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AIG reports Q2 net income of $91mn; solid GI underwriting result

6th August 2021 - Author: Luke Gallin

American International Group, Inc. (AIG) has reported net income of $91 million for the second quarter of 2021 versus a loss of $7.9 billion a year earlier, supported by a strong underwriting result in General Insurance (GI), lower cat losses, and higher investment income.

AIG LogoThe main driver of the improvement is the fact AIG recognised an $8.4 billion loss from the sale and deconsolidation of Fortitude in June of last year.

Nevertheless, the carrier’s GI unit performed well in the period, with a combined ratio of 92.5% compared with 106% for the prior year period, driven by both commercial and personal insurance.

The company says the improvement reflects significantly lower losses from catastrophes and overall strong underwriting results driven by an 11.3 reduction in the loss ratio and a 2.2 point reduction in its expense ratio.

For the second quarter of 2021, AIG’s GI segment has reported underwriting income of $463 million, which is a huge improvement on the $343 million underwriting loss reported a year earlier.

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In Q2 2021, underwriting income included catastrophe losses of $118 million, which is down significantly on the $674 million seen for the prior year period, which included $458 million of COVID-19 related losses.

Additionally, the current period also included favourable net prior year loss reserve development, net of reinsurance, of $51 million.

The GI segment has also reported an improved investment performance for the second quarter of 2021, which increased by 41%, year-on-year, to $731 million on the back of alternative investments.

Net premiums written within GI increased by 24% to $6.9 billion for the second quarter of 2021, driven by robust growth in North America Commercial Lines and International Commercial Lines, says AIG.

Within GI, AIG has announced Q2 2021 adjusted pre-tax income (APTI) of $1.2 billion, reflecting growth of $1 billion from the $175 million reported a year earlier, driven by the improved underwriting performance and higher investment income.

In AIG’s Life and Retirement business in Q2 2021, APTI hit $1.1 billion, reflecting growth of 26% from the prior year period, with all segments reporting a higher APTI, year-on-year.

Life and Retirement premiums were flat when compared with the prior year period, amounting to $1.6 billion, driven by growth in International Life and Pension Risk Transfer premiums, partially offset by lower Structured Settlement premiums.

Across the group, total net investment income totalled $3.7 billion in Q2 2021, which is growth of 9% from the $3.4 billion reported for the same period in 2020.

AIG President and Chief Executive Officer (CEO), Peter Zaffino, commented: “We had another outstanding quarter with our businesses performing extremely well while we continue to make significant progress on strategic priorities and position AIG for sustainable profitable growth over the long-term. General Insurance delivered excellent results, Life and Retirement was once again a meaningful contributor, and we accelerated work on AIG 200 and the separation of Life and Retirement from AIG.

“This exceptional performance is the direct result of the hard work and dedication of AIG colleagues around the world who pursue excellence in everything we do and strive to create value for clients, distribution partners, shareholders, and our other stakeholders.

“In General Insurance, net premiums written grew by an impressive 24%, driven by improved retention, outstanding levels of new business, and continued improvement in rate. We also reported another quarter of strong underwriting profitability, with a combined ratio of 92.5 inclusive of catastrophe losses, and 91.1, as adjusted, a 380-basis point improvement from the adjusted combined ratio in the second quarter of 2020.

“In Life and Retirement, adjusted pre-tax income increased 26% to $1.1 billion driven by investment returns and improving market conditions.

“In July, we announced a strategic partnership with Blackstone whereby Blackstone will purchase a 9.9% equity stake in Life and Retirement for $2.2 billion in cash and manage certain specified Life and Retirement general account assets. This investment represents 1.1x of target pro forma adjusted book value and validates Life and Retirement’s industry leading position. In addition, a long-term perpetual vehicle affiliated with Blackstone will purchase certain of our Affordable Housing assets for $5.1 billion in cash.

“These transactions, together with our strong liquidity position at June 30 of $7.2 billion, will generate significant additional capital for AIG to deploy towards our near term capital management priorities, which are de-levering, returning capital to shareholders, and investing in organic growth.

“Given our strong balance sheet and liquidity, the AIG Board of Directors increased our current share buyback authorization to $6 billion, inclusive of the approximately $900 million that was remaining under the prior authorization. In the second half of 2021, we expect to repurchase at least $2 billion in common stock and reduce debt outstanding by $2.5 billion.

“We have incredible momentum as we head into the second half of the year and I am confident that we will continue to execute on our transformation and growth strategy. I am immensely proud of what our team has achieved and the progress we are making on our journey to become a top performing company.”

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