Large primary insurer AIG has reported a rise in adjusted pre-tax income within its general insurance business of 5% to $1.32 billion for the second-quarter of 2023, as higher investment income offset slightly lower underwriting profit as a result of elevated catastrophe losses and lower favourable prior year development, net of reinsurance and prior year premiums.
Group-wide, AIG’s net income fell from more than $2.7 billion in Q2 2022 to $1.5 billion in Q2 2023, which the insurer attributes primarily to a decrease in net realized gains on Fortitude Re funds withheld assets and embedded derivative, a decrease in net realized gains excluding Fortitude Re funds withheld assets and embedded derivative, the higher cat loss experience, and lower net favorable prior year development.
Despite the dip in net income year-on-year, the company’s operating segments performed well in the quarter, including its general insurance segment, which recorded a 9% rise in gross premiums written (GPW) to $10.4 billion.
Net premiums written (NPW) also increased in the quarter, from $6.9 billion in 2022 to $7.5 billion in 2023, driven by growth all territories and lines with the exception of international personal insurance.
However, underwriting income has declined 26% to $594 million in Q2 2023, reflecting a dip in all business lines, and included $250 million of catastrophe-related charges, driven by $159 million of losses in North America as a result of severe convective storms, and $91 million in the international segment as a result of typhoon Mawar. Last year, AIG’s general insurance segment recorded cat-related charges of $121 million.
Following the higher cat load experienced int he quarter, AIG has reported a higher general insurance combined ratio of 90.9% for Q2 2023, compared with 87.4% a year earlier. On adjusted basis, however, the unit’s combined ratio strengthened slightly to 88% against 88.5% in Q2 2022.
Turning to its life and retirement business, and AIG has reported a rise in adjusted pre-tax income of 33% to $991 million, driven by solid growth in individual retirement, group retirement, and institutional markets, partially offset by a dip in life insurance.
Premium and fees within this part of the business increased 75% year-on-year to over $3.2 billion, while premiums and deposits rose 42% to more than $10 billion.
Within its other operations, AIG has again reported loss, although at $414 million it did improve from the loss of $494 million seen in Q2 2022.
As noted above, AIG’s investment performance improved in the second quarter of 2023, reaching $3.6 billion compared with $2.6 billion a year earlier. Within general insurance, net investment income rose 58% to $725 million, and in life and retirement, investment income jumped 25% to $2.5 billion.
Peter Zaffino, AIG’s Chairman and Chief Executive Officer (CEO), commented: “In the second quarter, we continued to build on our momentum, delivering outstanding financial results as well as successfully executing on multiple strategic priorities. Second quarter adjusted after-tax income attributable to AIG common shareholders per diluted common share was $1.75, AIG’s highest adjusted EPS since 2007, representing another significant milestone on our path toward sustainable earnings growth over the long-term.
“Our ability to continue to grow, manage volatility and improve profitability reflects our commitment to underwriting and operational excellence. In addition to our strong financial performance, our team executed on several transactions that will simplify AIG, reduce volatility, generate liquidity and capital efficiencies, and allow us to accelerate our capital management plans.
“In General Insurance, continued accident year underwriting margin improvement and strong growth resulted in yet another quarter of excellent financial results. Net premiums written increased 11%† year- over-year and Commercial Lines net premiums written grew 13%† driven by strong growth in North America Commercial Lines of 18%†. North America Commercial rate increased 8% or 9% excluding Workers’ Compensation while International Commercial rate increased 9%.
“The General Insurance combined ratio was 90.9%, inclusive of $250 million of catastrophe losses, or 3.9 loss ratio points, a tremendous result against the backdrop of a very challenging quarter for the industry. The second quarter accident year combined ratio, ex-CAT, was 88.0% and the lowest ratio recorded for the second quarter since 2007. This ratio improved by 50 basis points year-over-year and was driven by an excellent Global Commercial accident year combined ratio, ex-CAT, of 84.4%.
“Life & Retirement delivered very good results, with premiums and deposits of over $10 billion, a 42% increase year-over-year, benefiting from record sales in Fixed Index Annuities. Results included strong continued base net investment spread expansion.
“With respect to capital management, we continued to execute against our balanced strategy. In the second quarter, we increased our quarterly common stock dividend by 12.5% to $0.36 per share, representing the first increase since 2016 and we returned $822 million to shareholders through $554 million of AIG common stock repurchases and $268 million of dividends.
“In May, we announced the sale of Validus Re to RenaissanceRe for $3 billion, which is expected to close in the fourth quarter of 2023. In addition, we announced and successfully completed the sale of AIG’s Crop Risk Services business to American Financial Group, Inc. for approximately $240 million. We also launched Private Client Select as a Managing General Agency with our partner Stone Point Capital LLC that will serve as an independent platform for the high and ultra-high net worth markets.
“In June, we completed a secondary offering of Corebridge Financial common stock. Furthermore, Corebridge issued a $400 million special dividend to its shareholders and executed the repurchase of $200 million of common stock from AIG and Blackstone. Including approximately $600 million in regular dividends, these actions resulted in approximately $1.2 billion of total capital returned to Corebridge shareholders since its initial public offering in September 2022. As a result of these actions, AIG received gross proceeds of approximately $1.7 billion and reduced its ownership in Corebridge to 65.3%.
“The scale of what AIG colleagues accomplished in the second quarter is extraordinary. I am more confident than ever in AIG’s promising future as we continue our journey to be a top performing company delivering excellence in all that we do and creating sustainable long-term value for our stakeholders.”
