Insurer AIG on Thursday posted a steeper third-quarter loss, undercut by declining interest rates and weak stock markets that reduced the value of its holdings while it paid out storm losses. It also took a big one-time charge for a fleet of older less fuel-efficient aircraft.
New York-based American International Group Inc. reported a loss of $4.1 billion, or $2.16 per share, compared with a loss of $2.52 billion, or $18.53 per share a year ago.
The operating loss was $3.04 billion, or $1.60 per share, up from a loss of $114 million, or 84 cents a year ago.
Analysts surveyed by FactSet expected a loss of 22 cents per share.
The company has been paying back the billions of dollars the U.S. government provided in the 2008 bailout and now owes roughly $68 billion.
At AIG's Chartis Insurance unit, net premiums written rose less than 1 percent to $8.66 billion from $8.59 billion while claims expenses rose nearly 12 percent to $6.84 billion. Underwriting expenses climbed 15 percent to $2.89 billion. That left the company with an underwriting loss of $582 million, compared with a profit of $65 million a year ago. Its combined ratio was 106.4 compared with 99.3 a year ago.
Combined ratio is the sum of an insurance company's loss ratio and expense ratio and is used as an indicator of profitability. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions. A figure below 100 indicates an underwriting profit.
The business posted catastrophe losses of $574 million up from $72 million of losses taken a year ago. Much of the current quarter's loss was from Hurricane Irene, which struck the East Coast in August.
"Despite the difficult external environment, we are encouraged by the progress we've made and the underlying strength of our core insurance businesses," CEO Robert H. Benmosche said in a statement.
In the SunAmerican Financial business, revenue fell 10 percent to $3.54 billion on lower premiums and investment income. Expenses rose 7 percent.
The company also took a $1.5 billion non-cash charge for aircraft in its International Lease Finance Corp. fleet. The charge is for older-generation planes that would be sold prior to the end of their previously estimated life.
The company said a declining stock market contributed to a loss of $2.3 billion in the valuation of its holding of AIA Group Ltd. shares.
Reduced interest rates and widening credit spreads cut the fair value of other holdings by more than $974 million.
AIG also paid the U.S. Treasury $2.2 billion in August, using proceeds from its sale of Nan Shan Life Insurance Co.
On Monday, AIG made an additional payment of approximately $972 million, primarily from the release of funds held in escrow related to the American Life Insurance Co.
The latest repayment brings the insurance giant's outstanding balance from the 2008 taxpayer-funded bailout down to roughly $68 billion.
The government provided AIG with $182 billion at the height of the 2008 financial crisis.
The government still owns 77 percent of AIG's common stock. While the government made an initial sale of AIG stock last May, the expectation is that those stock sales will not resume until the value of AIG shares increase in value. AIG stock has lost nearly half of its value this year.
Shares rose 44 cents, or 1.8 percent, to close at $24.63 before the company posted results. That is below the $28.72 price where the Treasury would be able to recoup all of its investment in AIG.
Shares fell another 18 cents in after-market trading. They are trading at nearly half their value at the beginning of the year. They've traded as high as $52.67 in the past 52 weeks.
AIG also said its board authorized the repurchase stock valued at up to $1 billion. The timing of purchases will depend on market conditions, AIG's financial condition, results of operations, liquidity and other factors.