Duperreault says Covid-19 remains earnings event despite AIG’s Q2 $7.9bn loss

AIG posted a net loss attributable to shareholders of $7.9bn in the second quarter of this year, compared with a net profit of $1.1bn for the same period of 2019. The loss included another $458m of estimated Covid-19 losses and $126m for civil unrest. AIG posted an underwriting loss of $343m in the quarter. Brian Duperreault, AIG’s CEO, said however that Covid-19 remains an earnings event rather than a capital event. He stressed that the bulk of AIG’s quarterly loss was driven by a $6.7bn after-tax loss from the sale and deconsolidation of its runoff reinsurance company Fortitude Re to an investor group led by The Carlyle Group and T&D Holdings. The quarterly loss also included $1.8bn of after-tax net realised capital losses primarily related to mark-to-market losses from variable annuity and interest rate hedges. Another hit came in June 2020, as the group made a prepayment of roughly $548m to the US treasury in connection with proposed tax settlement agreements related to the disallowance of foreign tax credits associated with cross-border financing transactions. AIG disclosed that it currently expects to make additional payments on this settlement of some $1.2bn as early as the fourth quarter of 2020, dependent upon the final calculation of accrued interest. The firm's adjusted after-tax net income was down 55.1% in Q2 to $571m. Mr Duperreault reported that AIG continues to see improved underlying underwriting profitability based on its ongoing portfolio remediation, expense discipline and improving market conditions. This was particularly evident in the results of its international commercial operations, which reported net premiums written up by 7% on a constant dollar basis, driven by “strong rate improvement” and higher retention across most commercial lines. Risk and insurance managers can continue to expect a disciplined approach from AIG during coming renewals, as Mr Duperreault presses ahead with his strategy to turn around the group’s underwriting performance and improve profitability. “We are effectively navigating the current complex environment due to the strong foundation we built over the last three years. While unprecedented and ongoing, Covid-19 remains an earnings event, not a capital event, for AIG. We also increased our financial flexibility, ending the second quarter with over $10bn in liquidity,” he said. “Our core businesses performed well in the second quarter. In general insurance, the underlying underwriting profitability improvement was driven by our focus on portfolio remediation and expense discipline. Life and retirement benefited from its diversification and agility, and continues to meet client needs despite an uncertain economic environment,” continued Mr Duperreault. The group’s general insurance combined ratio was 106%. This included 11.9 points of catastrophe claims for Covid-19, civil unrest and weather-related events, as well as reinstatement premiums, of which 8.2 points was related to pandemic losses. “Commercial lines in both North America and international continued to show strong improvement due to underwriting and reinsurance actions taken to improve business mix, loss performance, and rate adequacy,” stated AIG.

Duperreault says Covid-19 remains earnings event despite AIG’s Q2 $7.9bn loss

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