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AIG sees improvement in GI underwriting results as combined ratio strengthens

4th May 2022 - Author: Luke Gallin

American International Group, Inc. (AIG) has reported pre-tax income of $1.2 billion within its General Insurance (GI) business for the first-quarter of 2022, which reflects a $373 million improvement in underwriting income on the back of a stronger combined ratio.

AIG’s GI segment has recorded an underwriting gain of $446 million in Q1 2022, compared with a gain of just $73 million in Q1 2021, as the combined ratio strengthened from 98.8% last year to 92.9% this year.

Within GI, the loss ratio improved by 4.7 percentage points to 60.9%, driven by strong underwriting results including significantly lower catastrophe losses of $274 million, mostly attributable to Australian floods, compared to cat losses of $422 million in Q1 2021.

Additionally, Q1 2022 included favourable net prior year loss reserve development, net of reinsurance, of $93 million, compared with favourable development of $56 million in the prior year quarter.

Taking a look at the GI result by sub-sector, and AIG has revealed that commercial lines underwriting results “continued to show strong improvement due to enhanced business mix”, as personal insurance underwriting results also improved.

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Across the GI business, net premiums written (NPW) in Q1 2022 spiked by 2% from the prior year quarter to $6.6 billion, attributable to strong North America commercial lines and international commercial lines growth.

In its Life and Retirement operation, AIG has reported adjusted pre-tax income of $724 million in Q1 2022, which is a decline of 23% on the prior year quarter’s $941 million. AIG attributes this dip to lower yield enhancements across all segments, as well as the sale of the affordable housing portfolio.

Premiums and deposits within Life and Retirement increased by $900 million to end Q1 2022 at $7.3 billion, driven mostly by improved fixed annuity sales.

All in all, AIG has announced first-quarter 2022 net income increased to $3.9 billion, primarily due to an increase in net realized gains, including a $936 million increase in net realized gains on Fortitude Re funds withheld embedded derivative. AIG also attributes the improved net income to overall strong underwriting results in GI, including higher premiums and lower cats, somewhat offset by lower net investment income across the portfolio.

Total consolidated net investment income reached $3.2 billion in Q1 2022, down 11% from the $3.7 billion reported a year earlier.

Peter Zaffino, AIG’s Chairman and Chief Executive Officer (CEO), commented: “In the first quarter of 2022, AIG delivered excellent results, while simultaneously advancing a number of strategic, operational and financial priorities. I am very pleased with the progress we achieved, including meaningful improvement in underwriting profitability in General Insurance, continued solid performance from Life and Retirement, significant progress on the separation of Life and Retirement from AIG, along with accelerated capital management actions.

“General Insurance continues to generate top line growth while driving sustainable underwriting improvement and expense discipline in both the combined ratio and the adjusted accident year combined ratio, which improved 590 and 290 basis points, respectively, year over year to 92.9% and 89.5%. We are compounding margin improvement over a multi-year period having improved the combined ratio and adjusted accident year combined ratio by 860 and 600 basis points over the prior two years.”

“Given our strong balance sheet and liquidity, the AIG Board of Directors increased the share repurchase authorization to $6.5 billion of AIG Common Stock, inclusive of any remaining amounts under the prior authorization. In the first quarter, we returned $1.7 billion to shareholders through $1.4 billion of AIG common stock repurchases and $265 million of dividends, and we ended the quarter with $9.1 billion of parent liquidity.

“We also announced a commitment to achieve net zero greenhouse gas emissions across our global underwriting and investment portfolios by 2050, or sooner. We believe our ESG commitments are an important step forward for AIG, the clients we serve and the global communities where we live and work.

“I am extremely proud of the outstanding work from our global colleagues and the value we continue to deliver for our clients, distribution partners, shareholders and other stakeholders as we continue our journey to be a top performing company,” he added.

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