Tax Changes, Wildfires Push AIG to $6.7 Billion Loss
February 08 2018 - 05:18PM
Dow Jones News
By Aisha Al-Muslim
American International Group Inc. posted a higher fourth-quarter
loss as the global insurance conglomerate was significantly
impacted by the wildfires in California last year and took a $6.7
billion hit from recent U.S. tax law changes.
AIG reported $762 million of catastrophe losses for general
insurance in the quarter, with $572 million due to the wildfires in
California. AIG had estimated about $500 million of losses for the
quarter from the wildfires.
For the full year, AIG said it had $4.2 billion of catastrophe
losses, a record high.
Shares of AIG, down 10% over the past year, rose 0.5% to $58.63
in after-hours trading Thursday.
The New York-based company reported a net loss of $6.66 billion,
or $7.33 a share, down from a net loss of $3.04 billion, or $2.96 a
share, a year earlier. Its adjusted after-tax income was $526
million, or 57 cents a share, compared with an adjusted after-tax
loss of $2.79 billion, or $2.72 a share, in the prior-year quarter.
The net loss for the quarter included a charge of $6.7 billion
related to the U.S. tax reform.
Analysts polled by Thomson Reuters had forecast adjusted
earnings of 75 cents a share.
Last month, AIG said it is acquiring Bermuda-based insurer and
reinsurer Validus Holdings Ltd. in an all-cash deal valued at $5.56
billion. The transaction is meant to strengthen AIG's global
general insurance business and advance the tools available for
underwriting, the company said. The transaction is expected to
close in mid-2018.
"2017 represents a starting point from which we expect to build
and 2018 will be a year of execution," AIG president and CEO Brian
Duperreault said in prepared remarks. "Our actions to diversify our
business and pursue profitable growth were further reflected" by
the acquisition of Validus.
Mr. Duperreault, who became AIG's CEO last May, made clear from
the start that he would look for deals to expand AIG. He turned to
Bermuda, where he was born and had two previous CEO roles, a
well-established hub for property-catastrophe reinsurance.
Reinsurance is an arrangement in which insurers take on the risk
of policies that primary insurers sell to businesses and
individuals. A big product line for Validus is property-catastrophe
reinsurance for hurricanes and other disasters.
AIG recently formed a Bermuda-domiciled legal entity named DSA
Reinsurance Company Ltd. to act as AIG's main runoff reinsurer. DSA
Re's purpose is to reinsure AIG's legacy life and retirement and
legacy general insurance runoff lines. DSA Re will also allow AIG
to consolidate its legacy books in one legal entity and under one
management team, AIG said.
Write to Aisha Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
February 08, 2018 17:03 ET (22:03 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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