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)

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