AIG Q3 Loss Narrows On Reinsurance Benefits

by Ike Obudulu Posted on November 1st, 2018

New York City, USA : American International Group Inc (NYSE: AIG) reported a smaller quarterly loss today as reinsurance pacts helped offset catastrophe losses in Japan and North America.

AIG reported a net loss of $1.3 billion, or $1.41 per share, for the third quarter of 2018, compared to a net loss of $1.7 billion, or $1.91 per share, in the prior-year quarter. Adjusted after-tax loss was $301 million, or $0.34 per share, for the third quarter of 2018, compared to an adjusted after-tax loss of $1.1 billion, or $1.22 per share, in the prior-year quarter.

“In the third quarter we continued to execute against our strategic priorities for delivering longterm, profitable growth,” said Brian Duperreault, President and Chief Executive Officer. “While managing a significant number of global catastrophic events, General Insurance continued to make progress against key initiatives, including improving underwriting capabilities, repositioning reinsurance structures, adding world class talent and driving efficiencies. We remain on track to produce an underwriting profit. Life and Retirement achieved increased sales and solid double digit returns, reflecting the strength of our product expertise and distribution networks.”

Mr. Duperreault added, “Looking ahead, we continue to work with a sense of urgency and are taking decisive actions across the company to position AIG for the future.”

AIG recorded net pre-tax catastrophe losses of $1.6 billion in the quarter that were largely in line with its forecast.

The losses were mainly related to typhoons in Japan as well as Hurricane Florence. AIG’s revised estimates for California mudslides also contributed to the losses.

Insured losses from Hurricane Florence will range from $2.8 billion to $5 billion, said RMS, a risk modeling and analytics firm, in September.

AIG estimated it has exhausted about $700 million of the $750 million retention under its North America aggregate catastrophe reinsurance program following the mudslides, Hurricane Florence and loss estimate from Hurricane Michael, which crashed into Florida earlier this month.

The adjusted pre-tax loss from the general insurance business narrowed 72 percent to $825 million, while the underwriting loss narrowed to $1.73 billion from $3.8 billion a year ago.

Adjusted pre-tax income from the life and retirement business fell 38 percent to $713 million in the quarter.

The company’s combined ratio fell to 124.4 percent from 157.1 percent. A ratio below 100 percent means the insurer earns more in premiums than it pays out in claims.

Loss ratio fell to 88.6 percent from 124.1 percent, when it recorded pre-tax catastrophe losses of $3 billion related to hurricanes Harvey, Irma and Maria.

On an adjusted basis, it lost 34 cents per share. Analysts on average were expecting earnings of 12 cents, according to Refinitiv data. It was not immediately clear if the numbers were comparable.

AIG Chief Executive Brian Duperreault, who took charge in May 2017, has vowed to turn the company around and post an underwriting profit as soon as year-end.

But some analysts are not convinced his plan is working. “The third quarter results do not suggest progress in and of themselves,” Sandler O’Neill analyst Paul Newsome said in an interview.

AIG has not made much progress in improving underwriting profit in its commercial property and casualty insurance business, even without the catastrophe losses, Newsome said. But there are some signs that AIG’s loss ratio is improving, he said.

AIG estimated it has exhausted about $700 million of the $750 million available through its North American catastrophe reinsurance program following the mudslides, Hurricane Florence and loss estimate from Hurricane Michael, which crashed into Florida earlier this month.

The adjusted pretax loss from the general insurance business narrowed 72 percent to $825 million, while the underwriting loss narrowed to $1.73 billion from $3.8 billion a year ago.

Adjusted pretax income from the life and retirement business fell 38 percent to $713 million, driven by changes to some actuarial assumptions following an annual review.

The company’s combined ratio fell to 124.4 percent from 157.1 percent. A ratio below 100 percent means the insurer earns more in premiums than it pays out in claims.

Loss ratio fell to 88.6 percent from 124.1 percent in the year-ago quarter, when it recorded pretax catastrophe losses of $3 billion related to hurricanes Harvey, Irma and Maria.

On an adjusted basis, it lost 34 cents per share. Analysts on average were expecting a profit of 12 cents, according to I/B/E/S data from Refinitiv. It was not immediately clear if the numbers were comparable.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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