AIG Announces Weak Q3 Results
by Stewart Douglas
Story link: AIG Announces Weak Q3 Results
Insurance group AIG has today announced disappointing third quarter results, largely stemming from a tougher commercial environment in light of the problems with the US housing market and the sub-prime crisis.
In the figures released today profits had fallen 27% on the last quarter, down to just $3.09 billion from $4.2 the year previous for the same quarter. Despite the fall in profitability, revenues were up this quarter from $29.3 to $29.8 billion as a result of continued expansion, reflecting growing cost center efficiency leaks at the firm.
The announcement represents rising costs in certain of the group’s divisions, as well as underperformance in its assets linked with the US sub-prime market which the company today described as secure, despite substantial write downs by many other companies with securities-based investment portfolios.
Whilst the firm does still have a substantial exposure to sub-prime linked investments, it is thought that its strategy is sufficiently diverse in order to counteract any potential further devaluations which could further depress profitability.
Speaking today on the results, chief executive Martin Sullivan said that he was confident that AIG would contain the mild effects of its overall sub-prime exposure, despite the fact that its residential division has suffered under pressure for private lines.
This results come just months after AIG announced its exposure to the sub-prime situation was minimal and that its investment strategy was robust enough to prevent the group from sustaining any major losses.
Market analysts have today described the results as disappointing, but not as bad as could perhaps have been the case, and certainly not as bad as the results of other insurance groups with sub-prime linked investment portfolios and investment banks over the course of this month.