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May 09, 2008 at 07:41 AM
The American International Group Inc. life and retirement operations took a hit in the first quarter along with the rest of the company.
AIG, New York, is reporting a $7.8 billion net loss for the latest quarter on $14 billion in revenue, compared with $4.1 billion in net income on $31 billion in revenue for the first quarter of 2007.
The financial services operations, which include the mortgage, commercial finance, leasing and capital markets units, suffered $8.5 billion in operating losses, down from $444 million in net gains during the first quarter of 2007, as a result of unrealized market valuation losses related to the credit default swap portfolio at the company’s AIG Financial Products unit.
But AIG also suffered from “difficult results across each segment,” securities analysts at Bank of America Securities, a unit of Bank of America Corp., Charlotte, N.C., write in a comment in the company’s earnings.
Operating income fell to $1.3 billion, from $3.1 billion at the property-casualty operations.
The life and retirement operations are reporting a $1.8 billion operating loss on $17 billion in premiums, deposits and other considerations, compared with $2.3 billion in operating income on $13 billion in premiums, deposits and other considerations for the first quarter of 2007.
Domestic life operating income increased 17%, to $418 million.
Net flows of cash into retirement services products were strong, the amount of life insurance in-force increased and sales of private-placement variable universal life insurance were strong, AIG says.
But annualized group life and group health earned premiums fell to $897 million, from $942 million.
The life and retirement operations were hurt by a decline in income from partnerships and unit trusts.
Excluding the effects of partnerships and other enhancements, AIG’s “net spread” on domestic group retirement products – the gap between that it pays to customers and what it earns on its own investments – fell to 2.23%, from 2.3%.
