NEW YORK (
American International Group
CEO Robert Benmosche worked to dampen concern about the company's core operating results on Friday, characterizing its fourth-quarter reserve build-up as a legacy issue and saying that client retention rates and pricing have gotten stronger.
When asked to compare AIG's current status with its pre-crisis reputation as an "800-pound gorilla" in the highly profitable commercial line business, Benmosche responded, "I would say we are about 780 pounds and on our way back," adding that "we are clearly the leader here."
Still, in late-morning trading on Friday after the conference call, AIG shares were getting hit hard by its underwhelming fourth-quarter report. The stock was down 5.1% at $38.39 in recent trading.
reported a $11.2 billion fourth-quarter profit on Thursday, though its bottom line was bolstered mostly by asset sales while underlying results appeared weak. Chartis, its core property and casualty business, had to take a
charge of more than $4 billion to bolster reserves against claims from years ago - indicating that its actuarial models had been subpar and pricing had been overly aggressive. Additionally, its aircraft leasing subsidiary, International Lease Finance Corp., reported an operating loss of $606 million last quarter while its financial-services division lost $326 million.
All told, AIG reported an after-tax operating loss of $2.2 billion.
During the conference call, Benmosche and other senior managers - including AIG CFO David Herzog, Chartis CFO Rob Schimek and executives from domestic insurance, domestic life and retirement services and financial services divisions - blamed losses on legacy issues, high unemployment and medical costs, as well as ILFC's aging fleet. Benmosche said most of Chartis' reserve issues pertained to workers' compensation and elevated Medicare costs during the recession.
"If you look at disability carriers as well as workers' compensation you will see they are out there longer," said Benmosche. "They don't come back to work as easily. And so you have to accept that as we get into this analysis that the recovery isn't as strong as we would like to see it."
However, he noted that 93% of Chartis' premiums are now in products that were not affected by its reserve adjusting, as it has "deliberately and strategically" moved into less capital intensive insurance products with higher margins, such as consumer and specialty commercial businesses. Benmosche also asserted that Chartis now has "more statutory surplus
capital than any P&C commercial insurance competitor in the US market."
Finally, the CEO appeared to tacitly admit to long-standing accusations that AIG had relied on its extensive government support to write new business on the cheap, in order to retain clients and gain market share. Executives at competitors like
have been vocal critics of AIG's pricing tactics,
"We used to be an organization that had unlimited capital and therefore it was about top-line growth," said Benmosche. "Now we are really looking at what our ROEs are by product, where on a risk-adjusted basis we are making the right return."
The company, whose bailout topped $180 billion at the height of its financial strains, has repaid the
and is working on a stock exchange for the U.S. Treasury Department to recoup its funds. AIG hopes to complete its bailout repayment by the end of 2012.
>>>Read More: AIG Competition Can't Take Advantage
>>>Read More: AIG Pricing Critics Persist
-- Written by Lauren Tara LaCapra in New York
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