The company also said it expects to reduce its global workforce by
about 3 percent, a move that analysts said could help the company
improve its underwriting profitability.
The results take AIG one step further into a turnaround story since
it was almost wiped out by its derivative bets during the financial
crisis, something that had drawn heavy ire from both lawmakers and
taxpayers. The company has repaid the $180 billion bailout it
received in 2008.
"We have seen that the public negative sentiment is down
dramatically," Chief Executive Robert Benmosche said on CNBC.
The company on Thursday raised its dividend by 25 percent to 12.5
cents from 10 cents per share and also authorized a share buyback of
up to another $1 billion.
"It certainly was a very strong quarter," said Gloria Vogel, senior
equity research analyst at Drexel Hamilton in New York.
Even so, she said, the company is still indicating that it is
receiving less in premiums than it is paying out in claims. That
could change going forward, Vogel said, in part on the workforce
reduction that Benmosche detailed in a memo to employees, which was
dated Thursday and obtained by Reuters.
"With results today, we announced a $265 million severance charge
taken at the end of 2013, which we expect will reduce AIG's global
workforce by approximately 3 percent," Benmosche wrote.
AIG shares rose 1.7 percent to $50.42 percent in extended trading.
Benmosche said also in the memo that while AIG has "positioned
ourselves for continued growth and profitability," there is a need
for more change, including "to cultivate a culture where there is a
clearer understanding of roles" and ensuring swift decision-making
by the most qualified people.
"To accomplish this, in many parts of the organization, we will need
to make some changes," he said. "We know that this will mean some
changes in roles and in reporting structure, and that some roles
will have to be eliminated."
PREMIUM PROFITABILITY COULD IMPROVE
For the fourth quarter, AIG reported net income of $1.98 billion, or
$1.34 per share, compared with a loss of $3.96 billion, or $2.68 per
share, a year earlier.
On an operating basis, the company earned $1.70 billion, or $1.15
Analysts on average had expected earnings of 96 cents per share,
according to Thomson Reuters I/B/E/S.
[to top of second column]
In commercial underwriting, net premiums earned rose 5 percent to
$5.294 billion from the year-ago quarter, and the combined ratio
improved to 107.7 from 130.3.
A combined ratio below 100 indicates an underwriting profit, meaning
an insurer is receiving more in premiums than it is paying out in
In consumer underwriting, net premiums earned dipped 7 percent to
$3.296 billion, but the combined ratio fell to 103.3 from 111.2 in
the year-ago period.
Net premiums earned in the company's property casualty unit were
flat at $8.6 billion, while the combined ratio improved to 103.8
from 125.1 in the same quarter of 2012.
The combined ratios will improve, "but it's not going to happen
overnight," Sandler O'Neill & Partners analyst Paul Newsome. "One of
their biggest issues is their expense levels as opposed to the
underwriting. I think that's more controllable, but it's not going
to happen overnight."
The company said the pre-tax severance charge of $265 million in the
fourth quarter primarily related to AIG Property Casualty as part of
efforts to lower expenses.
The year-earlier quarter included a net loss of $4.4 billion related
to the sale of AIG's aircraft leasing business and after-tax
catastrophe losses of $1.3 billion from superstorm Sandy.
The company's shares closed at $49.59 in regular trade on Thursday.
(Reporting by Luciana Lopez in New York and Aman Shah in Bangalore;
additional reporting by Sam Forgione in New York; editing by Leslie
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