(Reuters) – On Wednesday, American International Group Inc. reported quarterly losses when the insurance company suffered from catastrophic losses and reduced the return on investment in a volatile market.
Excluding realized investment gains and losses and some other items, AIG reported a loss of $ 559 million, or 63 cents per share, for the fourth quarter ended December 31, compared to $ 526 million, or 57 cents per share, for the quarter ago.
On this basis, Wall Street analysts estimated a 42 cent per share income according to IBIN data from Refinitiv.
The company's insurance unit reported an insurance loss of $ 1.1 billion compared to $ 846 million a year ago, largely due to Hurricane Michael
. AIG, however, said that the total insurance accident's annual combination ratio, which excludes changes from losses in recent years, was 98.8% for the quarter, compared to 1
A low 100% ratio means that the insurer earns more in premiums than it pays out in claims. The accident year quota is a measure that AIG's CEO Brian Duperreault has cited as the best gauge of the unit's long-term profitability. The number excludes disaster claims and reserve fees.
Mr. Duperreault, who took the helm at AIG in May 2017, has promised to turn the company. His most critical task is to return to profitable insurance, something that AIG has not achieved since 2007.
The total quota in AIG's commercial insurance unit, which includes losses for disasters, was 115% compared to 113% for the quarter.
In December, Duperreault stated that AIG expected to enter 2019 "with a small insurance result" in its insurance unit. It would only be a way to go to a double-digit return on equity, a process that can take up to three years, he said.
AIG is still on the right track to meet these goals, says Duperreault in a statement on Wednesday.
"It's something he has been very vocal about and he really needs to deliver," says James Breece, a portfolio manager and stock analyst for Spears Abacus Advisors LLC. The New York-based investment firm advised Beehive Fund, which owned 150,250 shares in AIG on September 30.
The fourth quarter of 2018 was challenging for the insurance companies, given the tumultuous financial markets. AIG's shares fell by 26%, ended the year at $ 39.41, while the S & P 500 Multi-Line Insurance Index fell by 19.5%, the largest decrease since 2012.
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The broader S & P 500 fell compared to 13.7%.
AIG's life and pension unit reported adjusted income before tax of $ 623 million, a decrease of 20% for the quarter.
AIG's total net investment income fell to $ 2.8 billion, in the quarter, from $ 3.5 billion a year ago, reflecting a significant impact on market trends, the company said.
The insurer added $ 365 million to his reserves in the quarter, following the completion of AIG's lead actor Mark Lonson. AIG decided to increase its money in order to pay futures receivables, to a large extent driven by insurance policies issued by the company in 2016 and earlier, the company said.