Reinsurance News

AIG reports improved GI underwriting performance despite $600m catastrophe load

2nd November 2022 - Author: Luke Gallin

Global insurer AIG has reported a 2.4 percentage point improvement in the General Insurance (GI) combined ratio to 97.3% for the third quarter of 2022 despite $450 million of losses related to Hurricane Ian, as net income across the firm jumped by more than $1 billion to $2.7 billion in the period.

The stronger GI combined ratio is reflected in higher underwriting income of $168 million in Q3 2022, compared with a gain of $20 million a year earlier and a combined ratio of 99.7%.

GI underwriting profit included $600 million of catastrophe losses, before reinstatement premiums, overall, of which the large majority, or $450 million relates to Hurricane Ian.

AIG notes that the 0.9 point improvement in the Q3 GI loss ratio is the result of strong underwriting results including comprehensive reinsurance programmes that mitigated its exposure to catastrophes, alongside an improved expense ratio on the back of a lower acquisition expense.

In commercial lines, AIG highlights continued strong improvement in the underwriting results owing to enhanced business mix, and net premiums written growth of 2% with persistent rate rises. In personal lines, underwriting results deteriorated in Q3 2022, says AIG, as it repositions the business and continues to cut exposure and increase reinsurance cessions to mitigate volatility.

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All in all, GI recorded Q3 2022 net premiums written of $6.4 billion, which is down 3% on the prior year quarter, but up 3% on a constant dollar basis.

The segment’s adjusted pre-tax income (APTI) fell by $61 million, year-on-year, to $750 million as a result of lower alternative investment income, somewhat offset by the stronger underwriting result.

In its Life and Retirement business, AIG has reported Q3 APTI of $589 million, which is actually a year-on-year dip of 33%, mostly driven by macroeconomic conditions leading to lower net investment income and fee income, somewhat offset by less adverse mortality and an improved outcome in the annual actuarial assumption review.

The Life and Retirement segment did, however, report higher premiums and deposits across all four operating segments in Q3 2022, achieving 23% growth when compared with the prior year.

Turning to the asset side of the balance sheet, and across the group, net investment income fell from $3.72 billion in Q3 2021 to $2.7 billion in Q3 2022.

Peter Zaffino, AIG’s Chairman and Chief Executive Officer (CEO), commented: “AIG had another very strong quarter of financial performance, driven by our successful execution of strategic priorities, and highlighted by the initial public offering of Corebridge, another major accomplishment by our team, as well as continued profitable underwriting results and decreased volatility in General Insurance. These results are even more impressive when viewed against the backdrop of a challenging macro-economic environment and one of the largest insured-loss hurricanes in U.S. history.

“The Corebridge IPO was completed in mid-September and I am very pleased with the successful outcome, which represented a critical milestone for AIG and Corebridge that enables both companies to continue to drive growth and value as market leaders in their respective industries.

“General Insurance once again delivered outstanding improvement and absolute financial performance building on our momentum over the last few years. The 210-basis point improvement in the accident year combined ratio, ex-CATs* to 88.4%, marked the 17th consecutive quarter of improvement. North America Commercial overall rate increased 9%, excluding Workers’ Compensation, in the third quarter and continued to exceed loss cost trends. I am extremely pleased with the overall underwriting profit in the quarter, particularly given $600 million of catastrophe losses, or 9.8 points of the combined ratio, of which approximately $450 million is attributable to Hurricane Ian. The strong performance in General Insurance demonstrates the benefits of the high-quality work we have done to transform our global portfolio and implement a best-in-class reinsurance program, which together have dramatically reduced volatility.

“Life and Retirement delivered another solid quarter with premiums and deposits of $8.9 billion, a 23% increase from the prior year quarter with growth in each of the four business segments. Sales in Individual Retirement grew by 16% to $3.8 billion, including a doubling of sales in fixed annuities and a record sales quarter in index annuities. Additionally, base net investment income from the fixed income portfolio started to see meaningful benefits from the higher interest rate environment.

“In the third quarter, we continued to progress and solidify our excellent partnerships with Blackstone, Inc. (“Blackstone”) and BlackRock, Inc. (“BlackRock”). We have transferred $50 billion of Corebridge AUM to Blackstone and completed $100 billion of asset transfer to BlackRock with $37 billion moving from AIG and $63 billion moving from Corebridge.

“We also continued our disciplined and balanced approach to capital management. We returned $1.5 billion to shareholders through $1.3 billion of AIG common stock repurchases and $247 million of dividends. Corebridge issued hybrid debt of $1 billion and drew down $1.5 billion of the delayed draw term loan. Subsequent to the close of the quarter, AIG redeemed or repurchased approximately $1.8 billion in aggregate principal amount of debt. Additionally, shortly after the IPO, Corebridge declared its first quarterly dividend of $148 million as part of its $600 million annual dividend commitment, which has already been paid.

“I am extremely proud of all that has been accomplished by our dedicated colleagues at AIG and Corebridge. We remain well-positioned to continue to drive excellence, deliver improving returns and create long-term value to our shareholders and other stakeholders.”

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