AIG, American International Group got a large bailout package during the crisis. Yet, they posted somewhat lower profits for the fourth quarter. The profits were dragged down by highly costly debt and their workers’ compensation system.

 

The insurance company reported a $655 million net income, a lot less than their $2 billion income from the year before. The company’s operating profit fell from $1.67 billion the year before to $1.36 billion last year. Realized capital gains and losses were not included in the income.

 

This caused a slight decline in the share price, going from $1.13 to 97 cents.

 

A large proportion of the decline was due to AIG adjusting their workers compensation reserves and adding to their other business lines’ reserves. These two moves cost 40 cents per share, €562 million in total.

 

Lower interest rates in 2014 influenced the entire insurance industry and cost it billions of dollars. A huge amount of insurers income comes from investments, which mostly consist of high-quality bonds. But workers’ comp businesses, where payments take place over many years, hit the industry hard.

 

AIG reported that in the 4th quarter around 1.5 billion dollars of common stock was repurchased and that the board has now authorized another repurchase of 2.5 billion dollars in additional shares.

 

According to Mr. Hancock, the results of the fourth quarter showed progress when it came to expense control, commitment and investments.