Earnings Preview: Sandy to weigh on AIG's 4Q

Insurer AIG expected to report 4Q loss due to $1.3 billion in Superstorm Sandy losses

Associated Press

LOS ANGELES (AP) -- American International Group Inc. is expected to report a loss in the fourth quarter, reflecting more than $1 billion in losses related to insurance policy payouts in the aftermath of Superstorm Sandy. AIG will report its latest financial results on Thursday after the market closes.

WHAT TO WATCH FOR: The extent of the loss due to Superstorm Sandy, and whether AIG expects to see more losses carry over into the first quarter.

In December, AIG estimated it would book $1.3 billion in losses related to the storm in the fourth quarter. Sandy made landfall on Oct. 29, spreading a swath of devastation that affected New York, New Jersey, Connecticut and eight other states.

The company said it would contribute about $1 billion to its U.S. property casualty insurance units to help offset the losses, which are after taxes and include reinsurance recoveries.

Investors also will be looking for an update on AIG's efforts to cut down its debt and how its investments fared during the quarter.

Insurers like AIG usually collect premiums from their customers and invest that money into bonds or stocks. Some analysts have said that sustained low interest rates will likely limit insurers' ability to make money from their investments.

In November, AIG reported a third-quarter profit of nearly $2 billion thanks to strength in its insurance operations and investment returns. In the same period a year earlier it lost $4 billion.

WHY IT MATTERS: AIG, based in New York, is among the nation's largest insurance companies. It became a household name after receiving the biggest government bailout of the 2008 financial crisis, $182 billion. That made it a lightning rod for critics who thought the government was propping up banks at the expense of individuals.

AIG sold off assets to pay back the bailout, and in December freed itself from the last of its Treasury ownership.

WHAT'S EXPECTED: Analysts, on average, expect a loss of 7 cents per share, according to FactSet.

LAST YEAR'S QUARTER: AIG reported net income of $19.8 billion, or $10.43 per share, in the fourth quarter last year, nearly all of it due to a tax-related accounting gain. Its after-tax operating income amounted to $1.6 billion, or 82 cents per share.

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