AIG Swings to Loss on Restructuring Costs
Benmosche comments, business unit performances, share price info added to this update
NEW YORK (
) -
American International Group
(AIG) - Get Report
swung to a big loss for the third-quarter due to heightened restructuring costs.
CEO Robert Benmosche also said that conditions in the underlying insurance businesses have been "soft."
The insurance giant reported a loss of $2.4 billion, or $17.62 per common share, on $19 billion in revenue. Management attributed most of the loss to discontinued operations and restructuring charges for divestitures.
The lone analyst covering AIG expected the firm to have earned $1.35 per share on revenue of $14.1 billion, according to Thomson-Reuters, though it's not clear whether that estimate is comparable.
When adjusting for special charges, AIG said it would have lost a more moderate $200 million, or $1.47 per share. When looking just at the continuing insurance businesses, AIG said it would have earned $2.1 billion.
Benmosche said AIG's core insurance operations at Chartis and SunAmerica "remain solid," though market conditions were difficult -- especially in annuity sales, which are sensitive to the low interest-rate environment.
"Despite soft market conditions in the property casualty market and a low interest rate environment, these businesses have demonstrated their market leadership and are maintaining their discipline," he said.
During the third quarter, AIG took in $865 million in pre-tax income from its general-insurance operations, up 27% year-over-year, with net premiums written up 6.5%. Its domestic life insurance and retirement division earned $998 million in pre-tax income with premiums down incrementally. The foreign counterpart to those operations posted better results, with pre-tax income of $691 million, up 30% year-over-year and premiums up nearly 15%.
AIG's infamous financial-services arm reported a pre-tax loss of $89 million due to asset-impairment charges on the fleet of its aircraft-leasing division. Additionally, the company said AIGFP has reduced the notional amount of its derivative portfolio by 46% over the past nine months to $505.8 billion.
"Other" operations is where AIG took the biggest hit, due to $1.8 billion in realized losses on discontinued businesses. During the quarter, AIG moved forward on several large transactions to divest subsidiaries ALICO, AGF, AIG Star and AIG Edison. It also divested AIA, a large life insurance division, in October. Additionally, AIG recently announced plans to repay its bailout in full.
Benmosche said the company is "extremely pleased" to have done so and noted that there will be a prepaid commitment fee to the Federal Reserve due to the early repayment. At Sept. 30 that fee stood at $4.7 billion.
Also on the restructuring front, AIG recently announced plans to repay its taxpayer-funded bailout in full. Benmosche said the company is "extremely pleased" to have done so and noted that there will be a prepaid commitment fee to the Federal Reserve due to the early repayment. At Sept. 30 that fee stood at $4.7 billion.
AIG shares closed at $44.74 on Thursday, approaching the top of it 52-week range of $21.54 to $45.90. The stock has closed above $40 since Oct. 6 and are up nearly 50% year-to-date.
-- Written by Lauren Tara LaCapra in New York
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