Global insurer AIG expects to record an underwriting profit for the full-year 2019 as its General Insurance business continued to rebound in Q2 on the back of a “refined” underwriting approach, supported by the firm’s evolving reinsurance use.
The firm’s net income increased to $1.1 billion in Q2 2019 with General Insurance producing a 97.8% combined ratio, the second quarter in a row the unit has produced a positive underwriting return.
Following the announcement of its strong second-quarter performance, AIG management discussed ongoing transformation efforts within general insurance, including the company’s reinsurance utilisation.
Peter Zaffino, Chief Executive Officer (CEO) of General Insurance at AIG, explained that the firm has enhanced its underwriting quality in recent times and, combined with the evolving structure of its reinsurance programme, has focused on more disciplined end-to-end business.
This sentiment was echoed by AIG’s Chief Executive Officer (CEO), Brian Duperreault, who underlined that the company has to be transformed, and that it has to be done fundamentally.
“It is the next step and it is a very, very important effort across the whole company,” said Duperreault. “It will provide that long-term benefit to us and get us to that place of greatness that we desire.”
For AIG, a refined underwriting approach with a focus on building a sustainable general insurance business has been supported by reinsurance protection, and this is something that has continued to evolve for the insurer as it ultimately looks to reduce the volatility of its insurance book.
Following two consecutive quarters of underwriting income in general insurance, it would appear that the restructuring of AIG’s reinsurance programme has played a vital role in improved profitability, and, the firm revealed during its Q2 2019 earnings call that it has further adjusted its reinsurance use.
In Q2, AIG’s Zaffino said that the firm purchased two additional property treaties, both placed below its property catastrophe placement. At the same time, the insurer also acquired a new aggregate retrocession treaty through Validus.
Zaffino suggested that the firm would continue to enhance its reinsurance use moving forward, while Duperreault said that the basis of its philosophy around reinsurance is “geared to addressing exposures that we feel we should share,” adding that “as it evolves, we will adjust our program accordingly.”
