AIG suffers Q2 margin slippage, underwriting profit down 26% y/y
AIG suffered a 26% decline in second quarter underwriting profits in its general insurance division, with margins down across its business but some three quarters of the decline traceable to its international operations.
The P&C combined ratio rose 3.5 percentage points to 90.9%, including a 3.1 point gain in the loss ratio, a mix of lightly higher cat losses and less favourable developments on prior year reserves.
“A tremendous result against the backdrop of a very challenging quarter for the industry,” CEO Peter Zaffino (pictured) said. Counting out cats and reserves, Zaffino is quick to call out “continued accident year underwriting margin improvement and strong growth” for the division.
Cat losses totalled $250 million or 3.9 loss ratio points, of which $159 million was in North America, mainly attributable to U.S. convective storms, and $91 million abroad, chiefly Typhoon Mawar. The prior year’s $121 million had accounted for 1.8 loss ratio points.
Cleared of reserve adjustments, AIG claimed to have snuck out a decrease in its current year underwriting ratios, attributable exclusively to North American commercial at 3.1 points from the prior year. Management credited “continued earn-in of premium rate increases exceeding loss cost trends in commercial lines.”
International operations suffered a 38% decline in underwriting income as growth proved muted. Mark net written premium growth at 3% on a mix of commercial lines growth at half the rate seen in North America and personal lines fading at a 6% annual pace.
The core segment of North American commercial suffered a more modest 13% decline in underwriting income NPW rose 17% in the segment.
North American personal insurance, admittedly a smallish chunk of the AIG business, is suffering along with the industry. The combined ratio is up 10.6 points year on year to 112.9% rendering a $51 million underwriting loss. Management blamed the full swathe of catastrophe losses, changes in business mix, reinsurance cessions and an increase in opex.
After a 33% increase in adjusted pre-tax income from the life and health division, a 37% increase in consolidated net investment income but a notable decline in realized gains on Fortitude Re funds and other assets, AIG ended with attributable net profits of $1.49 billion, down 46% year on year.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
