Quality of earnings will be more stable going forward, AIG CEO says

AIG CEO on earnings

American International Group reported a big fourth-quarter loss on Tuesday, but its CEO told CNBC on Tuesday he expects the quality of the company's earnings to be "a lot more stable" going forward.

AIG's net loss widened to $3.04 billion, or $2.96 a share, in the quarter after the commercial insurer recorded a $5.6 billion charge related to measures to reduce reserve additions.

However, that charge needs to be looked at together with the "very substantial" reinsurance transaction it recently undertook with Warren Buffett's Berkshire Hathaway, CEO Peter Hancock said in an interview with "Closing Bell."

AIG agreed last month to pay about $10.2 billion to Berkshire Hathaway to take on many long-term risks on U.S. commercial insurance policies AIG has already written.

"This is a manageable adjustment to our reserves and radically reduces the uncertainty around the book value of the company and gives us more secure earnings going forward," Hancock said.

He said the insurer decided to strengthen its U.S. causality reserves against future claims for its clients because there have been "a lot more accidents, they have been more severe [and] jury awards have been increased."

At the same time, AIG has also reduced its reliance on the business, reducing its exposure "quite dramatically" over the last 18 months.

That more balanced set of business lines means more stability in earnings, as well as the freeing up of more capital to invest in growth and to return to shareholders, Hancock said.

AIG announced on Tuesday it raised its share buyback program by up to $3.5 billion.

— Reuters contributed to this report.