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AIG Reports First Quarter 2013 Net Income of $2.2 Billion


Posted on 03 May 2013 by Neilson

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AIGAmerican International Group, Inc. (AIG) today reported net income attributable to AIG of $2.2 billion and after-tax operating income of $2.0 billion for the quarter ended March 31, 2013, compared to net income attributable to AIG of $3.2 billion and after-tax operating income of $3.0 billion for the first quarter of 2012. The prior-year first quarter included $3.3 billion of pre-tax income from investments in AIA Group Limited (AIA), Maiden Lane II LLC (ML II), and Maiden Lane III LLC (ML III) that were sold or liquidated in 2012.

Diluted earnings per share attributable to AIG and after-tax operating income per share attributable to AIG were $1.49 and $1.34, respectively, for the first quarter of 2013, compared with diluted earnings per share attributable to AIG and after-tax operating income per share attributable to AIG of $1.71 and $1.62, respectively, for the first quarter of 2012.

"AIG's results this quarter reflect the depth of our global operations, the market's demand for the products and services we offer, and the strong performance of our investment portfolio," said Robert H. Benmosche, AIG President and Chief Executive Officer. "We are pleased with these results and look to continue to build on our successes, especially as we continue to make progress towards achieving our 2015 aspirational goals.

"Our priority this year is to improve operating fundamentals and reduce costs. Whether this means lowering the cost of capital, re-engineering our systems, or focusing on business lines and geographical locations that make strategic sense for our company - reducing expenses and improving operating efficiencies are leading goals of every AIG employee. We have already narrowed our core businesses to insurance and retirement services, and see the potential for further cost savings as we work to transform the corporate structure to support this leaner business. And, as a global company with half of our people outside the United States, we are exploring the capabilities, expertise, and opportunities where we have operations."

Mr. Benmosche concluded, "Over the course of 2013, we intend to continue to show how these investments and hard work will come to fruition."

Liquidity, Capital Management, and Other Significant Developments

  • AIG shareholders' equity totaled $99.5 billion at March 31, 2013.
  • AIG called $1.1 billion of junior subordinated debentures and purchased, for approximately $1.3 billion, approximately $1.0 billion principal amount of debt in cash tender offers in the first quarter of 2013, which will result in lower annual interest charges of $165 million.
  • Cash dividends and loan repayments to AIG Parent received from AIG Life and Retirement subsidiaries totaled $1.3 billion in the first quarter of 2013.
  • AIG Parent liquidity sources amounted to approximately $15.0 billion at March 31, 2013, including $5.5 billion allocated toward future maturities of liabilities and contingent liquidity stress needs of the Direct Investment book and Global Capital Markets.
  • During the first quarter of 2013, AIG completed the purchase of warrants issued to the United States Department of the Treasury (U.S. Treasury) in 2008 and 2009.

AIG PROPERTY CASUALTY

AIG Property Casualty reported operating income of $1.6 billion in the first quarter of 2013, compared to operating income of $1.0 billion in the first quarter of 2012, reflecting increases in both underwriting income and net investment income. AIG Property Casualty's improved underwriting margins were driven by a shift in the portfolio mix, the benefits of underwriting improvement initiatives, which are enhancing our risk selection, and increases in pricing.

The first quarter 2013 combined ratio was 97.3, compared to 102.1 in the first quarter of 2012. First quarter 2013 results included moderate catastrophe losses of $41 million and favorable net prior year development of $52 million. The first quarter 2013 accident year loss ratio, as adjusted, improved to 63.2 from 66.3 in the first quarter of 2012 driven by a shift to higher value business, enhanced risk selection, and price increases. The first quarter 2013 acquisition ratio was 19.7, a 0.5 point decrease compared to the first quarter of 2012. The general operating expense ratio was 14.3, a 0.4 point increase compared to the first quarter of 2012. During the first quarter of 2013, AIG Property Casualty continued to invest in strategic initiatives and incurred higher severance and other personnel-related costs, partially offset by lower bad debt expense compared to the first quarter of 2012.

First quarter 2013 net premiums written of $8.4 billion decreased 4.3 percent compared to the first quarter of 2012, reflecting the effects of recognizing ceded premiums written for excess of loss reinsurance agreements at contract inception rather than ratably over the contract period, foreign currency exchange rates, which were primarily driven by strengthening of the U.S. dollar against the Japanese yen, and the timing of a catastrophe bond issuance in the first quarter of 2013. Excluding these items, first quarter 2013 net premiums written increased 4.0 percent compared to the first quarter of 2012. Commercial Insurance net premiums written excluding the impact of the items noted above increased 3.8 percent compared to the first quarter of 2012. Growth in higher value products and geographies was partially offset by continuing efforts to improve risk selection, particularly in U.S. casualty. Consumer Insurance net premiums written excluding the impact of the items noted above increased 4.2 percent compared to the first quarter of 2012. Consumer Insurance continued to focus on growing higher value lines of business, while expanding direct marketing as part of its multi-distribution channel strategy.

Commercial Insurance reported first quarter 2013 operating income of $1.0 billion and a combined ratio of 92.2, compared to operating income of $645 million and a combined ratio of 101.7 in the first quarter of 2012. The first quarter 2013 accident year loss ratio, as adjusted, improved to 65.4 from 70.3 in the first quarter of 2012 due primarily to the shift to higher value business, enhanced risk selection, and price increases. The first quarter 2013 acquisition ratio was 16.3, a 1.7 point decrease compared to the first quarter of 2012. The first quarter 2013 general operating expense ratio was 11.0, a 0.4 point decrease compared to the first quarter of 2012.

Consumer Insurance reported first quarter 2013 operating income of $153 million and a combined ratio of 98.4, compared to operating income of $234 million and a combined ratio of 96.7 in the first quarter of 2012. The first quarter 2013 accident year loss ratio, as adjusted, was 58.8 compared to 58.4 in the first quarter of 2012. The first quarter 2013 acquisition ratio was 24.9, a 1.2 point increase over the first quarter of 2012 due to changes in Consumer Insurance's business mix and increased investments in direct marketing. The first quarter 2013 general operating expense ratio was 15.7, a 0.8 point increase over the first quarter of 2012, which was primarily attributable to personnel-related costs and strategic expansion in growth economy nations.


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