AIG's first quarter net income hits $1.5bn

AIG has reported net income of $1.5bn for the first quarter of 2010, or $2.16 per diluted common share, compared to a net loss of $4.4bn in the first quarter of 2009.

Its first quarter 2010 adjusted net income was $809m, compared to an adjusted net loss of $2.1bn in the first quarter of 2009.

AIG's continuing insurance operations earned $2.2bn before tax in the first quarter of 2010, compared to $908m in the first quarter of 2009.

Despite $481m of catastrophe losses in 2010, general insurance recorded $879m in the quarter, compared to $710m in the first quarter of last year, benefiting from improved investment performance.

Domestic life & retirement services' earnings improved, principally due to increased net investment income and the absence of unfavorable deferred acquisition cost (DAC) unlockings in 2010. Premiums, deposits, and other considerations declined by 6.5%, compared to the first quarter of 2009, as a result of a decline in individual fixed annuities and lower life insurance sales. Surrender activity has stabilized.

AIG's financial services arm, the part of the business generally held responsible for its exposure to the financial crisis in 2008, AIG Financial Products' (AIGFP) loss narrowed due to increased fair values of its asset and derivatives portfolios, offset somewhat by the effect of AIG's tightened credit spreads. International Lease Finance Corporation (ILFC) reported a loss, solely as a result of asset impairments in connection with recently announced aircraft sales.

AIG president and chief executive Robert Benmosche said: "During the quarter, AIG announced more than $51bn in sale transactions, led by the announced sales of AIA and ALICO. These transactions are expected to close by the end of 2010 and allow the company to substantially reduce its obligations to the Federal Reserve Bank of New York (FRBNY) and take a significant step toward a sustainable capital structure. As with previous reductions in the FRBNY available amount, accelerated amortization of the pre-paid commitment fee will be triggered when proceeds are applied to pay down the FRBNY Credit Facility balance and available amount. Future quarters may also be affected by possible goodwill impairment charges, a potential bargain purchase gain arising from the acquisition of additional shares in Fuji Fire & Marine Insurance Company Limited (Fuji), and gains and losses on sales of certain companies.

"Operating earnings at our continuing insurance operations showed further signs of stability, with $2.2bn of pre-tax operating earnings generated by Chartis, SunAmerica Financial Group, and AIG Star and AIG Edison, despite catastrophe losses in our General Insurance business. Our teams have worked extremely hard to strengthen their franchises, through extensive distribution, client, and employee outreach, in the midst of very competitive market conditions. I am pleased with their progress, but there is still more work to be done.

"UGC reported a profit for the first time since the first quarter of 2007, as residential mortgage trends showed signs of improvement.

"ILFC generated approximately $4bn of liquidity in the first four months of 2010, including $1.3bn from two secured term loans and $2.75bn in senior unsecured debt. In April, we announced the sale of approximately $2.0 billion of aircraft and amended and extended ILFC's bank facility, providing additional financial flexibility. A search is underway for a permanent CEO, but we expect a smooth transition, given that Alan Lund, ILFC's long-time CFO, was able to step in as interim president and CEO. Separately, American General Finance, Inc. (AGF) raised $3.5bn through secured borrowings and an asset securitization since year-end. We continue to address the long-term financing needs of both companies and explore strategic alternatives for AGF.

"We remain focused on further stabilizing and strengthening our businesses while continuing our restructuring activities, closing the pending transactions, and developing plans to address our highly leveraged capital structure."