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AIG swings to profits in Q4

American International Group (AIG) has reported a net income of $11.2bn, or $16.60 diluted earnings per share for the fourth quarter of 2010, compared to net loss of $8.84bn, or $65.51 diluted earnings per share for the same quarter of 2009.

AIG’s property insurance business Chartis posted an operating loss of $4.0bn for the quarter of 2010, compared to a loss of $1.8bn in the fourth quarter last year.

SunAmerica Financial Group operating income was $1.0bn for the fourth quarter of 2010, was $43m lower than the fourth quarter of 2009.

Financial Services operating loss of $326m before net realized gains (losses) compared to operating income of $468m in the fourth quarter of 2009, resulting primarily from $742m of impairment charges on certain aircraft at International Lease Finance Corporation (ILFC).

The AIG Other Operations posted operating income of $470m for AIG’s Direct Investment business, and operating income of $154m at United Guaranty Corporation (UGC).

The American insurer sold ALICO for $16.2bn (including $7.2bn in cash) and, in an initial public offering, sold 67% of its shares of AIA for approximately $20.5bn.

AIG said the net cash proceeds from these transactions have been used to repay the Federal Reserve Bank of New York. AIG recognized a $15.5bn gain (net of tax) on these transactions.

The insurer raised more than $5.5bn of new, non-government debt through a debt offering, a contingent capital facility, and new bank facilities.

AIG recorded a $1.1bn expense for amortization of the prepaid commitment fee asset in the fourth quarter of 2010, including $705m of accelerated amortization resulting from a $4.7bn repayment and reduction in the maximum credit available under the FRBNY Credit Facility.

Tax expense incurred was $4.8bn in the fourth quarter, primarily resulting from the gains related to ALICO, AIA, and the sale of the Otemachi Building in Japan.

Total equity was $113.2bn for the fourth quarter of 2010, a $15.1bn increase from $98.1bn from the quarter of last year.

AIG president and CEO Robert Benmosche said in 2010, AIG said it would realign AIG to grow the businesses and to ultimately repay the US taxpayer.

"We remain extremely grateful to the taxpayers and have made significant progress since January 2010 towards independence from this support.

"Our results for the quarter reflected the effects of our comprehensive review of Chartis reserves. As we disclosed earlier this month, we strengthened reserves related to AIG-specific and emerging industry loss trends, primarily in asbestos and workers’ compensation, among other lines.

"In 2011, as we emerge from our restructuring, AIG will focus on growing our already strong businesses domestically and around the world, risk and capital management, strategic asset management, and cost savings throughout the organization," Benmosche said.