AIG Reports Q1 Net Earnings of $2.66 Billion

April 23, 2004

American International Group reported a 35.9 percent increase in first quarter net earnings to $2.66 billion, or $1.01 per share, compared to $1.95 billion or $0.74 per share in the first quarter of 2003.

The company said that “Net Income Excluding Realized Capital Gains and Losses and Cumulative Effect of an Accounting Change Increased 19.9 Percent to $2.84 Billion -$1.08 Per Share compared to $2.37 billion or $0.90 per share in the first quarter of 2003.”

It also noted that “Income before income taxes, minority interest and the cumulative effect of an accounting change for the first quarter of 2004 was a record $4.29 billion, a 46.8 percent increase over $2.92 billion in the first quarter of 2003. These results include realized capital gains of $4.9 million in the first quarter of 2004, compared to realized capital losses of $631.5 million in the same period last year.”

Maurice R. “Hank” Greenberg expressed satisfaction with the results, which beat most analysts’ forecasts. “AIG had a very good quarter led by excellent General Insurance results and strong gains in Life Insurance & Retirement Services,” he commented, noting the figures.

Commenting on the results in the General Insurance sector, Greenberg noted that “operating income excluding realized capital gains (losses) rose 14.0 percent in the first quarter to a record $1.50 billion, as a result of strong performance in both domestic and foreign operations. Net premiums written increased at a good rate -up 23.9 percent over the first quarter of 2003 to a record $10.21 billion. The General Insurance combined ratio was 93.22 compared to 93.13 in last year’s first quarter.”

While assuring shareholders and the investment community that AIG was pursuing a “disciplined approach to underwriting and pricing,” Greenberg took a swipe at those he considers to be less disciplined. “A number of insurance companies, however, appear to be pursuing strategies focused on market share growth and cash flow underwriting,” he warned.

“In the past, companies that have pursued these strategies have frequently become impaired, which should raise concerns in the marketplace about the soundness and security of coverages, especially for long tail risks.” He cited statistics from A.M. Best, showing that 218 U.S. property-casualty companies became insolvent between 1993 and 2002, including 41 that had been rated “A” or “A-” at least two years prior to the insolvency and 29 that were rated “A” or “A-” least one year before they became insolvent. “Buying long tail insurance from companies with low insurer financial strength (claims-paying) or low long-term debt ratings is in effect purchasing ‘junk insurance,'” Greenberg concluded.

That’s probably good – if somewhat self-interested – advice coming from one of the world’s few remaining triple-“A” rated insurance companies.

AIG held a conference call to discuss the results on Thursday April 22, which will be archived until April 30. It can be accessed over the Internet at: The company’s full report can be consulted on its Web site at:

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