AIG records $7.9bn quarterly loss driven by de-risking deals, higher cat and COVID-19

American International Group (AIG) swung to a quarterly loss driven by higher catastrophe, COVID-19, private equity losses and costs tied to the sale of Fortitude stake, but insisted that its underlying underwriting profitability is improving and the company remains well positioned for future growth opportunities.

The global insurance conglomerate posted a net loss of $7.9 billion for the second quarter of 2020, compared with a profit of $1.1 billion in the prior year quarter.

AIG said the loss was primarily driven by a $6.7 billion after-tax loss from the sale and deconsolidation of Fortitude and $1.8 billion of after-tax net realised capital losses.

Its core general insurance unit reported $674 million of pre-tax catastrophe losses, net of reinsurance, including $458 million of estimated COVID-19 losses, $126 million of civil unrest related losses and $90 million of natural catastrophes.

The GI combined ratio jumped to 106 percent, while the gross premiums written fell by 2 percent year-on-year in the quarter to $8.474 billion from $8.654 billion in Q2 2019.

Brian Duperreault, AIG’s chief executive officer, said: “We are effectively navigating the current complex environment due to the strong foundation we built over the last three years. While unprecedented and on-going, COVID-19 remains an earnings, not a capital, event for AIG. We also increased our financial flexibility ending the second quarter with over $10 billion in liquidity."

“Our core businesses performed well in the second quarter," Duperreault added. "In General Insurance, the underlying underwriting profitability improvement was driven by our focus on portfolio remediation and expense discipline. Life and Retirement benefited from its diversification and agility, and continues to meet client needs despite an uncertain economic environment.

“We also executed two important transactions in the second quarter that significantly enhanced our risk profile and helped to position our core businesses for growth. The sale of our majority stake in Fortitude Holdings de-risks our balance sheet and reduces our exposure to long-tail runoff liabilities and interest rate risk. Our Personal Insurance high net worth portfolio benefited from the formation of Syndicate 2019 and new quota share reinsurance agreements, which will enable us to unlock the strategic value and growth opportunities of this business through a new, innovative capital model."

Duperreault concluded: “I am proud of the many ways we are managing through this challenging period in time. Our colleagues continue to show strength and resiliency as we remain focused on supporting our clients, each other and our communities. I remain confident that AIG is well-positioned for the future as we make progress toward becoming a top-performing company and leading insurance franchise.”