AIG Profits Up 51 Percent For Second Qtr.
Despite fallout from regulatory probes, analyst calls performance 'outstanding'
American International Group reported a 51 percent jump in second-quarter net income and did nearly as well for the first half, fueled by strong gains in its foreign life insurance and retirement business.
Net income for the quarter came in at $3.9 billion, compared to $2.65 billion in the comparable period in 2004. For the first half, net income jumped 47.4 percent to $7.68 billion.
Revenues for the second quarter for the New York-based insurer rose 14.3 percent to $26.7 billion.
Chief Executive Officer Martin Sullivan, in a conference call with analysts, refused to answer any questions relating to the regulatory investigations by the New York Attorney General's Office and U.S. Securities and Exchange Commission into alleged accounting fraud and complicity in brokerage bid-rigging.
In addition, he said he had not read former CEO Maurice Greenberg's white paper questioning the motives behind AIG's restatement earlier this year that lowered its net income by $4 billion. Mr. Greenberg, who is facing civil and criminal investigations, said many changes in the restatement were unnecessary and exaggerated and designed to justify his ouster.
In its 10-Q form, AIG said its International Lease Finance Corp. restated its accounts for the last five years to correct the way it accounted for derivatives. Mr. Sullivan said the restatement was not a part of the general financial restatement announced in May.
Williams Capital analyst Peter Streit called the second-quarter results "outstanding. They were much better than expected in domestic and foreign property-casualty and foreign life and retirement services." In addition, consumer finance also performed extremely well, he noted.
The company said property-casualty operating income increased 20.5 percent on a combined ratio of 92.4, with the foreign sector far outperforming the domestic–coming in with an 82.04 combined ratio compared to 96.05 for domestic business.
The foreign life and retirement segment also contributed impressive numbers, with Japan showing a first-year premium growth increase of 31.8 percent, and total foreign annuity production rising 43.3 percent.
On the domestic life and retirement side, the strains of recent regulatory investigations took their toll somewhat in the form of decreased sales volumes from some of their agencies. Mr. Streit attributed operating income growth of 5 percent and lower transaction volumes to increased wariness on the part of AIG agents in the aftermath of its restatement.
"However, in the last month of the quarter and in the month of July, AIG has seen that trend beginning to reverse," Mr. Streit said.
Other segments impacted by the investigations included capital markets that suffered from, according to Mr. Sullivan, "difficult market conditions and customer uncertainty during much of the quarter surrounding the negative ratings actions and the ongoing investigations."
The AIG board increased the quarterly cash dividend on the company's common stock to 15 cents per share, up from the prior 12.5 cents, payable on Sept. 16 to shareholders of record on Sept. 2.
Flag: Key Numbers
Head: AIG On The Rebound
47.4%
Jump in net income for first half, to $7.68 billion
92.4
Combined ratio for second quarter–82.04 for foreign business, versus 96.05 for domestic
14.3%
Revenue growth for the second quarter, to $26.7 billion
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