AIG’s Q4 profits plummet

American International Group (AIG) quarterly profits dropped 72% as a result of over US$2 billion in charges for regulatory settlements and increased reserves. In addition to these financially damaging the losses related to last year’s U.S. hurricanes also hurt AIG’s fourth-quarter (Q4) earnings.Executive Martin J. Sullivan, president and chief executive of AIG, informs investors that the Company has put the worst behind it. AIG’s 2005 year end results reflected over US$10 billion in profits despite the damaging fourth-quarter settlements. In addition, net income for the Q4 was US$444 million, (US$0.17 per share), reflecting a decrease of more than 70% from the US$1.6 billion (US$0.62 per share) reported in 2004. The Company saw a net income, after capital and accounting adjustments, of US$376 million ($0.14 per share). A US$1.15 billion after-tax charge relating to the Feb. 2006 settlement with the Securities and Exchange Commission, New York state Attorney General Eliot Spitzer’s office and other regulators resolving deceptive accounting practice allegations, is included in the Q4 results. In addition the Q4 results include a US$1.19 billion after-tax charge that the Company associates to its increase in net reserve for losses and loss expenses.After-tax catastrophe losses of US$217 million are also reflected in the Q4. AIG has filed a third restatement of earnings, which reflects figures back to 2000. The Company anticipates that more restatements may ensue as AIG has not finished “remediation” work in areas such as derivatives accounting. AIG ensures investors that the Company’s executives anticipate that its internal control weaknesses will be corrected by date of file in 2006. Settlements with regulators, AIG reports, will allow the Company to resolve its legal and regulatory issues and concentrate on business growth.