AIG's transformation taking time as Q1 profit falls

CHICAGO: American International Group Inc (AIG) says it’s making progress on a turnaround, but investors aren’t seeing the payoff yet.

Profit in the first quarter declined from a year earlier and fell short of analyst estimates, the New York-based insurer said on Wednesday in a statement. Insurance results were dragged down by catastrophe costs and a decline in net premiums written. Net investment income fell 9% to US$3.3bil.

AIG chief executive officer Brian Duperreault, who’s been in charge about a year, has reorganised the company, hiring new senior executives and announcing a US$5.56bil deal to buy Bermuda-based reinsurer Validus Holdings Ltd to expand abroad and enter new businesses.

“We made progress towards delivering consistent results with net favourable reserve development, a stable general insurance accident year loss ratio, and solid life and retirement results,” Duperreault said.

“Our emphasis on fundamental underwriting practices, increasing accountability across our businesses, and disciplined decision making is taking hold.”

AIG reported US$376mil of catastrophe losses, including those tied to California mudslides and an earthquake in Papua New Guinea. The combined ratio for general insurance was 103.8, meaning AIG lost 3.8 US cents for every premium dollar after claims and expenses.

Net income fell to US$938mil, or US$1.01 a share, from US$1.19bil, or US$1.18, a year earlier while adjusted after-tax income per share was US$1.04, missing the US$1.25 average estimate of 14 analysts surveyed by Bloomberg.

Book value was US$69.95 at March 31, down from US$72.49 as of Dec. 31 while underwriting loss was US$251mil. The company posted a US$108mil gain on an adjustment to reserves. — Bloomberg