AIG Profit Machine Unharmed

Fourth-quarter earnings rise 11.5% and top estimates.
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American International Group's

(AIG) - Get Report

fourth-quarter earnings rose above storm and scandal, climbing 11.5% from a year ago on higher premium income.

AIG earned $3.02 billion, or $1.15 a share in the quarter, compared with $2.71 billion, or $1.03 a share, last year. Excluding investment and accounting items, AIG earned $3.07 billion in the quarter, 4 cents better than analysts had forecast, according to Thomson Financial First Call.

The improvement came despite a $170.5 million catastrophe loss in the latest quarter, an item that was absent from the year-ago period. The charge reflected claims arising from the series of Florida hurricanes last summer and the horrific southeast Asian earthquake and tsunami.

The final quarter of 2004 also was bogged down by a $53 million charge to settle probes by various regulators into questionable "earnings smoothing" products sold to clients

PNC Financial

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Salvaging the quarter was a 15.5% rise in net premiums written over last year to $10.58 billion in the company's general insurance division. In life insurance, premiums rose 12.1% from a year ago to $7.3 billion, offsetting a 7.3% decline in financial services revenue to $1.9 billion. Asset management revenue rose 25% from a year earlier to $1.1 billion.

Total revenues at the world's largest insurer rose 16% to $25.8 billion.

"Our ability to absorb $682.7 million in catastrophe losses, tackle challenging regulatory issues and navigate through a volatile global economic and political environment and still achieve record net income is a testament to the diversity and strength of our franchise,'' said AIG Chairman and CEO Maurice Greenberg, in a prepared statement.

Besides the investigations involving the sale of so-called income-smoothing financial instruments, AIG figures prominently in the kickback and bid-rigging investigation launched by New York Attorney General Eliot Spitzer into the insurance business. The Spitzer investigation led to the filing of civil fraud charges against insurance brokerage

Marsh & McLennan

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and an $850 million settlement with the firm.

So far, two AIG employees have pleaded guilty to charges they participated in a bid-rigging scheme orchestrated by Marsh. AIG itself has not been charged with any wrongdoing.