American International Group Inc. moved from a loss to a profit for the fourth quarter of 2019 and the full year, with top executives crediting its turnaround efforts for improving the insurer’s results and raising rates throughout the property/casualty market.

The insurer reported sharp rate increases in several areas, such as excess and surplus lines and directors and officers liability insurance.

In addition, AIG expects to accelerate the overhaul of its business processes in 2020, as it starts a $1.3 billion three-year spending program on operational improvements, AIG’s top management said on a call with analysts Thursday.

AIG reported a profit of $922 million for the fourth quarter of 2019 compared with a $622 million loss in the same quarter of 2018.

The insurer also reported an underwriting profit. AIG’s general insurance unit, which includes its commercial and personal lines property/casualty business, reported a combined ratio of 99.8% for the quarter, compared with 115% in the 2018 fourth quarter. For the full year, the unit reported a combined ratio of 99.6% compared with 111.4% in 2018.

“I honestly can’t remember the last time AIG had a full-year underwriting profit,” Brian Duperreault, CEO of AIG, said on a conference call with analysts Thursday. “This inflection point was critical to achieve.”

Mr. Duperreault, who began his career at AIG and went on to hold several senior positions at the insurer, was brought back in 2017 to lead a turnaround of the troubled company, which had posted several years of poor results. As part of the turnaround strategy, the insurer has cut back on various accounts and lines of business, increased rates, bought more reinsurance and overhauled its management ranks.

The changes in underwriting strategy “not only dramatically reshaped our portfolio, it stimulated a global market cycle that I believe is improving and sustainable,” Mr. Duperreault said.

AIG’s general insurance business reported net premium written of $5.83 billion for the fourth quarter, down 9.2% compared with the same period in 2018.

“We have not been concentrating on the top line because we had to concentrate on the bottom line. Once you get a base that you believe is sustainable, then you grow it,” Mr. Duperreault said.

North America commercial lines net premium written decreased 7.9% to $1.99 billion in the fourth quarter. The line of business continued to post an underwriting loss with a combined ratio of 104.8% in the fourth quarter compared with 120.9% in the same period in 2018.

AIG reported net premium written for international commercial lines of $1.38 billion in the fourth quarter of 2019, an 11.7% decrease compared with the 2018 period. The combined ratio for the business improved to 101.6% in the 2019 quarter compared with 113.6% in the same period in 2018.

For the full year, AIG reported a profit of $3.3 billion, compared with a $6 million loss in 2018. The improvement was largely due to a $1.7 billion reduction in catastrophe losses compared with prior year, improved property/casualty insurance results and a $2.1 billion increase in investment income, the company’s earnings statement said.

Fourth-quarter net catastrophe losses were $411 million compared with $826 million in the same period in 2018, said Peter Zaffino, president and global chief operating officer of AIG, on the earnings call. Typhoon Hagibis, which hit Japan in October, resulted in $233 million in claims for AIG, said Mr. Zaffino. Other significant catastrophe losses included Texas tornadoes and unrest in Chile, he said.

The insurer also saw significant rate increases during the fourth quarter, Mr. Zaffino said.

Many insurers and brokers have reported increased average rates over the past year with rate hikes accelerating over the past few months. In addition, insurers have cut limits offered, particularly in the excess and surplus lines markets.

“During the fourth quarter we continued to see meaningful acceleration of rate increases. It was the strongest quarter of rate increases that we’ve seen over the last decade,” Mr. Zaffino said.

Overall rate increases for AIG’s general insurance business were in the low double-digits for the fourth quarter. Average North America commercial rate hikes ranged from low-double digits to mid-teen percentage increases in the fourth quarter, he said. International commercial insurance rates increased in the low double-digits.

North America admitted excess casualty rate increases “trended in the mid-40% range in the fourth quarter and energy rates increased approximately 35%,” Mr. Zaffino said.

International commercial rate increases were highest in the United Kingdom where D&O rates rose nearly 40% and marine and energy rates increased in the mid-20% range, he said.

Highlighting AIG’s excess and surplus lines unit, Lexington Insurance Co., which has been overhauled over the past couple of years, Mr. Zaffino said, Lexington’s fourth-quarter casualty insurance submission volume increased 86% over the prior year period.

Hardening insurance rates typically result in more business moving from the admitted market to the nonadmitted market as insurers’ drop or cut back on some lines and policyholders search for alternatives.

“We reduced limits on our most volatile accounts by 67% in the fourth quarter … while rates increased 28%,” Mr. Zaffino said.

In Lexington’s property book, fourth-quarter submissions increased 41%, it reduced in-force limits by 19% and rates increased 32%, he said. Average deductibles increased by more than 50% in 2019.

AIG has also repositioned its North American retail property insurance portfolio, Mr. Zaffino said. AIG reduced in-force limits by 17% in the fourth quarter and increased average deductibles by 21%. Average rate increases were in excess of 40% in the fourth quarter, he said.

“We have dramatically changed this portfolio and in 2020 we expect to see further improvements in derisking as long-term agreements roll off,” Mr. Zaffino.

In North America financial lines, D&O rates increased 35% in the fourth quarter, he said. AIG reduced primary D&O aggregate limits by 40% in the fourth quarter. In addition, it cut the number of policies with lead layers over $10 million by 50% in the fourth quarter, he said.

In addition to reunderwriting its books of business, AIG expects to accelerate operational changes through its so-called AIG 200 program, which it announced last year.

“This is not about Band-Aids or temporary fixes that simply kick the can down the road, this work will address underlying problems and position us for long-term sustainability,” Mr. Duperreault said on the call.

Mr. Zaffino, who leads the initiative, said the company has targeted 10 core operational programs it will begin to execute in 2020 and it expects to invest $1.3 billion in the programs over the next three years.

The programs include building a standard commercial underwriting platform and overhauling digital workflow in its Japanese business.