AIG posts $8.9bn Q4 loss

AIG has posted a loss of $8.9bn for the fourth quarter of 2009, compared to a net loss of $61.7bn in the same period in 2008.

The bailed out insurer - almost 80% owned by the US governement - attributed the loss to charges relating to asset divestments, an increase in commercial insurance loss reserves of £2.3bn and a £2.7bn tax-related allowance.

AIG's fourth quarter 2009 adjusted net loss was $7.2bn, compared to an adjusted net loss of $38.5bn furing the same period in 2008.

The insurer recorded a full year net loss loss of $10.9bn for 2009, a dramatic fall when compared to its $99bn net loss in 2008.

Commenting on the fourth quarter and full year 2009 results, AIG president and chief executive Robert Benmosche said: “Our team made great progress during the year in executing our strategic restructuring plan, by stabilizing and strengthening AIG’s insurance businesses, reducing AIG Financial Products Corp exposures, and positioning certain businesses for sale. I am delighted that several seasoned, well-respected, financial services executives, including Peter Hancock, Tom Russo, Michael Cowan and Sandra Kapell, have joined the AIG team and enhanced our prospects for rebuilding this great company.

“In the fourth quarter, we took significant strides toward the dispositions of American International Assurance Company and American Life Insurance Company; and through the creation of two special purpose vehicles that now own these two companies, we reduced our debt to the FRBNY Credit Facility by $25bn in exchange for FRBNY ownership of preferred interests in the SPVs."

Chartis

AIG’s general insurance unit, Chartis, reported a fourth quarter 2009 operating loss before net realized capital gains (losses) of $1.8bn, due to loss reserve strengthening of $2.3bn, compared to a $1.7bn operating loss in the fourth quarter of 2008, which included a $1.2 billion goodwill impairment charge.

Chartis recorded net premiums written of $6.9bn in the fourth quarter 2009, a 2.2% fall from the fourth quarter of 2008. AIG described it as a "modest decline" and a "significant improvement over prior quarters in 2009 and reflects increased business retention, new business submissions, and a more stable rate environment."

However, it added that net premium writings continue to be affected by challenging economic conditions, the effect of foreign exchange, and Chartis’ strategic decision to maintain price discipline in lines of business where market rates are unsatisfactory, particularly in certain classes of workers’ compensation.

Reserves

The fourth quarter 2009 combined ratio was 132.5%, including 28.2 points from reserve strengthening, compared to 120.8% in the prior year period, which included 13.8 points related to the goodwill impairment. For the full year 2009, the current accident year combined ratio was 99.2%, a 2.6 point improvement over the 2008 accident year combined ratio.

AIG said the reserve increase was mainly related to excess casualty, and excess workers compensation lines, particularly for the 2002 and prior accident years.

Benmosche continued: “Importantly, in the fourth quarter, AIG strengthened its general insurance worldwide loss reserves by $2.3 billion, or $1.5 billion after tax, based on AIG’s year end internal actuarial analyses. AIG considered the results of its third party actuary’s analysis in reaching its judgment. This reserve strengthening represents roughly 3.6% of Chartis’ carried reserves at December 31, 2009."

He concluded. “Lastly, we are increasingly confident in how we see the mix of AIG's businesses over the long term. We are taking the right steps to regain our stature as one of the most respected and diverse property-casualty operations in the world, with a strong U.S. life and annuity operation and several other businesses that will enhance our nucleus, help us to meet our goal of repaying taxpayers and provide value to the communities where we operate."