American International Group posted a loss from continuing operations in the first quarter as it recorded a charge of more than $3 billion related to its recapitalization and termination of its credit facility from the Federal Reserve.
For the first quarter 2011, the insurer reported net income of $269 million and after-tax operating income of $2.0 billion, compared to net income of $1.8 billion and after-tax operating income of $637 million for the first quarter of 2010.
Chartis reported a first quarter operating loss before net realized capital gains (losses) of $463 million, reflecting $1.7 billion of catastrophe (CAT) losses comprised of $1.3 billion for the Japan earthquake and tsunami, including losses related to the Japan Earthquake Reinsurance Company (JERC), and $0.4 billion in non-Japan related catastrophe events, including the New Zealand earthquake and Australian floods, compared to $0.5 billion of CAT losses in the first quarter of 2010 from last year’s earthquake in Chile, rain storms in the northeast U.S., Madeira flooding, and the winter freeze in the southeastern U.S.
Excluding catastrophe losses, Chartis’ first quarter 2011 operating income before net realized capital gains (losses) was approximately $1.3 billion, reflecting strong net investment income and Chartis’ continued strategy to increase writings in higher-margin, less volatile lines of business.
The first quarter 2011 combined ratio was 119.0, including 19.9 points from CATs, compared to 102.5 in the first quarter of 2010. The current accident year combined ratio, excluding CATs and prior year development, was 98.7, the same as in the prior year period.
There was no significant loss development reported in the first quarter of 2011.
First quarter 2011 worldwide net premiums written of $9.2 billion increased 19.9 percent compared to the same period last year, reflecting the consolidation of Fuji Fire & Marine Insurance Company (Fuji) and modest increases in Chartis’ U.S. business. Excluding Fuji and the impact of foreign exchange, worldwide net premiums written increased 6.2 percent, partly due to increased retention in Chartis U.S., a significant new customer program underwritten in the first quarter, and organic growth in Chartis International.
Pricing has been steady and stronger than industry averages, while key business metrics continued to show a positive trend.
“At Chartis, our worldwide property-casualty business, first quarter results were affected by significant catastrophe losses related to the Japan earthquake and subsequent tsunami, while overall net premiums increased, customer retention remained strong, pricing was stable, performing better than industry averages, and our reserve positions tracked our expectations,” said Robert H. Benmosche, AIG president and CEO.
Chartis also announced a reorganization of its operations to more strongly focus on global commercial and consumer business. During a transition process, Chartis will continue to report financial results as Chartis U.S. and Chartis International. The new structure will be reflected in public financial filings beginning in the third quarter of 2011.
“During the quarter, we demonstrated the strength and resiliency of our operations, and our focus on the fundamentals of providing innovative products and services showed the earnings power of our global franchises,” said Benmosche in a statement. “We have continued to refine how we do business to leverage our global footprint, as we continue to focus on growth, sustained profitability and completely repaying the U.S. taxpayer.”
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