Analysts say AIG has turned a corner
American International Group may have turned a corner with its latest financial results, according to industry experts.
They were speaking in the wake of the latest quarterly results from the insurance giant, the first since the company announced a strategic plan.
Headquartered in New York, AIG has a long association with Bermuda and has offices in Richmond Road.
Joshua Stirling, a senior analyst with Sandford C. Bernstein & Co in New York, said: “It appears, with the quarter showing healthy progress, the firm has survived this test and the turnaround may be turning the corner.”
AIG reported a second quarter profit of $1.9 billion, up 7.4 per cent on the same quarter last year — its first profitable quarter in four quarters.
Mr Stirling said that “the results may be just in time to satisfy the activists the company is making progress — and in front of the fall build-up to the winter proxy season, it may not be a moment too soon.”
He added: “Simply put, for AIG to retain control of the situation, it was critical that they demonstrated momentum in their tactical efforts to drive margins and return capital.”
Mark Dwelle, an analyst with RBC Capital Markets in Richmond, Virginia, said that net written premiums for the firm declined by 21 per cent, steeper than his firm's forecast of 12 per cent.
Mr Dwelle added: “The overall combined ratio of 102 per cent was weaker than our 98.8 per cent forecast reflecting both higher catastrophe losses and reserve additions.”
But he said: “The overall companywide results were decidedly better than expected, led by both better than forecast investment results as, for most units, lower than expected expenses.”
He added: “There are a few small elements of progress relative to the company's strategic plan, most notably in monetising legacy assets and divestitures and in personal insurance.”
The AIG strategic plan included simplifying the company's structure, exiting unprofitable lines and selling off non-core business units.
Two activist investors, John Paulson and Carl Icahn, earlier called on Peter Hancock, the AIG CEO, to split the firm and separate the life business from the property and casualty segment and also won board representation.
Mr Icahn said the company need to split to improve margins and divest assets to escape a US government “too big to fail” designation.
Mr Hancock outlined a goal in January to return $25 billion to shareholders over two years and has been freeing up capital by divesting units, entering reinsurance agreements and shifting out of volatile investments like hedge funds.
Sales of so-called legacy assets generated $4.3 billion in the past three quarters, AIG said.
Funds affiliated with Lightyear Capital and PSP Investments bought AIG's Advisor Group this year, and the company said on Tuesday that the sale of shares in China's PICC Property & Casualty Co generated a pretax gain of $928 million in the second quarter.