Global re/insurer AIG has achieved record underwriting profitability within its General Insurance (GI) division for the full year 2022 to $2 billion, which alongside net realized gains on Fortitude Re funds withheld embedded derivative, contributed to a rise in net income to $10.2 billion for the year.
At the same time, the insurer has seen its adjusted after-tax income (AATI) fall from $4.4 billion in 2021 to $3.6 billion in 2022, primarily as a result of lower alternative investment income and call and tender income, partially offset by the improved GI underwriting result.
All in all, net investment income decreased to $11.8 billion for the year, compared with $14.6 billion in 2021.
Turning to the fourth quarter of 2022, and AIG’s GI division again performed well, with underwriting income rising by 27% to $635 million, driven by a better result in the majority of lines.
Net premiums written (NPW) in Q4 2022 fell by 6%, year-on-year, to $5.6 billion, with solid North America commercial lines growth of 3% attributed to strong new business and retention, and international commercial lines growth of 2%.
GI’s adjusted pre-tax income (APTI) decreased $297 million to $1.2 billion in the quarter on the back of lower alternative investment income, partially offset by a better underwriting result, which increased by $136 million year-on-year.
The GI underwriting result for Q4 2022 included $235 million of catastrophe losses, before reinstatement premiums, notably from Winter Storm Elliott.
The quarter also included favourable prior year reserve development (PYD), net of reinsurance, of $151 million compared to favourable PYD of $44 million in the prior year quarter.
In the end, the GI combined ratio improved by 2.5 percentage points to 89.9% for Q4 2022, driven by an improved loss ratio that included higher favourable PYD.
Within its Life and Retirement business, AIG has reported a 19% dip in APTI to $781 million, primarily driven by lower net investment income, lower fee income, and higher deferred policy acquisition costs amortization in individual and group retirement.
The division still had a strong quarter, however, with premiums of $2.1 billion and premiums and deposits expanding 2% from the prior year quarter to $8.8 billion.
COVID mortality in life insurance is in line with the previously disclosed estimates of exposure sensitivity of $65 million to $75 million per 100,000 population of U.S. death, says AIG.
Peter Zaffino, AIG’s Chairman and Chief Executive Officer (CEO), commented: “2022 was an extraordinary year of progress for AIG. We continued to improve the profitability of our General Insurance business, closing the year with the strongest underwriting results the business has ever achieved and with the second consecutive year of underwriting profitability improving by $1 billion. In addition, we made considerable progress on the separation of our Life and Retirement business and completed the initial public offering (IPO) of Corebridge Financial in September 2022.
“We reached significant milestones on AIG 200 that modernized our technology infrastructure and operational capabilities, while executing on our target run-rate savings of $1 billion six months ahead of schedule. We revamped AIG’s investment management strategy through strategic partnerships with Blackstone and BlackRock and have transferred approximately $50 billion and $150 billion of assets, respectively, to these partners.
“Improvement in General Insurance continued through portfolio optimization, prudent risk selection and limit reduction of over $1.2 trillion since 2018. The full-year 2022 combined ratio of 91.9% represents a 390-basis point year-over-year improvement. The accident year combined ratio, x-CAT of 88.7% improved 230 basis points from prior year, marking the fulfillment of our full-year sub-90 goal and was sub-90 in every quarter of 2022. Our strong momentum continued through the complex January 1 reinsurance renewal season, where the quality of our portfolio enabled us to secure treaties on favorable terms in a very challenging market.
“Life and Retirement delivered a solid year with strong sales, particularly in Individual Retirement where Fixed Annuity and Fixed Index Annuity sales continued their robust growth trends. The fixed income portfolio experienced meaningful lift in portfolio yield and widening spreads benefiting from the higher interest rate environment. The capital strength and free cash flow profile of the business remain healthy.
“2022 was also a significant year in terms of capital management. We returned over $6.1 billion to shareholders through $5.1 billion of AIG common stock repurchases and $1.0 billion of dividends and Corebridge paid two dividends totaling approximately $300 million in the fourth quarter of 2022 following its IPO in September. We established Corebridge’s capital structure and reduced AIG debt, setting a strong foundation for the future.
“In 2022 our colleagues across the globe aligned behind common goals and maintained a steadfast commitment to executing with the highest quality, and I am incredibly proud of the meaningful progress we made. As we look ahead to 2023, the world faces many uncertainties. AIG is better positioned than ever as a risk expert to continue executing on our strategy to deliver excellence as a top-performing company. I am confident we will continue to lead the market and create long-term value for our clients, distribution partners, colleagues, shareholders, and other stakeholders.”