American International Group Inc.’s second-quarter earnings took a hit on a slump in income from the insurer’s investment portfolio. The stock fell as much as 6.1 percent.
Profit in the period fell from a year earlier and missed analyst estimates as private equity and hedge fund performance weakened, the New York-based insurer said Thursday in a statement. Net investment income declined 12 percent to $3.1 billion.
Chief Executive Officer Brian Duperreault, who’s been in charge for a little more than a year, is working to improve performance to show an underwriting profit by year-end. The combined ratio for general insurance was 101.3 in the quarter, meaning AIG lost 1.3 cents for every premium dollar after claims and expenses.
“Heading into the quarter, there was an expectation that AIG is in the final innings of fixing its commercial-lines book,” Amit Kumar, an analyst at Buckingham Research, said in an email. “However, investors were negatively surprised by the high level of severe losses.” He said he sees “renewed uncertainty in terms of how much time will it take to turn this behemoth around.”
The shares fell as low as $51.80 in extended New York trading after closing at $55.16. AIG had declined 7.4 percent for the year as of Thursday’s close.
‘Taking Hold’
Duperreault said AIG made progress during the quarter.
“We continued to take actions across general insurance to establish a culture of underwriting excellence and added stellar talent,” Duperreault said in the statement. “Our efforts are taking hold.”
This week, AIG agreed to sell 19.9 percent of its DSA Reinsurance unit to Carlyle Group LP. Duperreault has also hired new senior executives, and last month bought Bermuda-based reinsurer Validus Holdings Ltd. for about $5.5 billion to expand abroad and enter new businesses.
Net income was also dented by $200 million in restructuring costs mainly for “efficiency initiatives,” AIG said.
Other highlights:
Net income fell to $937 million, or $1.02 a share, from $1.13 billion, or $1.19, a year earlier. Adjusted after-tax income per share was $1.05, below the $1.21 average estimate of 17 analysts surveyed by Bloomberg. Book value was $68.65 per share at June 30, down from $69.95 as of March 31. The underwriting loss was $89 million, compared with a gain of $149 million a year earlier. The life and retirement business had adjusted pretax income of $962 million, down from $993 million from a year ago.