AIG could trim excess reinsurance in 2025 after completing transition
Global insurance giant AIG could scale back from its rather extreme reinsurance coverage once it completes its current transition and the ongoing deconsolidation of its life and retirement business, CEO Peter Zaffino has indicated.
“Over time, we have the balance sheet and perhaps the risk appetite to take more net on our cat program post-deconsolidation,” CEO Zaffino told his company's Q1 earnings call, with the standard caveat: “subject to market conditions.”
Reinsurance coverage of late is hefty as AIG works to not only protect its balance sheet but control earnings volatility during a transition that has seen major asset disposals, including the continuing spin-off of the life and retirement unit Corebridge.
Reinsurance has been a key element of a roughly 40% decline in key PMLs over the past year, and includes major earnings protection via industry-low attachment points, Zaffino claimed.
As Zaffino puts it, he could put another $500 million on his group's attachment points globally and they would still “likely remain the lowest among our peer group.”
Attachment points clearly kick in at frequency levels, at the 1-in-11 year level for North American wind and the 1-in-19 for North American earthquake, he claimed.
It's only the transition that forces the caution. The portfolio as written gross looks strong enough for AIG to handle more risk, Zaffino said.
“In terms of the portfolio, I am comfortable today taking more net,” Zaffino insisted. “We can absolutely take more net if we decide to as we enter 2025 depending on the profitability and depending on our appetite for volatility."
A rejigging of reinsurance at the 1.1 reinsurance renewals in 2024 subdued net written premiums, the only revenue line which AIG reports in its quarterly trading statements.
AIG laid claim to a low single digit increase in first quarter general insurance premiums across most segments after counting out the major asset disposals that otherwise left it 35% smaller in NPW than it was a year ago.
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