AIG Reports 81% Drop in Profit

American International Group Inc., the biggest insurer, said third-quarter earnings dropped 81%, hurt by $820 million in claims from the Sept. 11 terrorist attacks and merger expenses.

New York-based AIG’s quarterly net income fell to $326.8 million, or 12 cents a share, from $1.70 billion, or 65 cents, a year earlier.

The results reflect about $2.31billion in charges, including losses from the World Trade Center attack. Costs from the company’s $23-billion acquisition of American General Corp. and a write-off of debt investments also dragged down earnings. Excluding these items, profit rose 14%, exceeding estimates.

“We’re hoping they’re correct when they say they’re being conservative about their losses” from the attack, said James Ellman, a senior portfolio manager at Merrill Lynch Investment Management, which owns AIG shares. “We’re also hoping to see significant rate increases across the board.”

AIG shares rose 9 cents to $83.89 on the New York Stock Exchange. They have gained more than 10% since the trade center attack and 11% in the last month.

Operating earnings, which exclude investment results and charges, rose to $1.92 billion, or 72cents a share, exceeding estimates. Revenue rose 13% to $15.7 billion.

Though operating earnings were better than expected, AIG raised its loss estimate from last month’s attacks to $820 million from a previous estimate of $800 million. It initially put losses at $500 million.

If, as expected, AIG is able to raise prices as much as 50% across all commercial lines, the insurer should be able to recoup its trade center losses in a year or two at the latest, said Paul Raman, an analyst at Glenmede Trust Co.

Other earnings:

* Adolph Coors Co. reported third-quarter net income of $38.9million, or $1.05 per share, compared with $34.5 million, or 92cents, a year ago. Excluding one-time items, Coors earned $35.2 million, or 95 cents per share, exceeding expectations. Sales of the Golden, Colo.-based beer maker dipped 3% to $634.7 million.

* AutoNation Inc., the largest U.S. automobile retailer, said third-quarter net income fell to $79.2million, or 24 cents a share, from $93.1 million, or 26 cents, a year earlier. Revenue at the Fort Lauderdale, Fla.-based company fell 6% to $5.01 billion as new-vehicle sales declined.

* Dow Chemical Co., the largest U.S. chemical maker, said third-quarter net income fell to $57 million, or 6 cents a share, from $357million, or 40 cents, a year earlier. Third-quarter profit would have been $150 million, or 16 cents a share, excluding costs for acquisitions, restructuring and insurance claims related to the terrorist attacks, matching analyst estimates. Sales at the Midland, Mich.-based company fell 9.7% to $6.73 billion.

* Estee Lauder Cos. said net income for the quarter ended Sept.30 rose to $97.1 million, or 38 cents a share, from $92.4 million, or 36cents, a year earlier. Sales rose 0.8% to $1.19 billion. The New York-based cosmetics company said earnings in the next quarter will be 49 to 52 cents, less than analysts’ 53-cent average estimate, because of sluggish retail sales.

* Goodyear Tire & Rubber Co., North America’s largest tire maker, said third-quarter net income fell to $9.3 million, or 6 cents a share, from $17 million, or 11cents, a year earlier. Goodyear said in September that profit would be less than forecast because consumer spending dropped after the terrorist attacks. The Akron, Ohio, company also reported higher costs after eliminating 7,500 jobs since December. Third-quarter sales rose 1.6% to $3.68 billion, in part because of price increases and the replacement program for recalls by Bridgestone/Firestone Inc.

* Northwest Airlines Corp., the No. 4 U.S. carrier, said third-quarter net income fell to $19 million, or 20 cents a share, from $207 million, or $2.23, a year ago. Revenue fell 17.4% to $2.59 billion. Northwest said its daily cash losses still range from $6 million to $8 million as travel demand remains weak, but advanced bookings are down just slightly systemwide for November. Its net income included $249 million in a pretax grant from the federal government as part of a $15-billion bailout package to airlines. It also included $61 million in charges related to aircraft write-down and severance charges for employees who were laid off. The Minneapolis-based airline cut back capacity last month by 20% and set plans to lay off 10,000 workers.

* Starwood Hotels & Resorts Worldwide said third-quarter net income fell to $30 million, or 14cents a share, from $103 million, or 50 cents, a year earlier. Revenue fell 12% to $965 million. White Plains, N.Y.-based Starwood, the largest hotel owner, said it doesn’t expect demand to improve in the fourth quarter and will take a charge of $75 million to $150 million for employee severance costs and restructuring.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Earnings Reports

(tabular data not included)