AIG posts $1.7bn Q3 loss on back of catastrophes and reserving

AIG has posted a larger than expected loss in the third quarter of 2017, after heavy catastrophe claims and a surprise reserving charge for commercial insurance.

The New York-based insurance group posted a third-quarter net loss of $1.74bn, compared with income of $462m during the same period of 2016. The loss was the result of $3bn in catastrophe losses and an $836m reserving charge for commercial insurance.

Shares in AIG were down 2.3% in extended trading on Thursday after it reported the third-quarter results, according to Reuters. The group reported an operating loss of $1.22 per share in Q3, much higher than the 79 cents per share loss expected by analysts, the newswire said.

AIG’s commercial insurance unit posted an operating loss of $2.86bn in the third quarter of 2017, compared with net income of $675m in the same period of 2016.

The commercial unit suffered $2.7bn of catastrophe-related losses and $837m of unfavourable prior year loss reserve development, of which $697m related to accident year 2016. The prior year loss development was largely caused by early unfavourable loss emergence in US casualty and financial lines, and an increased number of large claims in European casualty and financial lines.

AIG’s commercial combined ratio deteriorated 89.6 points to 195.4%. The property combined ratio increased 153.7 percentage points to 277%, while the liability businesses combined ratio was 45.2 points worse at 138.3%.

AIG’s president and chief executive officer Brian Duperreault said the insurer strengthened reserves based on additional information that became available in the third quarter through its quarterly reserve review, which primarily related to the 2016 accident year.

“We are laser-focused on commercial underwriting and taking actions to enhance underwriting tools and, more importantly, our talent base. With this increased focus on underwriting and our recently announced changes to AIG’s operating structure and executive leadership, we will continue to execute on our strategy to better position AIG for long-term profitable growth,” he said.

Mr Duperreault joined AIG in May, replacing Peter Hancock who left the insurer after it posted a fourth-quarter loss in 2016 following a $5.6bn reserve charge for US liability business.

For the first nine months of 2017, AIG’s net income fell 74% to $576m. The commercial insurance combined ratio deteriorated 33.6 points to 133.9%.

AIG was not the only US insurer this week to post third-quarter losses on the back of Hurricanes Harvey, Irma and Maria.

On Thursday, Liberty Mutual reported a $665m loss in the third quarter following $1.79bn in catastrophe losses. US insurer Alleghany also reported a third-quarter net loss of $314.2m after posting $792.5m in catastrophe losses.

Bermudian group Argo Group posted a third-quarter net loss of $61.3m, compared with income of $55.2m in the same period of 2016.

Earlier this week, London-based Lancashire reported a pre-tax loss in the third quarter of $136.4m, from catastrophe losses of $165m. It produced a combined ratio of 213.3%.