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AIG reports profit surge, delays life unit sale

Posted On: Aug. 9, 2022 11:04 AM CST

Peter Zaffino

American International Group Inc. reported a significant increase in profit late Monday on its previous sale of a runoff reinsurer and strong underwriting results but said it had delayed the planned second-quarter initial public offering of its life and retirement business due to stock market conditions.

AIG announced in 2020 plans to separate its life and retirement business, which will be renamed Corebridge Financial, from its core property/casualty business and filed for an IPO earlier this year. After the recent slump in stock prices, the next “window” for the IPO will be September, Peter Zaffino, chairman and CEO of AIG, said on a call with analysts Tuesday.

AIG reported net income of $3 billion in the second quarter, compared with a $91 million profit in the same period last year. The sharp rise was in part due to an increase in net realized gains on an embedded derivative related to its 2019 sale of Fortitude Group Holdings.

AIG reported a combined ratio of 87.4%, compared with 92.5% in the same period last year, marking the first time in more than 15 years that the insurer has reported a combined ratio below 90%, Mr. Zaffino said.

Net premium written rose slightly to $6.87 billion. In its North America commercial lines business, net premium written rose 9.9% to $2.92 billion, and underwriting income for the business more than doubled to $406 million. Within the segment, AIG’s excess and surplus lines business saw a 31% increase in premium, Mr. Zaffino said.

International commercial lines net premium written fell 1.2% to $2.04 billion, but underwriting income increased 60.1% to $349 million.

Net investment income fell 37.3% to $458 million.

Average global insurance rates increased 7% and continued to outpace loss costs, Mr. Zaffino said.

“This is the fourth consecutive year in which we’re achieving rate above loss cost trends,” he said.

North America commercial saw an average 7% rate increase but some sectors saw significantly higher increases, Mr. Zaffino said. For example, professional liability saw an average 34% increase, led by cyber liability where rates increased 52% on average.

Excess casualty rates increased 10% on average, Mr. Zaffino said.

Meanwhile, AIG has moved much of its personal lines property insurance business for wealthy individuals from the admitted market to the nonadmitted market “particularly in cat exposed states,” Mr. Zaffino said. The decision to do so was largely due to higher reinsurance costs and regulatory constraints on making coverage changes on admitted policies, he said.

“As part of our go-forward high-net-worth strategy, we’re going to move homeowners and possibly other products and more states to the nonadmitted market,” he said.