Tax Changes, Wildfires Push AIG to $6.7 Billion Loss -- Update

By Aisha Al-Muslim 

American International Group Inc. posted a wider fourth-quarter loss as the global insurance conglomerate was significantly affected 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.

AIG reported a $4.2 billion in catastrophe losses in 2017, a company record and more than three times higher than the prior year. However the insurer touted delivering $3.16 billion in adjusted pretax income for the year, up from $1.42 billion in 2016.

Shares of AIG, down 10% over the past year, fell 0.3% in after-hours trading Thursday.

The New York-based company reported a net loss of $6.66 billion, or $7.33 a share, compared with 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 overhaul.

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 Chief Executive Brian Duperreault said. "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 Co. 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 [e-mail]

(END) Dow Jones Newswires

February 08, 2018 18:23 ET (23:23 GMT)

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