AIG suffers US$5 billion loss in 2007 Q4
American International Group, Inc. (AIG) reported loss of US$5.3 billion for 2007 Q4, and a net income of US$6.2 billion for the full year 2007, representing a 55.9% decrease over the prior year.
In 2006 Q4, AIG reported a profit of US$3.4 billion. "The 2007 other-than-temporary impairment charges resulted primarily from the significant, rapid declines in market values of certain residential mortgage-backed securities in the fourth quarter, for which AIG cannot reasonably determine the recovery period will be temporary," the company reported in a statement.
AIG president and CEO Martin J. Sullivan said "AIG's results in 2007 were clearly unsatisfactory."
The year was challenging, he continued, because the "deterioration of both the U.S. residential mortgage and credit markets significantly affected several of our operations and investments."
The company's domestic brokerage group and foreign general experienced improved underwriting results in 2007 Q4, a company statement says. But the improvements were offset by a US$348-million operating loss in mortgage guaranty and a US$184-million operating loss in personal lines (compared to a 2006 Q4 operating income of US$79 million).
The decline in personal lines was due to "losses and reinstatement premiums related to the California wildfires, unfavourable loss reserve development in prior-accident years, primarily in agency auto, an increase in the current-accident-year loss ratio and transaction and integration costs related to the acquisition of the minority interest in 21st Century Insurance Group," the release says.
"Strong private client group premium growth was offset by declines in the direct and agency auto segments."
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