(Reuters) – American International Group Inc (AIG.N) on Thursday reported a 17 percent fall in quarterly profit as its general insurance business failed to show improvement, missing analysts’ expectations.
FILE PHOTO: A banner for American International Group Inc (AIG) hangs on the facade of the New York Stock Exchange, in New York, U.S., on October 16, 2012. REUTERS/Brendan McDermid/File Photo
AIG shares fell more than 5.5 percent to $52.15 after hours.
Chief Executive Brian Duperreault, who took charge more than a year ago, has been trying to turn around the company and its commercial insurance business, including by sharpening underwriting practices.
The second-quarter results included a $200 million restructuring charge related to “efficiency initiatives,” including compensation.
AIG has been on a hiring spree to bring on new executives to boost profits. On Wednesday, AIG named veteran industry executive David McElroy to head its Lexington Insurance Co unit.
McElroy had been executive chairman of Arch Insurance Group Inc and vice chairman of Arch Worldwide Insurance Group.
Peter Zaffino, former CEO of Marsh & McLennan Cos Inc’s (MMC.N) insurance brokerage unit, was named to head AIG’s general insurance business. Former Berkshire Hathaway executive Tom Bolt was named chief underwriting officer of general insurance.
Adjusted pretax income from AIG’s general insurance business dropped 46 percent to $568 million, while underwriting income swung to a loss of $89 million from a $149 million profit a year ago.
Duperreault has launched an underwriting review of AIG’s general insurance business and increased the company’s focus on technology to boost its stock.
In May, Duperreault said he expected an underwriting profit by year-end.
The combined ratio in AIG’s general insurance business rose to 101.3 percent from 97.7 percent a year ago, as more claims were paid than premiums earned because of severe and catastrophe-related losses.
Duperreault has said his goals include getting the ratio to below 100 percent, a measure of underwriting profitability. Adjusted pretax income from the company’s life and retirement business fell 3 percent to $962 million in the quarter.
Net income fell to $937 million, or $1.02 per share, from $1.13 billion, or $1.19 per share, in the year-ago quarter.
On an adjusted basis, AIG earned $1.05 per share. Analysts on average had expected earnings of $1.21, according to Thomson Reuters I/B/E/S. It was not immediately clear if the numbers were comparable.
Reporting by Suzanne Barlyn in New York and Diptendu Lahiri in Bengaluru; Editing by Arun Koyyur, Phil Berlowitz and Richard Chang