Streamlined AIG doubles its profits
Boosted by strong earnings in the fourth quarter of 2013, American International Group (AIG) posted strong profits for 2013 more than doubling its net income for the year compared with 2012.
The US insurance group’s insurance operations posted full year 2013 pre-tax insurance operating earnings of $10.1 billion, a 41 percent increase on the $5.9 billion it made in 2012. Its 2013 full net income was $9.1 billion compared with $3.4 billion for the full year of 2012.
In the fourth quarter alone, AIG reported net income of $2 billion compared with a net loss of $4 billion for the fourth quarter of 2012.
The year ago quarter included a $4.4 billion net loss associated with the sale of International Lease Finance Corporation (ILFC) and pre-tax catastrophe losses of $2.0 billion from Storm Sandy ($1.3 billion after tax). It agreed to sell ILFC to AerCap Holdings in the fourth quarter of 2013 for total consideration of approximately $5.4 billion.
It partly attributed its higher profits to an ongoing effort to reduce its expenses and become more efficient. It said it continues to centralise work streams into lower cost locations and create a more streamlined organisation. In the fourth quarter of 2013, AIG incurred a pre-tax severance charge of $265 million associated with these initiatives primarily related to AIG Property Casualty.
“AIG’s strong performance in both the fourth quarter and the full year of 2013 represents another successful milestone in our journey to further build on AIG’s core insurance operations,” said Robert Benmosche, AIG president and chief executive. “Global demand for our products and services, combined with our reputation for innovation, has helped to re-establish AIG as one of the world’s preeminent insurance companies.
“I am also pleased to announce the board’s capital management decisions to increase AIG’s quarterly dividend by 25 percent and authorise the repurchase of up to an additional $1.0 billion worth of AIG Common Stock, both of which reaffirm the Board’s confidence in our strategy and allow us to return a portion of our success directly to our shareholders.
“Our profits illustrate the individual and combined earnings power of all three of our core insurance operations, as well as our ongoing commitment to capital management.
“With another year of solid performance under our belts, I am confident that we have positioned ourselves for strong growth and profitability in all of our operating businesses. Most importantly, this foundation will enable us to focus our energy on our customers.
“In addition, our fourth quarter severance charge represents another step in AIG’s continued transformation. We are increasingly a more agile, focused, and sustainable company. As we think about the long-term future of our company, we must be able to more efficiently meet and exceed the evolving expectations of our global customer base,” Benmosche concluded.