Investors Trust upon AIG
American International Group’s chief executive said the insurer would make a full recovery from its near-death experience, declaring the turnround was well under way even as the company posted a quarterly net loss of $8.9bn.
AIG is on its “way to regaining our stature as one of the world’s largest and most successful property-casualty insurance operations,” Robert Benmosche, the company’s chief executive said on Friday in a message to shareholders.
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Some investors remained sceptical. AIG’s shares dropped 9 per cent to $25.09 in New York trading following the quarterly report. The stock is off 16 per cent since the start of the year.
“AIG’s core insurance units remain weak, and a high degree of execution risk remains in AIG’s turnaround strategy,” Catherine Seifert, an analyst with Standard & Poor’s, wrote on Friday.
The net loss, equivalent to $65.51 a share, narrowed sharply from a year earlier, when AIG lost $61.7bn, or $459.99 per share, a record shortfall for a US company. AIG’s operating loss narrowed to $7.4bn from $31.8bn.
The fourth quarter figures were depressed by an after-tax charge of $3.4bn to account for prepaying some of its government debt, which had reduced its remaining credit facility and prompted the amortisation of related assets.
The results were hit by Chartis, an insurance unit falling into a loss of $1.75bn after it set aside $2.3bn in additional reserves. bijay-lifeinsurance.blogspot.com
AIG’s collapse during the financial crisis led to an $85bn government bail-out and left investors sceptical it could sell enough assets to repay the debt.
Since then a number of moves, including the anticipated sale of its Alico division and the planned listing of an Asian unit, have helped foster some confidence in the turnround, though doubts remain. bijay-lifeinsurance.blogspot.com
The company continued to wind down exposures at its financial products business, whose credit derivatives brought AIG to the brink of insolvency.
The financial services division reported a $92m quarterly profit.
AIG also opted not to use its insurance cash flows to repay $8.5bn in debt to the New York Fed.
“We think the combination of strategic asset sales and reviving businesses will generate sufficient funds to repay the taxpayer, mooting the need to pursue the previously contemplated life insurance securitisation,” AIG said.
Its domestic life insurance unit earned $1bn, while its foreign life business reported a $1.1bn profit.
The company remains in talks to sell its Alico division to MetLife for $15bn. Earlier this month it chose Goldman Sachs and six other banks as bookrunners for the initial public offering of AIA.
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