AIG 2015 profits dive thanks to Q4 losses
Insurance company American International Group (AIG) posted a big loss for the fourth quarter of 2015, reporting an after-tax operating loss of $1.3 billion, compared with after-tax operating income of $1.4 billion in the prior-year quarter.
This had a negative impact on its full year profits, which more than halved in 2015 to $2.9 billion, compared with $6.6 billion in 2014.
AIG said the fourth quarter operating loss was primarily due to adverse prior year loss reserve development, and lower returns on alternative investments.
The firm saw a 2 percent fall in its net written premiums for its property/casualty (P/C) sector in Q4 2015, compared with Q4 2014, down to $4.60 billion.
AIG said this was primarily due to the strengthening of the US dollar against the Euro, British Pound, and Japanese Yen. Excluding the effects of foreign exchange, net premiums written increased by 2 percent.
This increase was primarily due to growth in new businesses and higher renewal in certain classes of businesses in all lines except for US casualty.
The combined ratio in its P/C sector also made a huge jump to 161.5 percent in the fourth quarter of 2015, compared with 103.4 percent in the fourth quarter of 2014.
Net premiums written also fell in the fourth quarter of 2015 compared to the previous year’s quarter in AIG’s mortgage sector (12 percent) and for personal insurance (5 percent). Combined ratio fared well in the mortgage sector in Q4 2015 to 35.7 percent, compared with 42.8 percent in 2014, however, it increased for personal insurance to 102.7 percent, compared with 98.7 percent in the fourth quarter of 2014.
“At the beginning of 2015, we embarked on a three-year plan to transform AIG,” said Peter Hancock, AIG president and chief executive officer.
“Over the past year, we have been implementing our strategy and made significant progress towards our objectives. During the fourth quarter, we streamlined our management structure to accelerate decision-making and strengthen accountability. Our recent strategy update detailed the next chapter of our transformation into a leaner, more profitable and focused insurer.
“I’m confident that our actions in 2015 positioned us to achieve the goals we’ve set for the next two years.”
Hancock also said that in 2015, AIG returned almost $12 billion of capital to shareholders in the form of share repurchases and dividends, and through February 11, 2016 it repurchased another $2.5 billion of outstanding AIG common shares.
AIG’s Board of Directors have also authorised the repurchase of an additional $5 billion of AIG common shares and increased the quarterly dividend by 14 percent to $0.32 per share.
“Together, these capital actions are a strong start towards our goal of returning at least $25 billion to shareholders by 2017,” he said.
“We’re working to become our clients’ most valued insurer and have a clear plan to maximise shareholder value that balances the interests of all of our stakeholders, including shareholders, debt holders, rating agencies, customers, employees, and regulators.”
