AIG posts Q2 loss of $538M on restructuring charges
The insurance giant AIG reported a US$538 million loss in the second quarter due to charges related to selling assets to repay the federal government bailout.
Its adjusted results excluding the charges beat Wall Street expectations, and its shares rose almost three per cent in pre-market trading. Its insurance business showed improvement.
American International Group Inc., which was rescued by the government during the financial meltdown, said its net loss attributable to common shareholders amounted to $3.96 per share. It had a profit of $311 million, or $2.30 per share, a year ago.
The net loss attributable to AIG was a larger $2.66 billion. That is much bigger than the $538 million loss attributed to its shareholders, because it includes the portion that the government is shouldering. The government owns 80 per cent of AIG.
Removing the charges, AIG earned $1.99 per share, up from $1.71 per share last year. That reflected improved performance in its insurance business, despite heavy claims related to the Gulf of Mexico oil rig explosion and subsequent spill, storms and flooding in the U.S. during the quarter and the Icelandic volcano.
Analysts polled by Thomson Reuters, on average, expected profit of 99 cents per share.
The company’s overall loss reflected $3.42 billion in charges related to the sale of its American Life Insurance Co. unit, or Alico, and its Nan Shan Life Insurance Co. Both are in the process of being sold to help pay back some of the $180 billion in federal bailout funds the company received in late 2008. The Alico sale to MetLife Inc. should close by the end of the year.
The company said in July it will conduct an initial public offering of AIA, its Asian life insurance unit, on the Hong Kong Stock Exchange, after the sale of the company to Britain’s Prudential PLC fell through.
AIG also reported $755 million in interest and other charges on its emergency line of credit from the Federal Reserve Bank of New York. That was down from $1.4 billion last year, due mainly to a reduction in the balance of the loan, which stood at $26.5 billion on June 30.
The total amount of outstanding government assistance fell slightly during the second quarter to $132.1 billion, not including the emergency line of the credit.
In prerecorded remarks, President and CEO Bob Benmosche said when the sale of Alico and the AIA IPO are completed, AIG will have paid back most of what it owes to the Fed.
AIG no longer holds a conference call to discuss quarterly results. Benmosche said in the recording that the company’s insurance businesses were profitable, posting income of $2.2 billion for the quarter.
When the restructuring is complete, Benmosche said, the company will have two main businesses, Chartis insurance and SunAmerica Financial Group, its U.S. life insurance and retirement unit.
Chartis posted operating income of $955 million. Chartis incurred about $287 million in catastrophe losses during the quarter, with claims related to floods in the Southeastern U.S., Hurricane Alex and other storms, the Icelandic volcano and the Deepwater Horizon explosion and oil spill in the Gulf of Mexico.
SunAmerica posted operating income of $1.1 billion, up from $254 million last year.
