AIG Europe reports loss for 2016 on reserve strengthening, claims and Ogden hit
AIG’s European operations recorded a loss before taxes in 2016 as several factors impacted the performance while the situation improved in the first quarter of 2017.
In the financial year ended 30 November 2016, AIG made a pre-tax loss of £171.1 million in Europe compared to a profit of £408.5 million in the same period a year ago.
The combined ratio of AIG Europe increased to 111.8 percent from 98.2 percent over the period.
AIG’s performance in Europe was impacted by adverse prior year developments and higher levels of severe claims within both Property and Special Risks and Liability and Financial Lines, affecting the accident year results, the company said.
Additionally, liability reserves were strengthened as a result of the announcement to lower the UK’s Ogden discount rate to minus 0.75 percent from 2.5 percent. These elements together with lower levels of investment returns resulted in a loss before tax, according to a statement.
Net premiums written in Europe rose 3 percent year-on-year to £3.66 billion in 2016.
A strong performance from personal insurance and liability and financial lines was partly offset by competition and rate pressure within property and special risks, AIG said. Liability and financial lines saw net premiums written rise 4 percent to £1.58 billion and Personal Insurance saw net premiums written rise 11 percent to £962.3 million. Property and special risks saw net premiums written slip 5 percent to £1.12 billion.
In the first quarter of 2017, AIG Europe returned to profitability, recording a pre-tax operating income of $28 million versus a fourth quarter loss of $382 million.