AIG Reports $9 Billion Fourth Quarter Loss

Published: Fri 26 Feb 2010

Larry Roth

On Friday, AIG posted a significant fourth-quarter loss, largely because of the expenses related to selling off large parts of its insurance companies to lower the debt the business owes to taxpayers.

The insurance company, based in New York, reported a loss of $8.9 billion, or $65.61 per share, during the quarter that ended December 31. One year before, AIG reported a loss of $61.7 billion, which is the largest one-quarter loss in history.

The company has recently said that it is beginning to turn its financial woes around. Before the last quarter, AIG had posted a profit for two consecutive quarters.

The loss in the fourth quarter was the result of billions of dollars in restructuring expenses that AIG incurred during the final three months of 2009.

Jettisoning Life Insurance Businesses

In December of 2009, AIG sold huge stakes in AIA and Alico, two large foreign life insurance companies, to the United States government. In return for those sales, the Federal Reserve lowered the amount that AIG must repay taxpayers by $25 billion. AIG reported a $5.2 billion charge for those transactions in the fourth quarter.

The corporation also suffered a $2.8 billion loss after selling Nan Shan, a Hong-Kong-based life insurer, and a $2.3 billion blow for raising its loss reserve.

Regaining Stability

AIG said the transactions helped stabilize its insurance companies and will reduce its debt to the federal government. The Fed and the Treasury gave AIG a bailout valued at up to $181 billion in the fall of 2008.

"I think it's fair to say that we made substantial progress in refocusing our businesses on growth and profitability, and we set in place the framework for repaying the U.S. taxpayers for their support of our company during its darkest days," explained CEO Robert Benmosche in a recorded message published on AIG's Web site.

AIG admitted in a different filing with the SEC that it would require additional taxpayer funds if the financial markets experienced another downturn.

"Should certain of these risks emerge, AIG may need additional support from the U.S. government," the insurer wrote in the 10-K filing.

However, that exact same statement also appeared in the insurer's prior 10-K. An AIG spokeswoman verified that the corporation's possible need for additional taxpayer assistance in declining financial conditions was "not new."

Improving Slowly

AIG's revenue amounted to $24.4 billion in the fourth quarter of 2009 and $96 billion for the entire year, an increase from only $6.9 billion for 2008.

AIG's insurance businesses stayed weak, with the number of written premiums declining in its foreign life insurance and property casualty insurance units. But the corporation claimed its primary businesses were becoming more stable as the financial markets recover.

"While a tremendous amount of work remains to be done, and there are no guarantees in life, we believe we are on our way to regaining our stature as one of the world's largest and most successful property casualty insurance operations," said Benmosche.