AIG posts $10bn operating profit as p/c business improves

The company's full year result benefited from a fourth quarter swing to a net profit of $1.9bn, from a $4bn loss in the fourth quarter of 2012, when AIG took a $4.4bn charge from the troubled sale of its aircraft leasing business, International Lease Finance Corporation (ILFC), and $2bn in losses from Superstorm Sandy. In the fourth quarter of 2013, AIG finally announced an agreement to sell ILFC to AerCap Holdings NV for $5.4bn. The transaction is expected to complete in the second quarter of 2014 and marks the final major asset disposal for AIG under its post financial crisis restructuring, according to Bob Benmosche, AIG President and Chief Executive Officer. AIG Property Casualty's big improvement reflected a more favourable fourth quarter in 2013 when it recorded a $1.1bn property/casualty operating profit, compared with a $944m loss for the same period of 2012.hideFourth quarter p/c profit was attributable to an improvement in underwriting results. This reflected much lower catastrophe losses of $208m compared with $2bn in the same quarter of 2013 and an increase in net investment income. These positive factors were partially offset by higher than expected severe losses, which totaled $277m in the quarter. Despite the improvements, AIG Property Casualty still made an underwriting loss of $330m in the quarter compared with a $2.1bn loss in the same period of 2012. AIG Property Casualty ended the year posting a $455m underwriting loss, compared with $3bn in 2012. The fourth quarter combined ratio was 103.8%, a 21.3 percentage point improvement on the Sandy-impacted fourth quarter of 2012. The commercial combined ratio improved 22.6 percentage points to 107.7%. The fourth quarter was also impacted by a $266m prior-year adverse reserve development for pollution and environmental business. However, this adverse development was more than offset by a $325m reserve discount benefit for workers compensation business. Net p/c premiums written increased 3% to $8bn in the fourth quarter, reflecting rises in premium rates and new business. AIG said that rate increases continued in the fourth quarter with global commercial rates up 2.6%, led by casualty at 5% and financial lines at 3.3%. The biggest rate increases were in the US, where commercial rates increased by 5% to 5.6% in casualty and 3.7% in property. Overall, AIG Property Casualty premiums were flat at $34.4bn in 2013. AIG’s strong group results enabled the company to increase its dividend to shareholders by 25% and pursue a $1bn share repurchase. In an analysts call, Mr Benmosche said that the firms increased dividend and share buyback reflected AIG’s growing strength in 2013 and over recent years. The New York-based insurer also said that it continues to look at ways to reduce expenses and improve efficiencies to best meet the needs of its customers. These initiatives include centralising work streams into lower cost locations and creating a more streamlined organisation. AIG incurred a fourth quarter severance charge of $265m associated with these initiatives, primarily related to AIG Property. Mr Benmosche indicated that job cuts are likely as some positions are eliminated.

AIG posts $10bn operating profit as p/c business improves

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