One of the giants of the insurance sector, both in the UK and internationally, is facing serious pressure as analysts suggest it will record its lowest second quarter profit since its taxpayer bailout back in 2008 – with net income to slump by more than 40%.
According to a Financial Times
report, Wall Street analysts have cut their earnings estimates for AIG by a third over the last year suggesting there is an ongoing impact on the insurance sector from persistently low interest rates. The forecast for AIG, which suggests net income of $1.09 billion in the second quarter, is down more than two fifths compared to one year ago and is indicative of a wider slump across the sector – with MetLife and Prudential
also expected to follow-up with net income declines in the region of 15% later this week.
AIG’s chief executive Peter Hancock will now reportedly face pressure after he defied calls from investors to break up the insurer.
On the back of the financial crisis, AIG attempted to slim down its business significantly and withdrew from aircraft leasing and consumer finance as it shed around $90 billion in assets. It also slashed its workforce – down from 120,000 to around 65,000.
However, since the third quarter of 2013, it has moved to buy back around $20 billion in stock – but its returns have remained underwhelming prompting calls to split its general insurance and life arms. Yet despite setting out plans for further disposals, including of one of its mortgage insurance arms in the USA, the Englishman has resisted those calls and instead is focusing on the segregation of legacy assets and a reduction of hedge fund exposure.
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