AIG's $4.4 Billion Loss Is Smallest in 6 Quarters

The Wall Street Journal
May 8, 2009

American International Group Inc. posted its smallest loss in six quarters, reporting a $4.4 billion deficit that reflected continuing hits to its investments and challenges facing its insurance companies.

In discussing AIG's results with investors Thursday, executives said negative publicity the company has endured since being bailed out by the government last year has hurt its brand and sales. But they also maintained the businesses are holding their own, and downplayed the loss of employees to rivals.

Leading up to Thursday, AIG had posted five quarterly losses in a row, totaling more than $100 billion since its last profitable period, the third quarter of 2007. Each one of those five prior losses had topped $5 billion, with the largest -- nearly $62 billion -- coming in the fourth quarter of last year.

The latest results included $1.9 billion in pretax charges tied to the wind-down of the Financial Products group, whose problems pushed the company to the brink of bankruptcy, and $2.5 billion in pretax investment losses.

Also on Thursday, the Federal Reserve said it marked down the value of its AIG holdings by $9.4 billion to $36.4 billion as part of its quarterly revalution of the assets. Two separate Fed limited liability companies hold a collection of AIG assets, including mortgage-backed securities and collateralized-debt obligations, as collateral for loans the Fed has made to the company as part of its rescue of the insurer.

Excluding net realized capital losses, income at AIG's general-insurance business dropped by 72% to $446 million, while life-insurance and retirement-services profits dropped 51% to to $1.2 billion.

The government rescued AIG last September, and has committed as much as $173.3 billion to the bailout. Taxpayers got a nearly 80% stake in the company in exchange.

AIG said negative publicity had an impact on net premiums for its U.S. commercial insurance business, which declined 18.3% from the same period a year ago. The company said the decline in premium also was "driven by the effect of the economic downturn" in key sectors, as well as its own discipline in underwriting business, and other factors.

The company also cited negative publicity in discussing the results of its life-insurance and retirement-services operations, where it said total premiums, deposits and other considerations fell 43% from the first quarter of 2008. AIG said it's looking into combining its domestic life insurance and retirement services businesses.

As of Wednesday, AIG had borrowed $45.5 billion from the Federal Reserve Bank of New York as part of the bailout.

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