AIG swings to $3.33bn yearly profit on back of big turnaround in general insurance

AIG saw net income swing back to an impressive $3.33bn last year from a $6m loss in 2018, as it turned around problems in general insurance, which delivered pre-tax profit of $3.53bn in 2019 from a loss of $469m in the prior 12 months. AIG said the improvement in its annual results was primarily due to the favourable impact of general insurance underwriting and reinsurance actions, a reduction in net catastrophe losses of $1.7bn, and an increase in pre-tax investment income of $2.1bn. General insurance’s 2019 combined ratio improved to 99.6% from 111.4% a year earlier. Its adjusted accident-year combined ratio fell to 96% from 99.7% in 2018. The business delivered an underwriting profit of $89m for the year, from a loss of $3.14bn in 2018. Gross written premiums were up a touch to $34.74bn, from $34.23bn a year earlier. AIG’s 2019 group figures were boosted by fourth-quarter numbers that delivered net income of $922, from a loss of $622m in the preceding quarter. General Insurance saw pre-tax income rebound to $778 from a $722m loss in Q4 2018. This comprised underwriting income of $12m and net investment income of $766m. General insurance’s fourth-quarter combined ratio also dipped below 100% to 99.8%, compared to 115% in the final quarter of 2018. General insurance’s Q4 accident-year combined ratio fell to 95.8% from 98.8%. AIG said this reflected underwriting and reinsurance actions taken to improve business mix, loss performance and reduce volatility in the general insurance book of business. AIG said its fourth-quarter group improvement was primarily due to the favourable impact of general insurance reinsurance actions, and favourable net prior-year loss-reserve development of $153m, compared to unfavourable development of $365m in the prior-year quarter. The numbers were also helped by a $385m reduction in pre-tax net catastrophe losses compared to Q4 2018, and an $833m increase in net investment income over the prior-year quarter. Fourth-quarter gross premiums written were down 5% in general insurance to $7.3bn. AIG CEO Brian Duperreault said the fourth-quarter and full-year results reflect “significant progress” to position the insurer for “long-term, sustainable and profitable growth”. “The improvement in our financial performance during the course of last year was broad-based, with contributions from all of our segments, but most notable was the return to underwriting profitability in general insurance,” he said. He added that AIG will continue working to turn around general insurance in 2020. Since Mr Duperreault took over, AIG has withdrawn capacity from unprofitable lines that had demanded consistent reserve additions, vowed to turn away business if rate is not adequate, and cut costs. Boosted by a hardening market, relatively low losses and decent investment income, the strategy appears to be working. “I remain confident we are on the right path at AIG and am very proud of what our colleagues accomplished since I joined the company in 2017. We entered 2020 with great momentum and excitement about what the future holds for AIG,” Mr Duperreault said as the insurer’s 2019 results were released. Meanwhile, Zurich’s P&C operating profit jumped 38% to $2.88bn in 2019 with its combined ratio improving 1.4 percentage points to 96.4%, as price increases rose throughout the year. This helped the insurer exceed its three-year targets put in place to turn fortunes around and saw group operating profit rise by 16% last year to $5.3bn.

AIG swings to $3.33bn yearly profit on back of big turnaround in general insurance

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