UPDATE: AIG Swings To 2Q Profit As Write-Downs Wane; Sees Stabilization
07 August 2009 - 10:22PM
Dow Jones News
American International Group Inc. (AIG) staunched the flow of
investment losses to turn its first profit in six quarters, but its
core insurance operations are still struggling to rebuild.
Shares were recently up 4.8% at $23.60 in premarket trading. The
stock through Thursday was already up 71% this week.
Chairman and Chief Executive Edward Liddy said the results
"reflect stabilization in certain of our businesses" and were
driven by lower net realized capital losses.
"While our insurance companies' operating results remain
challenged, largely driven by weak economic conditions and the
lingering effect of negative AIG events earlier in the year,
performance trends stabilized from the first quarter," he went on
to say. Liddy added that the company expects volatility in its
results to continue in the coming quarters, partly because of
charges related to restructuring.
The results in its insurance operations - lower premiums and a
smaller underwriting profit, gives some support to claims by
competitors that AIG is cutting prices in order to keep business,
creating an unfair disadvantage for insurers that do not receive
government support.
AIG - which is 80% owned by the U.S. government following its
rescue of the company last September - posted income of $1.82
billion, or $2.30 a share, compared with a year-earlier loss of
$5.36 billion, or $41.13 a share. Excluding capital losses and
other items, earnings were $2.57 a share, compared with a
prior-year loss of $10.15 a share.
Revenue jumped 48% to $29.53 billion.
Operating income at AIG's general-insurance business dropped 19%
on a decline in underwriting profit, while net premiums written
fell the same amount. Combined ratio, or the portion of premiums
paid out on claims and expenses, rose six percentage points to
98.2%.
Meanwhile, the life-insurance and retirement-services segment's
loss narrowed sharply as the company said it had a difficult but
improving operating environment.
On Monday, Robert Benmosche, the former chairman and chief
executive of MetLife Inc. (MET), will step in as AIG's new chief
executive, and new director Harvey Golub, formerly chief executive
of American Express Co. (AXP), takes over as non-executive
chairman. Edward Liddy, who took both roles in September after
AIG's first bailout, will step down.
-By Lavonne Kuykendall and Kerry Grace Benn, Dow Jones
Newswires; (312) 750 4141; lavonne.kuykendall@dowjones.com