Zaffino hails 'outstanding' Q2 as AIG rebounds from massive loss of last year
Global insurance conglomerate American International Group (AIG) has returned to profitability in the second quarter of 2021 after suffering a significant loss of $7.9 billion at the same point last year. Its new chief executive officer (CEO) Peter Zaffino (pictured) highlighted that the company has made huge progress on its strategic priorities and repositioning of its portfolio with an overarching focus on long-term sustainable growth.
For the second quarter of 2021, AIG generated a net profit of $91 million, compared with a net loss of $7.9 billion in the prior year quarter. It said the increase was primarily due to the recognition of an $8.4 billion loss from the sale and deconsolidation of Fortitude in June 2020, lower net realised losses, higher net investment income, significantly lower catastrophe losses, net of reinsurance (CATs), and overall strong general insurance underwriting results.
However, it noted that these pre-tax increases were partially offset by $1.9 billion higher income tax expense with $1.7 billion attributable to the tax benefit on the deconsolidation of Fortitude in 2020.
The company's core general insurance unit generated improved underwriting results, with a combined ratio of 92.5, a 13.5 point decrease from 106.0 in the prior year quarter, driven by both commercial lines and personal insurance.
General insurance gross premiums written grew 12 percent to $9.5 billion, from $8.47 billion reported in Q2 2020.
AIG president and CEO Zaffino said: “We had another outstanding quarter with our businesses performing extremely well while we continue to make significant progress on strategic priorities and position AIG for sustainable profitable growth over the long-term. General Insurance delivered excellent results, Life and Retirement was once again a meaningful contributor, and we accelerated work on AIG 200 and the separation of Life and Retirement from AIG.
“In July, we announced a strategic partnership with Blackstone whereby Blackstone will purchase a 9.9% equity stake in Life and Retirement for $2.2 billion in cash and manage certain specified Life and Retirement general account assets. This investment represents 1.1x of target pro forma adjusted book value and validates Life and Retirement’s industry leading position. In addition, a long-term perpetual vehicle affiliated with Blackstone will purchase certain of our Affordable Housing assets for $5.1 billion in cash.
“These transactions, together with our strong liquidity position at June 30 of $7.2 billion, will generate significant additional capital for AIG to deploy towards our near term capital management priorities, which are de-levering, returning capital to shareholders, and investing in organic growth.
“Given our strong balance sheet and liquidity, the AIG Board of Directors increased our current share buyback authorization to $6 billion, inclusive of the approximately $900 million that was remaining under the prior authorization. In the second half of 2021, we expect to repurchase at least $2 billion in common stock and reduce debt outstanding by $2.5 billion.
“We have incredible momentum as we head into the second half of the year and I am confident that we will continue to execute on our transformation and growth strategy. I am immensely proud of what our team has achieved and the progress we are making on our journey to become a top performing company.”
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