I found 35 US Big Insurance Corps, other than Health Insurance Corps, with Pretax Income or Pretax Loss of more than $100 mil each in either the 4Q 2011 or the 4Q 2010.
How did they do?
Well, these 35 US Big Insurance Corps, had a Total Pretax Income in the 4Q 2011 of $11.8 bil, or an increase of $3.2 bil, or 37% above the 4Q 2010 amount of $8.6 bil.
But on the downside, this increase was not widespread throughout the Big Insurance Corp community, with 18 of the 35, or more than half, registering Pretax Income declines in the 4Q 2011, as compared with the 4Q 2010.
So how could that be?
Well, it's basically all due to your AIG, which the US Government owns a huge chunk of, and thus you also own it.
AIG's Pretax Income increased by a monster $5.0 bil in the 4Q 2011, going from a Pretax Loss of $3.2 bil in the 4Q 2010 to a Pretax Profit of $1.8 bil in the 4Q 2011.
But the real problem with this monster earnings increase is that AIG's operating performance was just horrible in the 4Q 2010. At least it's now going in the right direction.
And to a somewhat lesser extent, Allstate also contributed to this huge total earnings increase. I was especially glad to see this, since Allstate did such a superb job on the devastating tornado that hit our home property. Whew! Now if only the IRS could follow Allstate's lead in both properly and fairly handling casualty losses. From first-hand experience, the IRS handles casualty losses similar to how FEMA reacted during and after Katrina.
Below here is the US Big Insurance Corp Sub-Sector breakdown for these 35 US Big Insurance Corps, and shows their 4Q 2011 Pretax Earnings (PTI), along with a comparison with the prior year’s quarter amounts.
..............................................................................Increase
...............................................PTI(L)....PTI(L)......(Decrease)
.................................................4Q..........4Q..................
...............................................2011.......2010....Amount....%
.................................................(millions of dollars)
Insurance Conglomerate
AIG(1)....................................1,846.....(3,153)....4,999....259%
Property/Casualty Insurance
Allstate..................................1,052.........363........689....190%
ACE Ltd....................................872.......1,134.......(262)...-23%
Travelers..................................778......1,197.......(419)...-35%
Chubb.......................................614.........699.........(85)...-12%
Progressive Corp......................375.........427.........(52)...-12%
American Financial...................241.........176..........65.....37%
CNA Financial...........................239.........476.......(237)..-50%
Assurance................................208.........150...........58.....39%
Cincinnati Financial..................186.........174...........12.......7%
WR Berkley...............................150.........176..........(26)...-15%
Arch Capital Group...................138..........231.........(93)...-40%
Hartford Fincl Svcs(2)...............122.........759.......(637)...-84%
HCC Insurance..........................112.........135..........(23)...-17%
Mercury General.......................111.........(50).........161....422%
Markel........................................75.........112..........(37)...-33%
XL Group(3)..............................(23)........181........(204)..-113%
Everest Re Group......................(42)........236........(278)..-118%
Transatlantic.............................(92)........159........(251)..-158%
Total all 18..............................5,116.....6,735.....(1,619)....-24%
Life Insurance
MetLife(4).................................930......1,523.......(593)...-39%
Prudential Financial..................788.........179........609...340%
Lincoln National(5)...................295.........252..........43.....17%
Genworth Financial(6)..............217........(255).......472..-185%
Torchmark................................192..........193...........(1).....-1%
Protective Life...........................129..........116..........13.....11%
Symetra Financial.....................107...........90...........17.....19%
Total all 7...............................2,658......2,098........560.....27%
Accident and Health Insurance
AFLAC.......................................834.........667........167.....25%
Principal Financial(7)................275.........287.........(12).....-4%
Assurant(8)...............................253.........184...........69.....38%
Reinsurance Group....................221.........275.........(54)...-20%
CNO Financial............................116..........111.............5.......5%
Unum Group(9)........................(704).......336.....(1,040)..-310%
Total all 6...................................995......1,860.......(865)...-47%
Insurance Agents/Brokers
AON..........................................384.........360..........24........7%
Marsh & McLennan...................344..........298..........46......15%
Total all 2.................................728..........658..........70......11%
Specialty Insurance
Erie Indemnity.........................425..........417............8........2%
Total all 35 Corps.................11,768.......8,615......3,153......37%
(1) AIG 2011 PTI excludes large Gain on Change in Fair Value of AIA Securities. Its 2010 PTI excludes massive Gain on Sale of Properties, mostly sale of AIA.
(2) Hartford Financial Services 2011 PTI excludes Goodwill Impairment Charge.
(3) XL Group 2011 PTI excludes Goodwill Impairment Charge.
(4) MetLife PTI(L) excludes Derivative Gains and Losses in both years.
(5) Lincoln National 2011 PTI excludes Intangible Asset Charge.
(6) Genworth Financial 2011 PTI excludes Goodwill Impairment Charge.
(7) Principal Financial PTI is Operating Earnings Before Tax, and excludes Realized Capital Gains.
(8) Assurant 2010 PTI excludes Goodwill Impairment Charge.
(9) Unum Group 2011 PTI includes both Increase in Policy Reserve Charge and Impairment of Deferred Acquisition Costs Charge.
There was one thing that happened in the 4Q 2011 in the US Big Insurance Industry which was fantastic news. This gets a bit complicated, but let me explain. It all relates to what has been going on with your company AIG.
Let me lay out AIG's Pretax Income (PTI) or Pretax Loss (PTL) in the past decade. First, here they are in its go-go years:
..........................US.........Foreign.....Worldwide
..........................PTI...........PTI..............PTI
.............................(million of dollars).............
.....2002..........3,489.......4,493...........7,982
.....2003..........4,326.......7,329.........11,655
.....2004..........6,069.......8,776........14,845
.....2005..........6,103.......9,110.........15,213
.....2006..........9,862.....11,825.........21,687
Yeah, these above earnings numbers are just incredibly robust.....almost too good to be true. In fact, I think they weren't actually all real profits, because it doesn't appear that AIG was properly accounting for the unregulated irresponsible risk it was taking while generating these reported earnings.
Now let me focus on the next 5 years from 2006 to 2011.
............................US.........Foreign.......Worldwide
..........................PTI(L).......PTI(L)............PTI(L)
...............................(million of dollars).............
.....2006............9,862.......11,825...........21,687
.....2007..........(3,957)......12,091.............8,134
.....2008.......(105,179)......(1,349)......(106,528)
.....2009.........(17,122)........2,815.........(14,307)
.....2010..........13,208.........4,728...........17,936
.....2011...........(1,942)...........877...........(1,065)
It looks like in 2007, AIG and its outsider auditors, got somewhat of a feel for the upcoming financial meltdown, as you can see from AIG's substantial drop in earnings from $21.7 bil in 2006 to $8.1 bil in 2007. And this substantial drop in earnings was all in the US.
Then the financial disaster occurred in 2008, and AIG recorded an almost unbelievable Pretax Loss of $106.5 bil, nearly all of it in the US.
Then the Obama Administration went to work on AIG and the rest of the financial industry.
I think it would be wise to recast the above AIG PTI(L) numbers to better reflect the economic realty of what was going on with AIG after the Obama Administration got involved in attempting to fix this just horrendous financial disaster at AIG.
.........................................2008...........2009........2010.......2011
............................................(millions of dollars)
Reported PTI(L)............(106,528)....(14,307).....17,936....(1,065)
Loss on Debt
...Extinguishment.....................................................104.....2,908
(Gain) Loss on Sale of
...Properties and
...Divested Businesses...........................1,271....(17,767).........74
= Core Pretax Income...(106,528)....(13,036)..........273......1,917
You can rightfully quibble with which items to exclude to convert Reported Pretax Earnings to Core Pretax Earnings.
If I expand the definition of Core Pretax Income to also exclude Aircraft Impairment Losses, and Changes in Fair Value of AIA Securities, Maiden Lane II and MetLife Securities before Sale, then the Core Pretax Income for 2011 is $2,268 mil and for 2010 is $54 mil.
And AIG, in its 4Q 2011 earnings release, disclosed its Pretax Operating Income as $2,178 mil in 2011 and $1,660 mil in 2010.
The key point is that these Operating Losses have dramatically improved since the Obama Administration got involved with AIG.
And here's the real kicker. These are all Pretax Income and Loss numbers.
In the 4Q 2011, AIG, with the blessing of its external auditors, recorded a massive $17.7 bil of Income Tax Benefit, and yes that's $17.7 bil of additional after-tax earnings. And this isn't included in the above Pretax Earnings amount.
So what's with this $17.7 bil of additional after-tax earnings?
Well, it's all about whether AIG can book the income tax benefit on the massive amounts of Losses it generated in 2008 and 2009 and which haven't been realized yet, for US federal income tax purposes.
US Generally Accepted Accounting Principles only permit the booking of this tax benefit if it is more likely than not that these Operating Losses Carried Forward can be realized in the future.....and AIG is only able to carry forward these massive Operating Losses for 20 years, and then they would expire.
Until the 4Q 2011, AIG, along with its external auditors, determined that it couldn't make that positive assessment. It's all about the assessment of future earnings.
Then in the 4Q 2011, AIG, with the blessing of its external auditors, reversed course and determined that now these Operating Losses will be able to be realized.
To quote AIG's 4Q 2011 earnings release.....
"AIG concluded that it is more likely than not that a substantial portion of the deferred tax assets of the U.S. consolidated income tax group will be realized, and therefore released the valuation allowance equal to that portion ($17.7 bil) in the fourth quarter 2011.
In 2011, we began to prosper once again,” Mr. Benmosche (AIG CEO) concluded. “We have a high degree of confidence in our future earnings prospects, which is a critical element in our assessment supporting the release of the deferred tax asset valuation allowance. As we look to 2012 and beyond, we anticipate we’ll continue to be competitive in all areas of our core insurance businesses."
If someone told me back in 2008 after the financial meltdown hit that the US would eventually get its money back from its massive bailout of AIG, I would have told them that they were completely nuts.
But you know what? I think it's going to happen.
And it's really too bad that the Republicans in the US Congress are preventing the Obama Administration from cleaning up Fannie Mae and Freddie Mac. The 99%, and particularly all of those whose homes have underwater mortgages, should be outraged.
Just think what the Obama Administration could accomplish in fixing the US economy if the Republicans in the US Congress would work with them, instead of nearly always working against them.
