AIG reports close to $9-billion net loss for 2009 Q4

American International Group, Inc. (AIG) reported a 2009 Q4 net loss of $8.9 billion, compared to a net loss of $61.7 billion in 2008 Q4.
According to AIG, the quarterly net loss can be primarily attributed to:
• $6.2 billion of interest and amortization expense, including $5.2 billion of accelerated amortization expense on the prepaid commitment asset resulting from the $25 billion reduction in the balance outstanding and the maximum credit available under the Federal Reserve Bank of New York (FRBNY) Credit Facility.
• A $2.8-billion loss recognized on the pending sale of Nan Shan Life Insurance Company, Limited. 
• Loss reserve strengthening of $2.3 billion in commercial insurance.
• A valuation allowance charge of $2.7 billion for tax benefits not presently recognizable, including those shown above.
AIG’s general insurance unit, Chartis, reported a 2009 Q4 operating loss of $1.8 billion due to loss reserve strengthening of $2.3 billion.
“The reserve increase follows the completion of AIG’s annual year-end loss reserve study and represents 3.6% of Chartis’ total carried loss reserves of $63.2 billion at Dec. 31, 2009,” the company says in a release. “The reserve additions are primarily related to excess casualty and excess workers compensation lines, particularly for accident years 2002 and prior.”
Chartis recorded net premiums written of $6.9 billion in 2009 Q4, a 2.2% decrease from 2008 Q4. 
The modest decline is a significant improvement over prior quarters in 2009 and reflects increased business retention, new business submissions and a more stable rate environment, AIG reports.
“However, net premium writings continue to be affected by challenging economic conditions, the effect of foreign exchange, and Chartis’ strategic decision to maintain price discipline in lines of business where market rates are unsatisfactory,” according to an AIG release.
The 2009 Q4 combined ratio was 132.5%, including 28.2 points from reserve strengthening.
For the full year 2009, the current accident year combined ratio was 99.2%, a 2.6-point improvement over the 2008 accident year combined ratio.