AIG to Buy Back More Stock as Profits Tumbled

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American International Group Inc. (NYSE: AIG) reported fourth-quarter and full-year 2014 earnings after markets closed on Thursday. For the quarter, the multinational insurer posted adjusted diluted earnings per share (EPS) of $0.97. In the same period a year ago, the company reported EPS of $1.34. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.06.

On a GAAP basis the insurer posted EPS of $0.46 on net income of $655 million, sharply below EPS of $1.34 and net income of $1.98 billion in the fourth quarter of 2013.

For the full year, net income dropped from $9.09 billion in 20133 to $7.53 billion and adjusted EPS rose from $4.49 to $4.58. On a GAAP basis EPS slipped from $6.13 in 2013 to $5.20.

During 2014, AIG also replaced about $3.3 billion of senior unsecured debt at lower interest rates, leading to a pretax charge of $824 million ($0.58 per share) against net income.

AIG did not offer guidance for the 2015 first quarter or for the full year, but the consensus estimates call for full-year EPS of $5.58. For the first quarter the consensus calls for EPS of $1.24.

The company repurchased approximately $1.5 billion worth of its shares in the fourth quarter and $4.9 billion in the full year. AIG’s board also authorized stock repurchases up to another $2.5 billion.

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The company’s CEO said:

AIG’s diversified and balanced business mix allowed for stable total insurance profits. Our strong balance sheet and continued profitability contributed to positive capital management in the fourth quarter, in the form of common stock and debt repurchases. We continued to optimize our funding profile by replacing high-cost legacy debt with new issuances at lower interest rates.

The company’s shares traded down about 1.7% in Thursday’s after-hours market, at $51.58 in a 52-week range of $48.00 to $56.79. The consensus target price for the shares was around $62.00 before the report.