December 28, 2010

AIG has Best Year Since 2003

‘Troubled’ financial giant leads U.S. insurance industry in beating benchmark

American International Group Inc., the company repaying a $182.3 billion government rescue, led the U.S. insurance industry to its best year since 2003 as investments strengthened.

Businessweekreports 19 of the 22 companies in the Standard & Poor’s 500 Insurance Index are beating returns for the benchmark S&P 500 this year. AIG, based in New York, has nearly doubled and is the insurance index’s best performer, according to the story. Warren Buffett’s Berkshire Hathaway Inc. has risen 22% this year. The index, which also includes MetLife Inc., the biggest U.S. life insurer, and brokers like Aon Corp., has advanced 15%, its biggest annual jump since 19% in 2003. The S&P 500 has risen about 13% so far in 2010.

As the article notes, the industry is building on a recovery that started last year when the insurance index rose 11%.  AIG, once the world’s largest insurer, is shedding assets as it seeks to repay the U.S. government rescue and has reported improved investment results. Realized losses on investments cost the company $661 million in the third quarter, compared with $1.86 billion a year earlier.

Other companies mentioned include MetLife, which has reported net income of more than $2.7 billion this year through Sept. 30 after a loss of about $2.2 billion in all of 2009. Third-quarter investment income rose 12% from a year earlier to $4.39 billion. New York-based MetLife has climbed 27% this year.

Prudential, the second-biggest U.S. life insurer, has advanced 20% so far this year. The Newark, N.J.-based company’s third-quarter earnings gained after a rising stock market allowed the company to reduce reserves against minimum-return guarantees it makes to annuity customers.

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