American International Group, Inc. (AIG) has reported net income of $3.9 billion for the first quarter of 2021, driven by an improved performance in both its General Insurance (GI) and Life and Retirement segments.
Year-on-year, AIG’s net income improved by roughly $2.2 billion from the $1.7 billion reported in Q1 2020.
AIG attributes the improvement to higher net investment income, improved GI underwriting income, and lower Variable Annuity deferred acquisition costs (DAC) and sales inducement assets (SIA) amortization and reserves.
Net investment income spiked considerably during the quarter for AIG, from roughly $2.5 billion in Q1 2020 to roughly $3.7 billion in Q1 2021.
In the re/insurer’s GI operation, adjusted pre-tax income increased by 69% from $501 million in Q1 2020 to $845 million in Q1 2021.
The GI unit recorded gross written premium growth of 6% to $10.7 billion in the first quarter, as net premiums written jumped by 9% to $6.5 billion.
Importantly, the GI segment has returned to underwriting profitability in Q1 2021, with income hitting $73 million against an underwriting loss of $87 million in the prior year quarter.
The Q1 2021 underwriting result includes $422 million of catastrophe losses, mostly from winter storms in the U.S., compared with $419 million of losses in the first quarter of last year.
Additionally, AIG’s GI segment has reported no further COVID-19 losses for Q1 2021, compared with an impact of $272 million in the prior year period.
The positive underwriting result also included favourable net prior year loss reserve development, net of reinsurance, of $56 million including $52 million of favorable amortization from the Adverse Development Cover (ADC).
All in all, the GI business has reported a combined ratio of 98.8% for the first quarter of 2021, compared with an unprofitable 101.5% in the prior year quarter.
In the company’s Life and Retirement operation, adjusted pre-tax income improved by 57%, year-on-year, to $941 million. The increase was driven by higher net investment income in the period, which contributed to increased APTI in Individual and Group Retirement and Institutional Markets.
The Life Insurance sub-segment had an adjusted pre-tax loss of $40 million in Q1 2021, which AIG says is a reflection of elevated mortality primarily driven by the COVID-19 pandemic.
Peter Zaffino, AIG’s President and Chief Executive Officer (CEO), commented: “AIG had an excellent start to the year and that is reflected in our first quarter results with growth in General Insurance and continued strong performance in Life and Retirement.
“In General Insurance, we delivered strong growth in net premiums written, driven by our North America and International Commercial businesses, and underwriting profitability. The combined ratio was 98.8 inclusive of catastrophe losses and 92.4, as adjusted. The successful repositioning of our global portfolio over the last three years allowed us to pivot from remediation to profitable growth, which we expect to continue throughout the year.
“Life and Retirement delivered another solid quarter, with adjusted pre-tax income growth driven by diversified product offerings and increased investment returns. With strong sales and profitability, this business continues to be a market leader in the protection and retirement savings industry.
“Our strong balance sheet and financial flexibility allow us to continue to invest in growth and core operating fundamentals with capital returns to shareholders when appropriate. During the first quarter we repurchased $362 million of common stock and ended the quarter with $7.9 billion of liquidity.
“I am immensely proud of our global colleagues and what we have accomplished together. Our first quarter results reflect significant momentum as we continue our pursuit to become a top performing company.”