AIG Reports Big Investment Gains, Premium Profits Down

American International Group earned a larger-than-expected profit during the third quarter, due in part to big gains on its investment holdings.

Questions about the sustainability of those profits, and uncertainty about the timing and structure of the U.S. Treasury Department selling its remaining 16-percent stake in the insurance giant, contributed to a drop in AIG shares in after-hours trading, analysts said.

"One of the biggest questions that people ask is the timing of the next offering of the U.S. government and whether AIG will participate in that offering," said Paul Newsome, an analyst who covers the firm for Sandler O'Neill Partners.

AIG had received $182.5 billion in bailout money from U.S. taxpayers at the height of the financial crisis and has been working to repay the government for the past few years.

The remaining stake pertains to AIG shares the Treasury Department owns in exchange for capital it infused. Last quarter, the Treasury Department sold $26.5 billion worth of AIG shares, including approximately $8 billion purchased by AIG.

The government still holds 234.2 million common shares. The timing of future sales, and whether AIG will repurchase stock, is unclear.

AIG reported an overall profit of $1.9 billion, or $1.13 per share, for the period, compared with a loss of nearly $3 billion, or $2.10 per share, in the year-ago quarter.

Analysts had expected AIG to earn 86 cents per share, on average, according to Thomson Reuters.

Because competitors like Travelers Cos. reported even stronger third-quarter results, it may have set investors' expectations even higher for AIG than what analyst figures suggest, Newsome said.

AIG shares fell 2 percent after it reported results. The stock had closed at $35.20 on the New York Stock Exchange.

Combined net investment income from AIG's P&C and life and retirement divisions rose 15 percent, contributing $505 million to earnings. AIG's sale of certain securities, including a stake in former subsidiary AIA Group Ltd as well as higher values of bond holdings, contributed to those profits.

In AIG's P&C division, net premium earnings fell 3.2 percent during the quarter. Pricing improved, but AIG has been limiting risk-taking in the business, the company said.

In its life and retirement division, premiums declined 2.7 percent. Policy fees climbed 5 percent, but low interest rates and costs related to a regulatory probe into death benefits claims also weighed on that business.

AIG's other business, aircraft leasing, also reported a small operating profit compared with a large loss a year ago. CEO Robert Benmosche, in an interview with CNBC, said he was still waiting for markets to improve before trying to take that business, ILFC Holdings, public.

It was too early for AIG to provide an estimate of how Hurricane Sandy will affect the insurance company's future results, Benmosche said in a statement. AIG's headquarters in Lower Manhattan was affected by the storm and remains closed because of a power outage.


Resource Center

View All »

Complimentary White Paper: The Compression of Workplace Time

How brokers and carriers respond to the compression of workplace time will create significant competitive...

The Changing Insurance Consumer: 6 Ways to Create Profitable Relationships

Today’s mobile and web-savvy consumers have new expectations when it comes to interacting with your...

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Looking for Markets?

Search Kirschner’s Insurance Directory to help service your hard to place risks.

497 Risk Categories | 70,000 P&C Insurance Markets

Specialty Markets Insight eNewsletter

Receive updates and analyses on hard to place and challenging coverages. Sign Up Now!

Advertisement. Closing in 15 seconds.