American International Group Inc (AIG), the largest commercial insurer in the US and Canada, said profit declined 67 percent on costs to pay down debt and add to reserves.
Net income fell to US$655 million, or US$0.46 per share in the fourth quarter of last year, from US$1.98 billion or US$1.34 a year earlier, the New York-based insurer said on Thursday in a statement.
Operating profit, which excludes some results tied to investing and debt redemptions, was US$0.97 per share, falling short of the US$1.06 average estimate of 22 analysts surveyed by Bloomberg.
AIG chief executive officer Peter Hancock has been revamping management and working to improve results at the property-casualty operation after taking over in September last year.
AIG has been issuing new bonds at lower interest rates to repay higher-cost debt, and took a US$824 million charge tied to those efforts in the fourth quarter.
“We’ll look back and say 2014 was a transitional year and 2015 will show some operational progress,” Sanford C. Bernstein & Co analyst Josh Stirling said by telephone before results were announced.
The stock lost US$0.34 to US$52.11 at 4:49pm in New York, after results were announced. AIG advanced 9.7 percent last year, trailing the 11.4 percent gain of the Standard & Poor’s 500 Index.
The board authorized the repurchase of US$2.5 billion of stock, according to the statement, after AIG bought back US$4.9 billion of shares last year.
Book value, a measure of assets minus liabilities, rose to US$77.69 per share on Dec. 31 last year from US$77.35 three months earlier.
AIG said it issued US$750 million of 4.5 percent notes due in 2044 while repurchasing about US$2.8 billion in high-cost hybrid and senior notes in the fourth quarter. The company also cut debt tied to the direct investment book by US$2.5 billion.
Full-year profit fell to US$7.53 billion, 17 percent lower than in 2013, AIG said.
Net investment income slumped 6.1 percent to US$3.97 billion in the fourth quarter as hedge-fund performance deteriorated. Those holdings contributed US$86 million, down from US$446 million a year earlier, AIG said in a supplemental document on its Web site.
Private equity generated US$206 million, compared with US$286 million a year earlier. AIG mainly invests in bonds.
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