AIG shrinks 35% on asset sales, claims low single digit underlying growth
Global insurance group AIG laid claim to a low single digit increase in first quarter general insurance premiums after counting out the major divestitures that otherwise left it 35% smaller than it was a year ago.
Net written premium in general insurance of $4.5 billion was down 35% year on year following the sale of Crop Risk Services and Validus Re, but management claimed underlying growth of 1% for commercial lines and flat NPW in personal lines.
The impact of the asset sales was most palpable on the North American market, where commercial line premium fell 69% to just over $1 billion.
Management could still brag of a 4.4% underlying gain on its rump assets in North American commercial, attributable to “continued rate increases, higher renewal retentions and strong new business production” in key areas, offsetting continued “discipline” vis-a-vis troubled financial lines.
International commercial lines were comparatively free of the impact of asset sales, but underlying growth remained muted at 1% on a decrease in global specialty and financial lines, partially offset by gains in property, casualty and at unit Talbot. Management bragged of the same impact from rate, retention and new business, plus changes in reinsurance cover.
The much-smaller personal insurance lines were also largely free of the impact of divestitures, but were still down year on year in North America and up only fractionally in the international segment.
North American commercial lines came through the divestiture upheaval with margins largely intact, with a combined ratio up a point to 88.1%.
Across all other general insurance segments in North America and abroad, chiefly unaffected by asset sales, margins improved handily, including an 8.3 point decline in international commercial lines.
That improvement in international commercial margins led to a doubling of underwriting profit for the segment, enough to overcome the loss of profit generation suffered in the North American asset sales.
As a result, group underwriting income increased $94 million or 19% from the prior year quarter to $596 million.
Cat losses of $106 million came in well below the prior year period's $264 million, cutting the loss ratio impact from 4.2 points to 1.9.
With a 12% rise in pre-tax income in life and retirement and a roughly $400 million gain in investment income, AIG returned to viable group profits of $1.2 billion, pushing its ROE on the reduced equity count to 10.8%.
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