AIG Set For Capital For At Least 12 Months

NU Online News Service

American International Group said it has enough money on hand to pay its obligations, complete its reorganization and repay its loans for at least the next 12 months.

The declaration came in the company's filing with the Securities and Exchange Commission yesterday as it reported its first-quarter results.

The assessment was made in light of the New York-based insurer's calculation that the government would continue with its current financial commitments and that it would be able to dispose of non-core businesses. Despite the risks and uncertainty in the planning, AIG said it believes it has sufficient liquidity for 12 months.

It warned, however, of a chance things might not go as planned. If there is a material difference from the plan in the future, the company said it may need to seek more government support.

In a conference call with analysts late yesterday, Edward M. Liddy, chairman and chief executive officer for AIG, said: "Our overriding goal, as you know, is to put the company in the best possible position to repay U.S. taxpayers, by protecting and enhancing the value of our businesses and positioning our key franchises for the future. The time-frame for the path for achieving this goal will be highly dependent on market conditions."

The company reported a net loss of $5.13 billion for the quarter and net loss attributable to AIG of $4.35 billion, which accounts for losses from businesses it has a minority interest in. The results were substantially better than the company's more than $7 billion loss a year ago.

In its filing, AIG said it recorded total revenues of $20.5 billion in the quarter, up from $14 billion for the same period last year.

Paula Rosput Reynolds, vice chairman and chief restructuring officer, said AIG is considering an initial public offering of 20 percent of American International Underwriters "as the first separation step to enhance the value of the underlying business in the property and casualty space."

Kristian P. Moor, executive vice president of AIG p-c group, said the insurer suffered a drop in retentions of almost 9 percent in the fourth quarter as rumors swirled that the company was on the verge of bankruptcy and the controversy over the AIG Financial Products bonus issue.

With the creation of AIU in April, the retention rate has stabilized to "historical levels," and despite customers seeking to diversify their risks, he said the belief is that as long as customers keep some business with AIU, the company will eventually win back business.

Net written premium in the unit dropped 18 percent to $4.2 billion, he said, from a combination of the impact of the economic crisis on some lines of business because clients are buying less insurance, continued price discipline in workers' compensation, and ceding premium to reinsurers.

He said the company is maintaining underwriting discipline and shedding unprofitable accounts, ending the first quarter with less than 2 percent decline in pure rate compared to a year ago, and seven points better than 2008.

Mr. Moore said despite complaints that the company is underpricing its business, government and private audits show AIG's pricing is adequate.

"The bottom line, we will not sacrifice top-line production at the expense of profitability," Mr. Moore declared.

He said the company has lost some valuable employees, but voluntary turnover was flat compared to the prior first quarter, and turnover in senior positions has stabilized. He added the company has replaced those positions with seasoned professionals.

In response to a question about pricing, Mr. Moore said that business AIG has lost is a result of its competitors undercutting AIG's prices. He added that pricing complaints are coming from its competitors and not brokers.

NU Online News Service, May 8, 2:32 p.m. EDT

American International Group said it has enough money on hand to pay its obligations, complete its reorganization and repay its loans for at least the next 12 months.

The declaration came in the company's filing with the Securities and Exchange Commission yesterday as it reported its first-quarter results.

The assessment was made in light of the New York-based insurer's calculation that the government would continue with its current financial commitments and that it would be able to dispose of non-core businesses. Despite the risks and uncertainty in the planning, AIG said it believes it has sufficient liquidity for 12 months.

It warned, however, of a chance things might not go as planned. If there is a material difference from the plan in the future, the company said it may need to seek more government support.

In a conference call with analysts late yesterday, Edward M. Liddy, chairman and chief executive officer for AIG, said: "Our overriding goal, as you know, is to put the company in the best possible position to repay U.S. taxpayers, by protecting and enhancing the value of our businesses and positioning our key franchises for the future. The time-frame for the path for achieving this goal will be highly dependent on market conditions."

The company reported a net loss of $5.13 billion for the quarter and net loss attributable to AIG of $4.35 billion, which accounts for losses from businesses it has a minority interest in. The results were substantially better than the company's more than $7 billion loss a year ago.

In its filing, AIG said it recorded total revenues of $20.5 billion in the quarter, up from $14 billion for the same period last year.

Paula Rosput Reynolds, vice chairman and chief restructuring officer, said AIG is considering an initial public offering of 20 percent of American International Underwriters "as the first separation step to enhance the value of the underlying business in the property and casualty space."

Kristian P. Moor, executive vice president of AIG p-c group, said the insurer suffered a drop in retentions of almost 9 percent in the fourth quarter as rumors swirled that the company was on the verge of bankruptcy and the controversy over the AIG Financial Products bonus issue.

With the creation of AIU in April, the retention rate has stabilized to "historical levels," and despite customers seeking to diversify their risks, he said the belief is that as long as customers keep some business with AIU, the company will eventually win back business.

Net written premium in the unit dropped 18 percent to $4.2 billion, he said, from a combination of the impact of the economic crisis on some lines of business because clients are buying less insurance, continued price discipline in workers' compensation, and ceding premium to reinsurers.

He said the company is maintaining underwriting discipline and shedding unprofitable accounts, ending the first quarter with less than 2 percent decline in pure rate compared to a year ago, and seven points better than 2008.

Mr. Moore said despite complaints that the company is underpricing its business, government and private audits show AIG's pricing is adequate.

"The bottom line, we will not sacrifice top-line production at the expense of profitability," Mr. Moore declared.

He said the company has lost some valuable employees, but voluntary turnover was flat compared to the prior first quarter, and turnover in senior positions has stabilized. He added the company has replaced those positions with seasoned professionals.

In response to a question about pricing, Mr. Moore said that business AIG has lost is a result of its competitors undercutting AIG's prices. He added that pricing complaints are coming from its competitors and not brokers.