AIG Stumbles

American International Group Inc's quarterly operating profit plunged as income at all but one of its underwriting businesses declined and tumultuous markets hurt its investments. AIG, the largest commercial insurer in the United States and Canada, also incurred a hefty US$274 million (RM1.17 billion) pre-tax restructuring charge that also hurt results in the quarter.

The company said restructuring costs would total US$500 million through 2017 as it simplifies its business to eventually save about US$400-500 million a year. AIG shares were down 1.9% after the bell. The company also said it would pay a quarterly dividend of 28 cents per share compared with 12.5 cents a year earlier.


The increase in dividend comes less than a week after billionaire Carl Icahn urged AIG to break itself apart, cut costs more aggressively and give back more to shareholders in one of the largest activist campaigns of the year. Icahn's proposal, supported by hedge fund manager John Paulson, has sparked talks among AIG directors about spinning off or selling the insurer's small mortgage-insurance business, the Wall Street Journal reported last week.


Operating income after tax tumbled 60% to US$691 million, or 52 cents per share, in the third quarter ended Sept. 30, widely missing the average analyst estimate of US$1.03, according to Thomson Reuters I/B/E/S. Pretax operating income from AIG's insurance operations slumped 41% to US$1.47 billion, as earnings fell in all its underwriting lines but mortgage guarantee insurance.


At the commercial property and casualty insurance business, traditionally AIG's forte, pre-tax operating income fell 40% to US$569 million, hurt by lower investment income and rates. Travelers Cos Inc, which vies with AIG for the title of the biggest U.S. commercial property and casualty insurer, reported a better-than-expected quarterly profit last month, helped by higher underwriting gains.


AIG, which traces its roots to a two-room office in Shanghai in 1919, also made a US$195 million loss from investments in the People's Insurance Group of China Ltd and its subsidiary, PICC Property and Casualty Co Ltd.