* 4th quarter loss $4 bln, or $2.68 per share
* Includes $4.4 bln ILFC loss, $1.3 bln in Sandy losses
* Operating EPS of 20 cents beats expectations
* Shares rise after-hours trading
By Lauren Tara LaCapra
Feb 21 Insurer American International Group Inc
reported fourth-quarter results that beat Wall Street
expectations, although Chief Executive Robert Benmosche said
some employee bonuses will be smaller this year because the
company did not meet all of its performance targets.
Overall, the company reported a $4 billion loss on Thursday,
due mainly to the sale of aircraft leasing business, ILFC, as
well as losses incurred from Superstorm Sandy.
But AIG's underlying business trends - with stronger
operating earnings in its life insurance business, better
underwriting margins in its property and casualty business and
higher investment income - helped lift operating earnings above
what analysts expected.
"It looks pretty good," Sandler O'Neill analyst Paul Newsome
said of AIG's earnings report.
"Relative to what I was looking for, the life insurance
business did better than expected and some of the noncore
businesses - like direct investment, and the capital markets
operation, which aren't necessarily the highest-quality earnings
- also reported bigger gains than I expected."
In after-hours trading AIG shares rose 4.2 percent, to
Last year marked an important milestone for the insurance
group, which was rescued by U.S. taxpayers in 2008 with a
bailout that eventually exceeded $180 billion. The U.S.
government, which took a stake in the insurer in exchange for
the bailout, exited nearly its entire investment in the company
The Treasury Department still holds warrants to purchase
about 2.7 million shares, but sold the remainder of its common
stock last quarter. The Federal Reserve also sold off its
holdings in an AIG-bailout related vehicle in 2012.
The bailout exit lifted some uncertainty for investors and
AIG replaced Apple Inc in the fourth quarter as the
hedge fund industry's favorite stock.
AIG came under enormous public pressure to slash bonuses
while taxpayers were supporting the company. As recently as last
month, the watchdog office of the Treasury Department's bailout
program said the agency had approved excessive pay for
executives at bailed-out companies - including AIG - even in
In a memo to employees, Benmosche called the fourth quarter
a "historic" one for the company, but also said some bonuses
will be smaller this year because of weak performance.
"We still have work to do, and we didn't meet all our
business goals in 2012, which will mean some short-term
incentive pools will be smaller this year than last year," he
said in the memo, which was obtained by Reuters.
While the company exceeded outsiders' expectations, AIG
management might have had more aggressive performance targets
internally, Newsome said. For instance, low-interest rates have
been crimping life-insurance profits industry-wide for some
time, leading analysts and investors to expect less from the
"Maybe AIG did better than Wall Street expected, but not as
good as they wanted," he said.
AIG's life-insurance business reported a 20 percent jump in
after-tax operating income last quarter. AIG attributed the
improvement to its efforts to "actively manage spread income."
Its direct investment book reported after-tax operating
income of $509 million, while the capital-markets operation
reported $300 million in after-tax operating income. A year ago
those operations reported an after-tax loss of $27 million and
after-tax income of $46 million, respectively.
In property and casualty, AIG reported an after-tax
operating loss of $945 million, due to the Sandy losses.
However, the company cited stronger underwriting margins in the
business, which Newsome said was a positive sign.
Overall, AIG posted a net loss of $4 billion, or $2.68 per
share, for the period, compared with a year-earlier profit of
$21.5 billion, or $11.31 per share.
On an operating basis, the company earned $290 million, or
20 cents per share. The company recorded after-tax losses of
$1.3 billion in the quarter from Superstorm Sandy.
Analysts polled by Thomson Reuters I/B/E/S on average
expected a loss of 8 cents per share in the quarter.