third-quarter profit of $455 million, or 68 cents a share. Excluding items, AIG earned $2.85 a share, beating Wall Street's forecast of $1.98 a share. Moody's said that, if AIG continues to stabilize, it will likely generate enough value to repay the government.

Moody's maintained its credit rating on the stock, affirming the long-term rating of A3 with a negative outlook. Lately, AIG was up $1.66, or 4.6%, to $37.84.

In other insurer news, MBIA ( MBI) shares fell sharply after the bond insurer late Monday reported a third-quarter net loss of $727.8 million, or $3.50 a share, as a result of increased unrealized losses on credit derivatives.

Deutsche Bank said its own calculations puts MBIA's operating loss at $1.24 a share for the quarter, which would be worse than the Thomson Reuters average estimate of $1.05 a share. MBIA shares were tumbling 97 cents, or 20.2%, to $3.83. Ambac Financial ( ABK) traded lower in sympathy, dropping 12.7% to $1.03.

Turning to bank stocks, Reuters reported that JPMorgan Chase ( JPM) will lift a salary freeze it put in place last year for employees making more than $60,000 a year, citing an internal bank memo.

The decision by JPMorgan to lift the salary freeze is part of its year-end performance and compensation review process, according to a memo from human resources director John Donnelly.

JPMorgan shares were slipping by 1.1% to $43.86. Other bank stocks were trading mixed Tuesday, with Bank of America ( BAC) rising 0.8% to $15.89, Citigroup ( C) was flat at $4.19, Goldman Sachs ( GS) slipped 0.3% to $176.05 and Wells Fargo ( WFC) lost 1% to $28.11.

Among analyst moves, Legg Mason ( LM) slipped 0.3% to $31.50 even after Credit Suisse upped its stock price target for the asset management company to $35 from $33. The firm lowered its fourth-quarter earnings estimate to 37 cents a share from 38 cents, while it increased its full-year 2011 earnings estimate to $1.57 a share from $1.53.

Elsewhere, Deutsche Bank upgraded Royal Bank of Scotland ( RBS) to buy from hold, while Keefe, Bruyette & Woods downgraded Allied Irish Banks ( AIB) to underperform from market perform. Royal Bank of Scotland shares were falling 2.5% on the New York Stock Exchange to $13.18, and Allied Irish Banks shares were dropping 9.2% to $5.73.

-- Written by Robert Holmes in New York.

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