AIG 2014 results hit by profit dive in Q4

A severe plunge in profits in the fourth quarter of 2014 has dented American International Group’s (AIG) year end results.

Its profits dropped 67 percent to $655 million for the fourth quarter of 2014, compared with $2 billion in the fourth quarter of 2013. In the quarter, AIG was hit with an after-tax loss on extinguishment of debt of $824 million, associated with liability management activities.

AIG’s profits for the year ended December 31, 2014, fell to $7.5 billion, compared with $9.1 billion for 2013. Its after-tax operating income for 2014 also fell to $6.6 billion, compared with $6.7 billion in 2013.

AIG also revealed that it has authorised the repurchase of $2.5 billion shares. During 2014, AIG repurchased approximately $4.9 billion of shares.

In its property casualty segment, the combined ratio improved 5.3 percentage points to 103.4 percent in the fourth quarter of 2014, due to a lower loss ratio and a decrease in the general operating expense ratio.

Its pre-tax operating income jumped 27 percent to $935 million in the fourth quarter of 2014, compared with $734 million in the same period of the prior year. AIG said this was driven by improved underwriting results, partially offset by lower new investment income.

Catastrophe losses were $35 million in the fourth quarter of 2014, compared to $188 million in the fourth quarter of 2013.

Peter Hancock, AIG president and chief executive officer, said: “Looking back on 2014, it was a year of transition and transformation, as we took important steps toward our goal of becoming the world’s most valued insurer.

“Our focus on value benefits our customers and our shareholders, and leverages our global scale to achieve the right balance between growth, profitability, and risk. We began several value-based initiatives in 2014 and will continue these efforts in 2015. We remain committed to streamlining our operations and reducing our cost structure. Beginning this quarter, we are providing more information and detail in our disclosures on expenses and investments, which we’ll discuss further on tomorrow’s earnings call.

“As of this quarter, our businesses are now reported in two segments: commercial insurance and consumer insurance. This segmentation reinforces our focus on the ultimate client group being served, not the product being delivered, and we’ve made acquisitions and investments along these lines.”

AIG, North America, Peter Hancock, Insurance