Thursday, February 28, 2008

AIG posts largest quarterly loss ever

Reuters Uncut

American International Group (AIG) Inc. today posted their largest quarterly loss ever when they reported their Q4 2008 earnings. They hugely, hugely missed the Street's expectations and reported a $5.29 billion or $2.08 a share loss, as compared to a profit of $3.44 billion or $1.44 a share during the year-ago quarter.

While we would attribute it to write-down of derivatives exposed to bad mortgage investments, closer analysis shows that if they exclude capital gains, losses and hedging activities, they still had a Q4 loss of $3.2 billion or $1.25 a share, as compared to analyst expectations of a $0.15 loss a share.

Their overall 2007 Annual Net Income dropped around 56% from $14.0 billion to $6.2 billion. More breakdown details from their Q407 financial reports that they released today, according to their different segments -

A. General Insurance : --2.9% to $2.11 billion (compared to Q406)
a. Domestic Brokerage Group (DBG): +14.1% to $1.66 billion
b. Personal Lines : from +$79 million in Q406 to --$184 million in Q407
- California wild fires
- unfavorable loss reserve development in prior accident years - primarily in agency auto
- increase in current year accident loss ratio
- transaction and integration costs in acquisition of minority interest, 21st Century Group.
c. United Guaranty Corporation (UGC) : From +$27 million operating profit in Q406 to operating loss of --$348 million in Q407
d. Foreign General : +2.2% to $805 million in Q407

B. Life Insurance and Retirement Services : Overall - Increased 9.2% to $2.66 billion
a. Domestic Life Insurance (+)
b. Domestic Retirement Services (-)
c. Foreign Life Insurance and Retirement Services (flat)

C. Financial Services - $10.25 billion operating LOSS (-)
a. Aircraft Leasing (+)
b. Capital Markets (---------------------------)
c. American General Finance, AGF (-)
d. AIG Consumer Finance Group (-)

D. Asset Management : --11.8% to $458 million

E. Other Operations : $400 million loss compared to $414 million loss in Q406

So, anyway - it seemz like the loss was distributed across all their segments, but heavily stemming from their Capital Markets segment. Other segments of interest to me, like Personal Lines, also reported huge losses, although they were positive last year on that. I don't know what they include in "Other Operations", but it looks like they are consistent in their losses in that segment - time to retire? Although it is nice to see that they've got their portfolio diversified with various insurance products (that's how they got to where they are now!) and hence were able to balance their risks/losses, I expect some spin-offs to come up soon, considering that they've been performing poorly in almost all the segments. Maybe they have been stretching it too far. Maybe it's time.

Shares fell 2.9% in the after-market trading, after having lost 4% in regular day trading.



Post a Comment

<< Home