American International Group Inc (AIG) on Thursday reported a plunge in fourth-quarter profit, hurt by debt charges, workers' compensation expense, and reserves provision. The insurer's operating earnings, which exclude one-time items, came in short of Wall Street estimates.
AIG announced an additional share buyback of up to $2.5 billion and declared a dividend of $0.125 per share.
Peter Hancock, who stepped in as CEO in September, has been striving to boost performance at the property-casualty unit which he previously headed, with efforts at cutting costs.
"Our fourth quarter results showed progress on expense control, ongoing investments in our businesses, and our commitment to balance sheet management," said Hancock.
AIG posted fourth-quarter net earnings of $655 million or $0.46 per share, compared with $1.98 billion or $1.34 per share last year.
Results for the quarter include an after-tax loss on extinguishment of debt of $824 million, as the company borrowed funds at lower interest rates to repay higher costing loans.
Excluding items, AIG's operating earnings for the quarter were $0.97 per share, compared with $1.13 per share a year ago.
On average, 23 analysts polled by Thomson Reuters estimated earnings of $1.05 per share for the quarter. Analysts' estimates typically exclude special items.
AIG said its operating earnings reflect a pretax reduction in workers' compensation discount of $568 million as well as adverse prior year reserve development of $297 million.
Also the Life operating segment recorded a charge of $104 million to increase reserves for incurred but not reported death claims.
AIG will now have two new segments, namely, commercial insurance and consumer insurance; its prior segments were property-casualty and life and retirement.
The company's commercial insurance business reported pretax operating earnings of $1.2 billion for the quarter, compared with $973 million last year, driven by gains at property-casualty and mortgage guaranty units, partly offset by a slump at institutional markets. Combined ratio at the property-casualty business improved to 103 percent from 109 percent last year.
Pretax operating earnings at the consumer insurance segment, including results from the life and retirement divisions, dropped to $923 million for the quarter from $1.2 billion in the prior year.
Within the commercial insurance segment, net premiums earned at property casualty segment fell 2 percent from last year to $5.2 billion. Net investment income slid 7 percent to $1.11 billion.
At consumer insurance segment, retirement revenues slid 5 percent to $2.47 billion, including an 11 percent drop in investment income; life revenues were almost flat at $1.58 billion; and earned premiums at personal insurance fell 5 percent to $2.93 billion.
As of December 2014, AIG's book value per share grew 13 percent from the previous year to $77.69.
AIG closed Thursday at $52.45, up $0.20 or 0.38%, on a volume of 9.3 million shares. In after hours, the stock dropped $0.87 or 1.66% at $51.58. In the past year, the stock has traded in the range of $48.00 - $56.79.
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