AIG profit misses again as weak hedge fund returns weigh

Tue May 3, 2016 7:24pm EDT
 
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(Corrects to "one member" from "two members" in paragraph 10)

By Sudarshan Varadhan

(Reuters) - American International Group Inc (AIG.N: Quote), under fire from investors to improve its performance, reported a lower-than-expected profit for the third straight quarter as poor returns from hedge funds hurt its investment income.

Shares of the biggest U.S. commercial insurer by premiums fell 3.3 percent in extended trading on Monday.

AIG has been scaling back investments in hedge funds, which have borne the brunt of excessive market volatility in the past year.

Big-name hedge funds favored by pension funds and the ultra-wealthy for their track record of stellar returns took a battering in the first quarter of 2016, with some posting their worst ever start to a year on record.

AIG's weak results come at a time when the company is facing the possibility of having to set aside more capital as regulators worry about financial firms deemed "too big to fail".

The insurer's near collapse in 2008 and its $182 billion bailout by the U.S. government led to its inclusion in the Federal Reserve's list of "systemically important financial institutions" (SIFIs).

Chief Executive Peter Hancock said in March that a judge's ruling that MetLife Inc (MET.N: Quote) was not "too big to fail" opened up an opportunity for AIG to seek an exemption from the designation.   Continued...

 
The AIG logo is seen at its building in New York's financial district March 19, 2015.   REUTERS/Brendan McDermid