Catastrophe losses and poor investment returns in a volatile market have seen American International Group (AIG) report an adjusted after-tax loss of $559 million.
In addition, the company added $365 million to its reserves in the quarter to cover policies issued in 2016 and earlier.
For the full year, this figure totalled $362 million compared to $978 million in 2017.
AIG’s President and Chief Executive Officer Brian Duperreault remains confident the company is on the right path to achieve long-term, sustainable growth and laid down an expectation for its general insurance unit to turn an underwriting profit entering 2019.
The company’s general insurance unit had an underwriting loss of $1.1 billion, a drop from the $846 million hit a year previous, driven largely by the California wildfires and hurricane Michael.
However, the combined ratio (CR) of the unit was 98.8% for the quarter, compared with 100.2% a year ago.
AIG’s post-tax cat losses totalled $630 million while, for the full year, while the net pre-tax cat loss of $2.9 billion improved from $4.2 billion in the prior year.
“Throughout 2018, significant foundational work was undertaken to remediate AIG’s core underwriting capabilities,” explained Duperreault.
“While many issues and challenges were uncovered, we moved quickly to reduce risk and volatility, as well as implement strategies that we believe will accelerate our progress in 2019.”
The CR of AIG’s commercial insurance unit, which includes losses for catastrophes, was 115% compared to 113% the year previous.
AIG’s life and retirement unit reported adjusted pre-tax income of $623 million, down 20% from $782 million the previous year.
The company said total net investment income dropped to $2.8 billion in the quarter from $3.5 billion a year ago, reflecting a significant impact from market performance.
“Our fourth quarter 2018 results showed positive improvements in General Insurance, reflecting actions we took throughout the year to re-position and strengthen the business, and Life and Retirement remains a stable source of earnings with attractive returns,” Duperreault added.
“Results were negatively impacted by performance in both equity and credit markets, catastrophe losses that came within our previously disclosed guidance, as well as modest net unfavorable prior year loss reserve development driven largely by underwriting decisions from 2016 and prior years.”
