AIG reports smallest loss

Troubled US giant insurer AIG reported its lowest loss for six quarters with a Q1 loss of $4.35bn, down from $7.81bn this time last year.

Financial highlights (2008 Q1 in brackets)

• Net loss attributable to AIG $4,353m ($7,805m)
• Net realised capital loss net of tax $2,631m ($3,963m)
• FAS 133 loss $118m ($281m)
• Adjusted net loss $1,604m ($3,561m)
• General Insurance operating income of $446m ($1.6bn)
• General Insurance net premiums written were $10.0bn down 17.5%
• Commercial Insurance net premiums written of $4.2bn, down 18.3%
• Foreign general net premiums were $3.bn, down 10.3%
• AIG Private Client Group net premiums written of $210m, down 2.3%

AIG’s said its first quarter 2009 net loss resulted from restructuring and market disruption-related charges and accounting charges related to taxes.

Interest and amortization charges related to the FRBNY Facility were $1.5bn ($1.0bn after tax).

There was a $1.9bn pre-tax ($1.2bn after tax) charge for restructuring costs, primarily related to the wind down of AIG Financial Products (AIGFP).

Market disruption-related losses cost $2.5bn pre-tax ($1.6bn after tax). Chairman and chief executive Edward Liddy said: “AIG’s first quarter 2009 results reflect our efforts, with the ongoing support of the Federal Reserve and the US Treasury, to execute on our plans that were designed to maximize the value of our core businesses and repay US taxpayers. In addition, we are making progress on winding down AIGFP. As of March 31, 2009 its portfolio had a notional value of approximately $1.5 trillion, down from approximately $2.7 trillion at December 31, 2007.

“Importantly, we are moving forward with our efforts to position our strong insurance companies as discrete businesses, for the benefit of all stakeholders, including policyholders, employees, and distribution partners.

“In addition, since year end, we have closed a number of transactions and reached several asset sales agreements, despite a very challenging market environment. On April 16, we announced the sale of our U.S. personal auto business, representing our largest asset transaction to date. Several other transactions are under discussion, and we continue to evaluate how best to assure the continued strength and success of all of AIG’s businesses.”

AIG said the general insurance decline was driven by the effect of the economic downturn on construction, real estate and transportation-related business and its deliberate strategy to remain price disciplined in workers’ compensation, as well as changes in the amount of premiums ceded to reinsurers.

Aside from the effect of these three items, net premiums written declined approximately 6%. Net premiums written were also adversely affected by the negative AIG publicity and the broader impact of the economy, which is decreasing ratable exposures on renewal business and limiting new opportunities across other lines of business.

“The retention of existing business was moderately lower than in the comparable prior year period, with some de-risking among clients, although retention levels have shown improvement since the end of the first quarter of 2009. Overall, rates in Commercial Insurance were essentially flat in the first quarter of 2009 compared to the first quarter of 2008. The stabilisation of rates is an improvement from the fourth quarter of 2008 and reflects the current market conditions,” AIG said.

But it said that its foreign general commercial business saw solid renewal retention and rates showed continued improvement, offset by reductions in insured’s values, payrolls, sales and inventories.

“In particular, Foreign General’s European operations delivered strong client retention results during their critical January 1 renewal period.”