American International Group Inc (AIG) posted lower than expected earnings in the fourth quarter due to lower rates of interest and refinancing expensive debt.
The firm reported net income of $655 million ($0.46 per share) for the fourth quarter that ended December 31. This was a 67 percent drop compared to the $2 billion that the company posted in the same quarter the year before.
Wall Street had expected earnings of $1.05 per share in the fourth quarter.
Cathy Seifert, an equity analyst at the S&P Capital IQ, said:
“In some respects it was a kitchen sink quarter. They did a lot of cleanup work here.”
On February 12, 2015, AIG’s Board of Directors gave the green light for the repurchase of additional shares of AIG Common Stock with an aggregate purchase price of up to $2.5 billion and declared a quarterly dividend of $0.125 per share.
“Our fourth quarter results showed progress on expense control, ongoing investments in our businesses, and our commitment to balance sheet management,” said Peter D. Hancock, AIG President and Chief Executive Officer.
“AIG’s diversified and balanced business mix allowed for stable total insurance profits. Our strong balance sheet and continued profitability contributed to positive capital management in the fourth quarter, in the form of common stock and debt repurchases. We continued to optimize our funding profile by replacing high-cost legacy debt with new issuances at lower interest rates. Book value per share excluding AOCI and DTA increased 12 percent compared to year-end 2013.”
“Our continued focus on managing our balance sheet to reflect our improved risk profile, combined with continued insurance company dividends, has contributed to the Board’s approval of an additional $2.5 billion share buyback authorization.”
“Looking back on 2014, it was a year of transition and transformation, as we took important steps toward our goal of becoming the world’s most valued insurer,” Mr. Hancock continued.
“Our focus on value benefits our customers and our shareholders, and leverages our global scale to achieve the right balance between growth, profitability, and risk. We began several value-based initiatives in 2014 and will continue these efforts in 2015. We remain committed to streamlining our operations and reducing our cost structure. Beginning this quarter, we are providing more information and detail in our disclosures on expenses and investments, which we’ll discuss further on tomorrow’s earnings call.”
