Second quarter income for American International Group, Inc. (AIG) dropped 29 percent to $3.19 billion or $1.21 per diluted share, compared to $4.49 billion or $1.71 per diluted share in the second quarter of 2005.
Second quarter 2006 adjusted net income was $4.16 billion or $1.58 per diluted share, compared to $3.28 billion or $1.25 per diluted share in the second quarter of 2005.
During the second quarter of 2006, AIG recorded an addition to income of $374 million, net of tax, or $0.14 per diluted share, related to the correction of the accounting for certain interests in unit investment trusts.
Net income for the first six months of 2006 was $6.39 billion or $2.43 per diluted share, compared to $8.29 billion or $3.16 per diluted share in the first six months of 2005. Adjusted net income for the first six months of 2006 was $7.53 billion or $2.87 per diluted share, compared to $6.51 billion or $2.48 per diluted share in the first six months of 2005.
At June 30, 2006, AIG’s consolidated assets were $900.67 billion and shareholders’ equity was $87.71 billion.
“AIG had a very good quarter. Once again, our performance
underscored the strength of AIG’s widely diversified business portfolio, both domestically and overseas,” commented AIG President and Chief Executive Officer Martin J. Sullivan.
General Insurance posted record underwriting profits, with a combined ratio of 86.47. Net premiums written increased across the board. Life Insurance & Retirement Services had a mixed quarter, including strong production results in the domestic life insurance, payout annuities and individual variable annuities lines, with an ongoing difficult sales environment in individual fixed annuities.
Sullivan said domestic life insurance operations were affected by declines in investment yield enhancements. They were also challenged by market conditions in Japan and Taiwan. So AIG is shifting its product mix to emphasize investment linked and personal accident & health products that provide better margins than traditional
savings-oriented life products in the current low interest rate environment.
After the quarter’s close, AIG announced the acquisition of Central Insurance Co., a significant general insurance business in Taiwan. With this acquisition, AIG’s companies become one of the largest general insurance businesses in that market, ranking third in gross
General Insurance reported second quarter 2006 operating income before realized capital gains (losses) of $2.99 billion, a 68.6 percent increase over the second quarter of 2005.
General Insurance achieved a combined ratio of 86.47, a 5.41 point improvement over the second quarter of 2005, primarily the result of an improved current accident year loss ratio compared to the 2005 accident year loss ratio recorded in the second quarter of 2005.
The strong underwriting performance reflects continued generally favorable pricing, policy terms and conditions, according to the company.
General Insurance net premiums written increased 9.3 percent to $11.63 billion in the second quarter. The Domestic Brokerage Group continued to expand distribution, product innovation and cross selling. DBG saw a 10.8 percent growth in net premiums written in the quarter.
In the U.S., property rates remained strong in the second quarter with modest rate declines in certain casualty classes. Personal lines reported an improved combined ratio and strong premium growth in the Private Client Group and Agency Auto, offset by the runoff of the
assigned risk business and a slight decline in the direct auto businesses. United Guaranty had strong premium growth with increases in all business lines, and improved persistency in
its domestic first lien business.
Foreign General net premiums written in original currency rose 12.4 percent in the second quarter, with strong growth in personal lines and accident & health, and very good retention rates in commercial lines. Efforts to expand the homeowners and warranty businesses contributed to personal lines growth in the quarter.
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