AIG, Marsh & McLennan Q4 Earnings Improve

American International Group

AIG reported a $19.8 billion profit for the 2011 fourth quarter, boosted by $17.7 billion in tax benefits. AIG said it has determined that it is likely to be consistently profitable in the future and thus released most of the tax benefit allowance in the quarter. In the prior-year period, AIG reported $11.2 billion income.

AIG also booked $1.6 billion in operating income from its insurance businesses and other units for its 2011 fourth quarter. Chartis reported fourth quarter operating income of $348 million, a vast improvement from an operating loss of $3.97 billion one year ago, which had reflected a reserve strengthening charge of $4.2 billion in the prior year period.

However, Chartis continued to see underwriting losses — though these losses were much smaller compared to one year ago.

The fourth quarter 2011 combined ratio for Chartis was 107.3 percent (74.5 loss ratio and 32.8 expense ratio), improving from 160.5 percent in the fourth quarter of 2010, which had included 49.2 points from the reserve strengthening in the prior year period. Chartis had an underwriting loss of $655 million in the fourth quarter 2011, while earning $1.0 billion in investment income. It also had net realized capital gains of $444 million. In comparison, Chartis suffered $5.18 billion in underwriting loss during the fourth quarter in 2010.

Chartis 2011 fourth-quarter results were also impacted by $467 million of catastrophe losses, including $368 million related to the Thailand floods, compared to $203 million of catastrophe losses in the fourth quarter of 2010.

Fourth quarter 2011 net premiums written at Chartis were $7.85 billion, up 3.6 percent from the prior-year period.

Consumer insurance accounted for 2.4 percent of the increase — $3.3 billion in net premiums written, up from $3.0 billion one year ago. The consumer insurance segment reported fourth quarter 2011 operating income of $174 million with a combined ratio of 97.6 ($85 million underwriting profit). Net investment income for the segment was $89 million.

The commercial insurance segment saw net premiums written fall 0.6 percent- to $4.51 billion from $4.53 billion one year ago — primarily from capital management initiatives in the casualty business. The commercial insurance segment reported fourth quarter 2011 operating income of $202 million with a combined ratio of 111.6 percent ($635 million underwriting loss). The net investment income for the segment was $837 million.

For the full-year 2011, Chartis had an underwriting loss of $3.23 billion, compared with an underwriting loss of $5.46 billion for the full-year 2010.

The full-year 2011 combined ratio was 109.0 percent (78.3 loss ratio and 30.7 expense ratio), improving from 116.8 percent for 2010.

Marsh & McLennan Companies

Marsh & McLennan Companies reported $256 million for its 2011 fourth-quarter net profit, up 26.1 percent from one year ago.

Consolidated revenue for the quarter was $2.9 billion, a 4 percent jump from the prior-year period. Operating income for the quarter rose 20 percent to $391 million.

For the 2011 full year, Marsh & McLennan posted net income of $993 million, up 16 percent.

The 2011 full-year revenue rose 9 percent to $11.5 billion. Operating income for the full year was $1.6 billion, up from $939 million.

Risk and insurance services revenue was up 6 percent to $1.6 billion in the quarter. Operating income for this segment was $304 million for the quarter, up 35 percent. Adjusted operating income in the quarter rose 11 percent to $288 million. For the year, risk and insurance services revenue was $6.3 billion, an increase of 9 percent from the prior year.

Marsh’s revenue in the fourth quarter was $1.4 billion, up 6 percent from a year ago. International operations reported underlying revenue growth of 6 percent in the fourth quarter — growth was especially strong in Asia Pacific and Latin America regions. In the U.S./Canada division, underlying revenue grew 2 percent. Guy Carpenter’s fourth quarter revenue was $193 million, a 5 percent jump from one year ago.

Consulting segment revenue rose 3 percent to $1.3 billion in the quarter. Operating income was $147 million in the quarter, compared with $150 million in the prior year. For the 2011 full year, consulting segment revenue rose 9 percent from the prior year to $5.3 billion. Adjusted operating income rose 12 percent to $619 million.

Mercer’s revenue was up 3 percent to $940 million in the fourth quarter. Oliver Wyman’s revenue rose 2 percent to $406 million in the fourth quarter. Marsh & McLennan had an investment loss of $4 million in the fourth quarter, compared with investment income of $19 million one year ago.