As many of its competitors were posting modest profits for Q4 of last year,
The good news for AIG is, despite this being the first quarter out of the last three to be in the red, the loss is positive compared to a net loss of $61.7 billion or $458.99 per diluted share in Q4 2008. Additionally, AIG's Q4 2009 adjusted net loss was $7.2 billion, which is a vast improvement over an adjusted net loss of $38.5 billion last year.
AIG attributes the net loss in the quarter to the following items:
• As previously disclosed, $6.2 billion ($4.0 billion after tax) of interest and amortization expense, including $5.2 billion ($3.4 billion after tax) of accelerated amortization expense on the prepaid commitment asset resulting from the $25 billion reduction in the balance outstanding and the maximum credit available under the Federal Reserve Bank of New York Credit Facility
• As previously disclosed, a $2.8 billion ($1.5 billion after tax) loss recognized on the pending sale of Nan Shan Life Insurance Co. Ltd.
• Loss reserve strengthening of $2.3 billion ($1.5 billion after tax) in Commercial Insurance
• A valuation allowance charge of $2.7 billion for tax benefits not presently recognizable, including those shown above
“Our team made great progress during the year in executing our strategic restructuring plan, by stabilizing and strengthening AIG’s insurance businesses, reducing AIG Financial Products Corp. (AIGFP) exposures, and positioning certain businesses for sale," AIG President and CEO Robert Benmosche said. “In the fourth quarter, we took significant strides toward the dispositions of American International Assurance Co., Ltd. (AIA) and American Life Insurance Co. (ALICO); and through the creation of two special purpose vehicles (SPVs) that now own these two companies, we reduced our debt to the FRBNY Credit Facility by $25 billion in exchange for FRBNY ownership of preferred interests in the SPVs. As a result of reducing our debt to the FRBNY, during the fourth quarter we incurred certain losses associated with this debt reduction."
Benmosche concluded by saying that he is confident in the mix of AIG's businesses over the long term.
"We are taking the right steps to regain our stature as one of the most respected and diverse property/casualty operations in the world, with a strong U.S. life and annuity operation and several other businesses that will enhance our nucleus, help us to meet our goal of repaying taxpayers and provide value to the communities where we operate,” he said.
