American International Group, Inc., (NYSE: AIG) UP 2.88 percent or $ 1.51 to $ 53.96 the big insurer that received—and repaid—one of the biggest bailout packages of the financial crisis, posted a sharply lower fourth-quarter profit, weighed down by its big workers' compensation business and a charge to retire some high-cost debt.

The global insurer reported quarterly net income of $ 655 million, a decline from $ 2 billion in the year-earlier period, while its closely watched operating profit declined to $ 1.37 billion from $ 1.67 billion a year earlier. Operating income excludes realized capital gains and losses in insurers' big investment portfolios and some other items.

The quarterly operating profit tallied 97 cents a share, down from $ 1.13 a share in the year-earlier period, and fell short of $ 1.05 a share projected by analysts polled by Thomson Reuters.

Much of the miss came as AIG adjusted the reserves for its workers' compensation business to reflect a steep drop in interest rates last year. In addition, the company took a charge to reflect additions to reserves for other lines of business. Those two moves totaled $ 562 million, or 40 cents a share.

Last year's fall in interest rates has been painful across the insurance industry. Insurers earn a large portion of their income by constantly investing premium dollars, and their investment portfolios are heavily tilted toward high-quality bonds. Business lines like workers' compensation, in which payments may stretch over years, can be especially hard hit because premiums can end up generating lackluster interest income for long periods.

The company's core commercial-insurance operation benefited from a quiet North Atlantic hurricane season.

AIG said the company had repurchased about $ 1.5 billion of common stock in the fourth quarter, and $ 4.9 billion for the full year. On Thursday, its board authorized the repurchase of up to $ 2.5 billion of additional shares.

Mr. Hancock said the fourth-quarter results "showed progress on expense control, ongoing investments in our businesses and our commitment to balance-sheet management," including "replacing high-cost legacy debt with new issuances at lower interest rates."

Mr. Hancock has said he doesn't expect abrupt changes in strategy and objectives. But he has made one notable change: The company is now reporting its results under two overall operating segments—commercial insurance and consumer insurance—while scrapping its previous breakdown of results by type of insurance: primarily, property-casualty and life.

 

 
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