March 5, 2021

DealBook: Posting a Profit, A.I.G. Aims to Trim U.S. Stake

Robert H. Benmosche, chief executive of the American International Group.Doug Mills/The New York TimesRobert H. Benmosche, chief executive of the American International Group.

8:49 p.m. | Updated

The American International Group said on Thursday that it swung to a profit in the second quarter as the company took fewer charges related to its effort to shed its government bailout.

Last year, A.I.G. posted a loss of nearly $2.7 billion for the second quarter, harmed by a $3.3 billion accounting charge tied to the sale of a major international life insurance unit. Since then, the insurer has shed additional businesses and, perhaps most important, begun selling down the government’s controlling equity stake.

“A.I.G. is basically back in business,” Robert H. Benmosche, the insurer’s chief executive, said in a telephone interview. “The crisis is over for this company.”

Still, much of the quarter’s gain came from its stake in American International Assurance, the big Asian life insurer that the company took public last year. A.I.G. earned $1.5 billion from its holdings in the unit.

A.I.G. is expected to make additional business changes in the near term, including a potential spinoff of its large aircraft leasing business.

For the quarter, the company earned $1.8 billion, or $1 a share. On an after-tax operating income basis, which excludes additional profit from discontinued businesses as well as accounting charges tied to its overhaul, A.I.G. earned 69 cents a share. That fell short of the 92-cent average consensus estimate of analysts, according to Thomson Reuters.

A.I.G. also said that it had finished an “active wind-down” of its financial products division, the unit whose derivatives contracts tied to subprime mortgages — a portfolio with a notional value of more than $1.6 trillion at one point — led to the company’s near-downfall.

The company said that the notional value of the financial products’ portfolio had fallen 42 percent to $198.4 billion, as the company closed out most of the remaining troublesome mortgage derivatives contracts. Remaining, according to A.I.G., are relatively benign contracts that are unlikely to cause ruinous damage.

Thursday’s results showed that A.I.G. still faced pressure on its core operations, as its Chartis casualty insurance business recorded $539 million in losses because of disasters like tornadoes in the Midwest.

The unit reported $789 million in operating income for the quarter, down from $955 million for the quarter. Still the business increased the amount of its net premiums written by 17.6 percent, to $9.2 billion. It also made few changes to its reserve levels, a sign of better financial health.

SunAmerica Financial, A.I.G.’s domestic life insurance unit, posted an 18.3 percent drop in operating income, to $743 million, hurt in part by lower investment income. But it showed strong growth in sales, including double-digit gains in annuity deposits and retail policies.

Other operations reported declines, including the aircraft leasing business, the International Lease Finance Corporation. The unit posted a 53 percent drop in operating income to $86 million because of accounting charges and retiring old aircraft, though its rental revenue dipped only slightly to $1.1 billion.

Though A.I.G.’s stock price has fallen 10 percent since its “re-I.P.O.,” and fell 6 percent on Thursday amid the broad market sell-off, Mr. Benmosche said that he was not worried about any future stock offerings that the company would hold.

A.I.G. is hoping to take down the government’s stake well below its current 77 percent.

“We’re going to make that decision in November,” he said.

Article source:

Speak Your Mind