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American International Group, the giant insurer bailed out by the U.S. government, reported its smallest loss in six quarters on Thursday, hurt once more by investment losses and write downs.
AIG has lost more than $100 billion over those periods, largely from excessive mortgage bets taken by a financial products unit. In the fourth quarter of 2008, AIG had a loss of $61.7 billion, the largest quarterly loss in corporate history.
The first-quarter loss was $4.35 billion, equal to $1.98 per share, compared with a loss of $7.81 billion, of $3.09 a share, in the same period a year ago.
Unlike other quarterly announcements since its federal rescue last September, AIG’s most recent quarter did not include a new iteration of its bailout plan.
But as in past periods, costs related to AIG Financial Products again burned a hole in the insurer’s financials. The quarter included a $1.9 billion restructuring charge primarily related to its wind-down of the controversial financial products unit.
AIG warned that future quarters could include similar charges.
The insurer also recorded $2.5 billion in pretax investment losses and write-downs, and had to pony up about $1.5 billion in interest and amortization charges for a Federal Reserve credit facility.
Shareholders’ equity fell to $45.8 billion at the end of the first quarter, 13 percent lower than 3 months earlier.
LOWER STRESS SCENARIO?
AIG released its results just as investors were digesting news that U.S. banks were not as strapped for cash as feared.
Citigroup analyst Joshua Shanker said optimism over the state of the banks could spread to AIG’s stock on Friday.
AIG’s stock rallied this week after a source familiar with AIG’s financial state said it was expected to report a lower net loss in the quarter and would not need new government aid.
“Early reactions to the bank stress test results seem to be favorable, and we would expect that AIG, perceived as an option on distressed asset appreciation, may benefit,” said Shanker in a research note.
AIG shares were trading one cent above their $1.95 close in post-market trading.
GOVERNMENT ASSISTANCE
Overall, the government has stepped forward three times as AIG’s benefactor, committing some $180 billion in its efforts to rescue the insurer in exchange for an 80 percent stake. The government aid includes some $85 billion in loans that the insurer is trying to repay through divestitures.
AIG has reached deals for a dozen businesses, raising more than $4 billion. It is in final talks to sell a Tokyo building to Nippon Life Insurance Co for a price that could exceed $1 billion. It is also in the later stages of vetting bids for an aircraft lessor and asset management business.
AIG’s Chief Executive Ed Liddy told investors in a post-earnings call that the company’s narrower loss was a good sign, but that there was still a long road ahead.
“We are making good progress in stabilizing the business,” he said, adding later that the insurer’s future results could still be burdened by restructuring costs and by what happens in the capital markets.
He also has not ruled out AIG eventually needing more federal aid.
AIG’s insurance businesses across 130 countries have also been dragged down by financial woes at the parent company. But management of these divisions said on Thursday that employee defections had settled down, and business was still coming through the doors.
Most units did, however, see a drop in revenue in the quarter. AIG’s general insurance business wrote $10 billion in net premiums during the quarter, a 17.5 percent decline. And premiums and other considerations fell for its life insurance and retirement services division by about 10.5 percent to $8.3 billion.
The insurer, once the world’s largest, is trying to line up some of these businesses for sale, potentially through initial public offerings.
The company said on Thursday it also plans to combine its U.S. life insurance and retirement services businesses, and re-brand the division to differentiate it from AIG, the parent company.
Two other insurers reported first-quarter losses on Thursday, also hurt by investment losses.
Allstate Corp, the largest U.S. publicly traded car and home insurer, had a net loss of $274 million. Genworth Financial, a life and mortgage insurer, had a quarterly loss of $469 million.
Allstate’s shares fell nearly 7 percent in post-market trading, and Genworth slid 14 percent, wiping away much of the gains recorded by each in the regular session.
(Reporting by Lilla Zuill, additional reporting by Paritosh Bansal; Editing by Steve Orlofsky, Matthew Lewis, Toni Reinhold)