AIG general insurance’s income jumps 69% as unit returns to underwriting profit
AIG’s general insurance business has moved from “remediation to profitable growth”, said group CEO Peter Zaffino as he announced improved profit, underwriting results and combined ratio in the first quarter, with international commercial lines performing particularly well.
General insurance’s adjusted pre-tax income was up 69% in the first quarter to $845m, due to a better underwriting results and higher net investment income.
Underwriting income was $73m for the period, compared to a loss of $87m in the first quarter of last year.
The underwriting income included $422m of cat losses, primarily related to winter storms, compared to $419m in the prior year quarter. This year’s first-quarter cat figures do not include any estimated Covid-19 losses, which stood at $272m in Q1 2020. The first-quarter underwriting income included favourable net prior-year loss reserve development of $56m.
Underwriting income in international commercial lines jumped to $186m from a loss of $24m in the first quarter of last year. But North American commercial business posted an underwriting loss of $136m from a loss of $18m a year earlier, on the back of those storm claims.
General insurance’s net investment income rose by 31% to $722m.
Its combined ratio was down below 100 to 98.8%, an improvement of 2.7 percentage points on Q1 2020. The international commercial lines combined ratio improved by an impressive 11.4 percentage points to 90%, but the ratio deteriorated to 106.7% from 100.9% for North American commercial business.
AIG said commercial lines “continued to show strong improvement” as a result of an improved business mix and rate increases, which drove better general insurance underwriting results.
The adjusted accident-year combined ratio for North America commercial lines improved 3.7 points to 93.9 and by 4.9 points in international commercial lines to 86.8.
AIG’s general insurance net premiums written increased 9% in the first quarter of 2021 to $6.48bn, buoyed by a rise of 29% in North America commercial lines and 20% in international commercial lines. AIG said this reflected “strong” rate increases across most lines, improved retention and higher new business volumes.
“In general insurance, we delivered strong growth in net premiums written, driven by our North America and international commercial businesses, and underwriting profitability. The combined ratio was 98.8 inclusive of catastrophe losses and 92.4, as adjusted. The successful repositioning of our global portfolio over the last three years allowed us to pivot from remediation to profitable growth, which we expect to continue throughout the year,” said Mr Zaffino, who is also AIG’s president.
“AIG had an excellent start to the year and that is reflected in our first-quarter results, with growth in general insurance and continued strong performance in life and retirement,” he added.
The group’s adjusted pre-tax income for the first quarter rose to $1.25bn, from $180m in the prior period. Adjusted after-tax income was up to $923m from $105m. Net income was $3.87bn, compared to $1.74bn in Q1 2020.
Total consolidated net investment income for the first quarter was $3.66bn, up 46% from the prior-year quarter.
AIG’s life and retirement business saw adjusted pre-tax income increase by 57% to $941m in the first quarter.
“Our strong balance sheet and financial flexibility allow us to continue to invest in growth and core operating fundamentals, with capital returns to shareholders when appropriate. During the first quarter, we repurchased $362m of common stock and ended the quarter with $7.9bn of liquidity,” said Mr Zaffino.
“I am immensely proud of our global colleagues and what we have accomplished together. Our first-quarter results reflect significant momentum as we continue our pursuit to become a top-performing company,” he added.
