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5th August 2020
AIG reports second quarter results-$458m of estimated COVID-19 losses
-General Insurance reported $674m of pre-tax CATs, net of reinsurance, or 11.9 combined ratio points, which included $458m of estimated COVID-19 losses, $126m of civil unrest related losses and $90m of natural CATs resulting in a General Insurance combined ratio of 106.
-The General Insurance accident year combined ratio, as adjusted, was 94.9, a 120 bps improvement from the prior year quarter, driven by improved Commercial Lines performance and continued expense discipline.
-Life and Retirement reported adjusted pre-tax income(APTI) of $881m, a decrease of $168m compared to the prior year quarter driven by private equity losses, continued spread compression and elevated mortality related to COVID-19. Adjusted return on attributed common equity (Adjusted ROCE) –Life and Retirement for the second quarter was 13.2%.
On 2nd June, AIG completed the sale of a 76.6% stake in Fortitude for $2.2bnn of proceeds, significantly improving AIG’s risk profile and reducing exposure to long-tail run-off liabilities and related interest rate risk.
-Net loss attributable to AIG common shareholders was $7.9bn, or $9.15 per common share, for the second quarter of 2020, compared to income of $1.1bn, or $1.24 per diluted common share in the prior year quarter. The loss was primarily driven by a $6.7bn after-tax loss from the sale and deconsolidation of Fortitude and $1.8bn of after-tax net realized capital losses primarily related to mark-to-market losses from variable annuity and interest rate hedges including the impact of AIG’s non-economic non-performance risk adjustment, per GAAP, on the fair value of AIG’s associated liabilities. The after-tax reduction to total AIG shareholders’ equity resulting from the sale and deconsolidation of Fortitude was $4.3bn, or $2.5bn on an Adjusted common shareholders’ equity* basis.
Adjusted after-tax income attributable to AIG common shareholders (AATI) was $571m, or $0.66 per diluted common share compared to $1.3bn, or $1.43 per diluted common share in the prior year quarter. The decrease was primarily due to higher CATs and lower net investment income including private equity losses which are generally recorded on a one-quarter lag.
Brian Duperreault, AIG’s ceo, comments “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 $10bn in liquidity.
Our core businesses performed well in the second quarter. 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 run-off 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.
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.”
AIG Trends(688 articles)