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AIG posts combined ratio of 92.4% as underwriting improves on lower cats

17th February 2022 - Author: Luke Gallin

Global insurer AIG has reported a strong underwriting result across its portfolio for the fourth quarter of 2021, as its General Insurance (GI) combined ratio improved by more than 10 percentage points to 92.4%, supported by lower catastrophe losses.

AIG LogoDuring the fourth quarter, the carrier’s GI division recorded an underwriting gain of $499 million compared with a loss of $171 million a year earlier, representing an improved performance across the book.

The strong underwriting result led to an increase in GI’s adjusted pre-tax income (APTI) of 87%, year-on-year, to $1.5 billion.

In Q4 2021, the GI underwriting result included $189 million of catastrophe losses, mainly attributable to tornadoes in the southern U.S. and wildfires, compared with cat losses of $545 million in Q4 2020, which included almost $180 million of COVID-19 related losses.

Additionally, Q4 2021 included favourable net prior year loss reserve development, net of reinsurance, of $44 million.

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For the final quarter of 2021, AIG’s GI unit has reported a lower loss ratio and lower expense ratio, as the segment’s combined ratio strengthened from 102.8% in Q4 2020 to 92.4%.

Also, within GI, the insurer has revealed a rise in gross premiums written (GPW) of 12% to $7.2 billion, while net premiums written (NPW) jumped by 7%, year-on-year, to $5.6 billion.

“General Insurance succeeded in producing more consistent underwriting results while achieving 13% net premiums written growth for the full year with 18% growth in Commercial Lines,” said AIG Chairman and Chief Executive Officer (CEO), Peter Zaffino.

“The business reported an underwriting profit for full year 2021 and for every quarter of the year, due to disciplined execution and volatility reduction in an environment of ever-increasing natural catastrophe risk. The accident year combined ratio, as adjusted, in the fourth quarter was 89.8%. For the full year, the accident year combined ratio, as adjusted, was 91.0%, driven by Global Commercial, which was 89.1%.”

In its Life and Retirement business, AIG has reported a slight dip in APTI of 6% to $969 million in Q4 2021, primarily due to unfavourable mortality in life insurance and increases in deferred policy acquisition costs amortization and reserves.

Premiums in this part of the business increased from $1 billion to $2.7 billion on the back of higher pension risk transfer sales in the quarter.

Across the Group, AIG has reported net income of roughly $3.4 billion for the fourth-quarter of 2021, compared with a net loss of $60 million for the same period in the previous year. The company’s APTI moved from $1.1 billion in Q4 2020 to $1.8 billion in Q4 2021, while net investment income fell to $3.6 billion from almost $4 billion.

“In the fourth quarter and full year 2021, AIG delivered outstanding financial results with General Insurance continuing to produce improved underwriting profitability through excellent top line growth and vastly reduced volatility due to gross limit reductions and the strategic use of reinsurance, and Life and Retirement again making a meaningful contribution to our overall results. We ended the year with parent liquidity of $10.7 billion,” said Zaffino.

“The quality of these outcomes is due to our global colleagues’ hard work, dedication and commitment to excellence in everything we do.”

Adding: “Since announcing our intent to separate Life and Retirement from AIG, we have made significant progress in preparing the business to be an independent, standalone company, including closing on the sale of a 9.9% equity stake to Blackstone in November 2021.

“Over the course of 2021, we reduced debt and preferred stock leverage by 380 basis points to 24.6% by repurchasing $4 billion of debt, and we returned $3.7 billion to shareholders through common stock repurchases and dividends.

“AIG entered 2022 better, stronger, and well positioned to continue to deliver value to all stakeholders as we continue our journey to be a top performing company.”

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