AIG posts first quarterly profit since 2007

American International Group Inc. (AIG) reported a net income of US$1.8 billion in 2009 Q2, its first quarterly profit since the third quarter of 2007.
Commenting on the second quarter results, AIG chairman and CEO Edward M. Liddy said the results reflected “stabilization in certain of our businesses.”
Liddy said improved market conditions, a decline in other than temporary impairments (resulting from the adoption of new accounting guidance) and continued reductions in the risk profile of the AIG Financial Products Corp. portfolio, among other things, were key drivers behind the results.
But whereas the company as a whole reported a good quarterly result, Liddy noted the insurance operations nevertheless suffered because of the negative publicity surrounding AIG last year. The company is currently about 80% owned by the United States government, which loaned AIG up to US$150 billion to keep the company afloat.
“While our insurance companies’ operating results remain challenged, largely driven by weak economic conditions and the lingering effect of negative AIG events earlier in the year, performance trends stabilized from the first quarter,” Liddy said.
“We continue to focus on stabilizing and strengthening our businesses, but expect continued volatility in reported results in the coming quarters, due in part to accounting charges related to ongoing restructuring activities.”
AIG’s general insurance results in 2009 Q2 included operating income before net realized capital gains of US$1 billion, compared to US$1.7 billion in 2008 Q2.
The second quarter’s results reflect a decline in underwriting profit as the combined ratio increased 6 points to 98.2%. However, for the first six months of 2009, the current accident year combined ratio was 95%.
Net investment income in 2009 Q2 declined US$81 million from the comparable prior year period due to lower yields and lower partnership income.
The commercial insurance combined ratio was 99.8% in 2009 Q2, an increase of 5.9 from the comparable prior year period.