AIG Sets Lofty Goals For Growth
NEW YORK ( TheStreet) -- American International Group's (AIG) CEO Robert Benmosche set some aggressive goals on its first quarter earnings conference call that left many questions hanging about the future of the insurer.
|AIG CEO Robert Benmosche|
"There is a lot to sort out and learn about their goals," said Sandler O'Neill analyst Paul Newsome. "There were still outstanding questions like, if they could achieve the mid-teens earnings growth they were talking about. I had questions about if they were in a cash flow positive. "
AIG's Benmosche said on the call that besides paying the government back, the insurer will raise $25 billion to $30 billion in deployable capital by 2015 and may start share buybacks in 2012.
"We believe they can begin to manage, probably in the second half of 2012, the amount of the equity we require in this company to support the liabilities that we have,"said Benmosche. "So it's really around that philosophy and we want to make sure we project ourselves as a very strong company like always live up to its guarantees at this point in time."
The insurer's larger goals came along with the announcement that it's first quarter profit fell by 85 percent to a net income of $269 million compared to a profit of $1.78 billion last year in the same quarter.
The losses were event driven in the first quarter, tied to catastrophe and repayments for its 2008 government bailout. AIG recorded a $1.7 billion loss on catastrophes tied to the March Japanese earthquake and tsunami, the earthquake in New Zealand and the floods in Australia. In addition a final pre-tax charge of $3.3 billion was related to a loss on extinguishment of debt related to the Federal Reserve Bank of New York (FRBNY) Credit Facility.
There are several factors that could play into the AIG's earnings going forward. The insurer, which is 92 percent owned by the government, plans to raise up to $3 billion and up to an additional $4 billion by January 14, 2012, by executing one or more offerings, according to documents filed with the Securities and Exchange Commission .
Along with plans to for its offerings, AIG is reorganizing its property and casualty business, Chartis, which is responsible for 40 percent to 45 percent of the company's operating profits. Chartis CEO Peter Hancock said that AIG was looking to expand the P&C insurer's business both internationally and nationally.Chartis saw net premiums rise by 20 percent.
On the life insurance side, there could be more of an upside. The majority of operating profits this quarter were generated by SunAmerica, which reported operating income was $1.1 billion. Premiums and deposits increased 31.4 percent to $6.2 billion compared to $4.7 billion last year, according to the earnings report.