Coming to
American International Group’s (AIG) assistance yet again, the US
government has agreed to allow AIG to retain
$2bn of the net cash proceeds from the recently closed sale of its
Japanese life insurance subsidiaries AIG Star Life and AIG Edison
Life.
The $2bn will go towards
funding part of the $4.2bn charge AIG took in its fourth quarter
2010 results to strengthen Chartis’ loss reserves.
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AIG Star Life and AIG Edison
Life were sold to US insurer Prudential Financial for $4.8bn,
$4.2bn of which was in cash and $600m by way of the assumption of
third-party debt. AIG completed the sale on 1 February
2011.
The need to strengthen
Chartis’ loss reserves resulted from adverse development on
business written primarily prior to 2005 in four classes: asbestos,
excess casualty, excess workers’ compensation and primary workers’
compensation.
In 2010, Chartis’ net written
premium income declined 2.6% compared with 2009 to $29.87bn. In its
fourth quarter 2010 results statement AIG said it anticipates that
Chartis faces a “challenging” market in 2011.
AIG’s other core insurance
unit, US-based life insurer SunAmerica Financial Group, reported
premiums, deposits and other items totalling $4.9bn in 2010, a 6%
decrease compared with 2009.
AIG said the decline was
primarily driven by lower sales of individual fixed annuities due
to the low interest rate environment experienced in
2010.
However, SunAmerica put in a
better showing in the fourth quarter of 2010, lifting individual
variable annuity sales by 164% compared with the same quarter in
2009. AIG attributed this improvement to “competitive product
enhancements, reinstatements at a number of key broker-dealers, and
increased wholesaler productivity”.
SunAmerica’s performance in
the life insurance sector also improved in the fourth quarter of
2010 with sales increasing by 19% compared with the fourth quarter
of 2009.
AIG said the increase
reflected efforts in 2010 “to re-engage independent distribution
and improve productivity of the career agency force are producing
results”. AIG added that surrender and lapse rates have “generally
returned to normal levels”.
SunAmerica reported fourth
quarter operating income of $1bn, compared with $1.1bn in the
fourth quarter of 2009.
For its full financial year
to 31 December 2010, AIG reported net attributable income of
$7.786bn compared with a net attributable loss of $10.949bn in
2009.
However, the profit in 2010
included a net gain on disinvestments of $13.527bn. Excluding this
gain and other non-recurring items, AIG reported an after-tax
operating loss of $898m up from a loss of $781m in 2009.
AIG sold assets totalling
some $41bn in 2010. The biggest sale was in October 2010 in the
form of an initial public offer of AIA on the Hong Kong Stock
Exchange in which AIG sold 67% of AIA for $20.5bn.
In November 2010, AIG closed
the sale of Alico to MetLife for $16.2bn of which $7.2bn was in
cash and the remainder in MetLife securities.
On 12 January, AIG announced
it had agreed to sell its 97.57% stake in its Taiwan unit Nan Shan
Life Insurance to Taiwan-based Ruen Chen Investment Holding Company
for $2.16bn in cash.
Commenting on AIG’s prospects, president and CEO Robert
Benmosche said: “In 2011, as we emerge from our restructuring, AIG
will focus on growing our already strong businesses domestically
and around the world, risk and capital management, strategic asset
management, and cost savings throughout the
organisation.”
