AIG Posts Second Straight Loss; Hancock Lifts Dividend, Buybacks

  • CEO announces $5 billion buyback, raises dividend 14%
  • Insurer's investment income hurt by results from hedge funds

American International Group Inc. posted its second-straight quarterly loss, adding to pressure on Chief Executive Officer Peter Hancock, who lifted the dividend and announced a $5 billion share buyback as he fights demands from activist investor Carl Icahn for a management shakeup.

The net loss was $1.84 billion, or $1.50 a share, in the three months ended Dec. 31 and compares with profit of $655 million, or 46 cents, a year earlier, the New York-based company said Thursday in a statement. The operating loss, which excludes some investment results, was $1.10 a share, missing by 19 cents the average estimate of 16 analysts surveyed by Bloomberg.

Hancock is seeking to reshape the company’s business mix, curtail investment risks and improve underwriting margins to reverse a stock slide and protect his job. Fourth-quarter results were hurt by higher-than-expected claims costs on casualty coverage and deteriorating results from hedge funds. The CEO unveiled a plan last month to return $25 billion in capital to shareholders over the next two years, funded partly with proceeds from asset sales.

AIG will become a “leaner, more profitable and focused insurer,” Hancock said in the statement. Thursday’s buyback authorization, and the 14 percent increase of the quarterly dividend to 32 cents a share “are a strong start towards our goal of returning at least $25 billion.”

Hancock’s presentation in January failed to win support from Icahn, who said management needs to be more aggressive in shrinking the company and that the CEO wasn’t up to the job after announcing more than $3 billion in costs to fill a reserve shortfall.

AIG has declined 18 percent this year to $50.52 as of 4 p.m. Thursday, compared with a drop of about 11 percent in the Standard & Poor’s 500 Index. Results were released after the close of regular trading.

Operating return on equity was 6.8 percent in 2015 and 6.7 percent in the fourth quarter. Icahn has knocked Hancock for failing to meet his long-time goal of a 10 percent ROE.

The insurer was also unprofitable in the third quarter when AIG posted a $231 million loss as investment results worsened. For the full year, net income fell 71 percent to $2.2 billion.

Book value, the measure of assets minus liabilities fell to $75.10 a share, from $79.40 three months earlier.

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