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AIG opts for IPO for life unit; reports profit surge

Peter Zaffino

American International Group Inc. will push ahead with an initial public offering to spin off its life and retirement business despite overtures from other companies interested in buying a portion of the business, its top executive said Friday after the insurer reported a significantly higher quarterly profit.

Insurance rates continued to rise in this year’s first quarter, particularly for excess and surplus lines business, AIG reported.

AIG will likely launch an IPO for its life and retirement business by the end of 2021, Peter Zaffino, president and CEO of the insurer, said on a conference call with analysts Friday. AIG announced last year that it planned to sell up to 19.9% of its life and retirement business, and on its last quarterly earnings call Mr. Zaffino said the company had received several approaches from companies seeking to buy a minority stake in the business.

“We conducted a robust evaluation of those opportunities to determine if they offered a better long-term outcome for our stakeholders than an IPO. At this time, we believe that an IPO remains the optimal path forward to maximize value for our stakeholders and to position the business for additional value creation as a standalone company,” he said on Friday’s call.

AIG reported net income of $3.87 billion for the first quarter, more than double its profit for the same period last year, reflecting higher investment income and increased income from its property/casualty insurance operations, where rates have increased significantly. Investment income increased 46% to $3.7 billion, in part due to strong equity markets.

The insurer reported $422 million in catastrophe losses net of reinsurance for the quarter, primarily from winter storms.

AIG’s general insurance operations reported gross premium written of $10.73 billion, up 6.4% over the same period last year, while net written premium increased 9.4% to $6.48 billion as AIG retained more premium.

North America commercial lines reported net premium written of $2.79 billion, up 29.4%. International commercial lines net premium written grew 20.3% to $1.98 billion.

The insurer’s combined ratio for the first quarter was 98.8% compared with 101.5% for the year-earlier period. The North America commercial lines combined ratio was 106.7%, a deterioration from 100.9%, and international commercial lines reported a 90% combined ratio, an improvement from 101.4%.  

Mr. Zaffino, who joined AIG four years ago to help lead the turnaround of the then-ailing insurer, said the company’s focus moved from “remediation to growth” in the first quarter.

AIG saw significant rate increases in the quarter, with global commercial insurance rates up 15% overall, Mr. Zaffino said. North America commercial rates were also up 15%, with its surplus lines unit Lexington Insurance Co. reporting a 36% rate increase on casualty business, excess casualty rates up 31% and financial lines up 24%.

Cyber liability rates increased 41% in the quarter, said David McElroy, CEO of general insurance, noting that AIG has added sublimits and coinsurance requirements to manage the increased ransomware exposure.