Global insurer AIG has announced a significant rise in net income to $1.7 billion for the third quarter of 2021, driven primarily by net realised gains, a strong underwriting result in its General Insurance (GI) unit and lower losses from catastrophes.
During the quarter, the firm’s GI unit recorded adjusted pre-tax income (APTI) of $811 million owing to an improved underwriting result.
The underwriting gain within GI amounted to just $20 million in Q3 2021, but marks a solid improvement on the underwriting loss of $423 million for the prior year quarter.
The performance included $628 million of catastrophe losses, related mostly to hurricane Ida in the U.S., and UK and European floods, compared with cat losses of $790 million a year earlier.
“Despite the elevated level of global catastrophic activity in the third quarter of 2021, AIG’s losses were mitigated by improved underwriting and enhanced reinsurance protections,” says the firm.
In Q3, AIG’s GI segment also benefited from favorable net prior year loss reserve development, net of reinsurance of $50 million.
Net premiums written (NPW) in GI spiked by 11% in Q3 2021 to $6.6 billion, driven by strong North America Commercial Lines and International Commercial Lines growth of 18% and 15%, respectively.
Year-on-year, the GI unit has reported an improved underwriting performance and this is reflected in its combined ratio of 99.7%, which reflects and improvement in both the loss and expense ratio.
Within its Life and Retirement business, AIG has revealed APTI of $877 million for the third quarter of 2021, a decline of 13% from the prior year period. Q3 2021 included a $166 million unfavourable impact from the annual actuarial assumption update, unfavourable mortality, higher general operating expenses.
Premiums in Life and Retirement increased by 33%, year-on-year, to $1 billion, driven by higher pension risk transfer activity in the period.
AIG President and Chief Executive Officer, Peter Zaffino, commented: “We continue to build momentum and execute on our strategic priorities as evidenced by another quarter of outstanding financial results, as well as significant progress on AIG 200 and the separation of Life and Retirement from AIG. Against the backdrop of a very active CAT season and the ongoing global pandemic, AIG colleagues demonstrated continued resilience and are performing at a high level delivering value to our stakeholders and excellence in all that we do.
“General Insurance delivered very strong results demonstrating the underwriting discipline now embedded in our culture and the benefits of our volatility reduction efforts through a well-articulated risk appetite and reinsurance program that performed well. Net premiums written grew by 11%, driven by Commercial Lines growth of 17%, which was balanced between 18% growth in North America and 15% growth in International reflecting improved retention, outstanding levels of new business, and a continued strong rate environment. We also reported another quarter of impressive underwriting profitability, with a combined ratio of 99.7 inclusive of catastrophe losses, and 90.5, as adjusted, which represents a 2.8 point improvement from the accident year combined ratio, as adjusted, in the third quarter of 2020.
“Life and Retirement was once again a solid contributor to profitability delivering adjusted pre-tax income of $877 million and a return on adjusted segment common equity of 12.2%.
“In the third quarter we repurchased $1.1 billion of common stock, redeemed $1.5 billion of debt and ended the quarter with $5.3 billion of liquidity, all demonstrating the strength of our balance sheet and exceptional financial flexibility as we execute against our capital management strategy.
“AIG’s performance in the third quarter and through the first nine months of the year validates the strategy we have been executing on over the last few years. We have vastly improved the quality of our portfolio by delivering superior risk solutions, we continue to embed operational excellence across the organization, and we recently reached a significant milestone toward making Life and Retirement a standalone company by closing on the sale of a 9.9% equity stake to Blackstone. AIG is well on its way to becoming a top performing company that delivers sustainable profitable growth over the long-term.”