American International Group Inc. reported $3.21 billion net income for its 2012 first quarter, a 147 percent increase from $1.30 billion net income posted during the same period one year ago.
The insurer’s profit surge was helped by low natural catastrophe claims as well as investment gains. One year ago, AIG had suffered significant catastrophe losses stemming from the earthquake in Japan. In the 2012 first quarter, pre-tax catastrophe-related losses at Chartis was $80 million, significantly lower than the $1.69 billion catastrophe-related losses recorded one year ago.
AIG also benefited from a positive change in the fair value of the Hong Kong-based life insurer AIA, which added $1.8 billion to the profit.(AIG also raised some $6 billion in March by further divesting its stake in AIA, which the company spun off in a public offering in 2010. AIG still holds a minority stake.)
Chartis Posts $1B Operating Income
AIG’s property/casualty division, Chartis, reported $1.0 billion in operating income, improving from an operating loss of $424 million in the first quarter of 2011.
Overall, Chartis underwriting loss narrowed to $180 million in the first quarter, improving from an underwriting loss of $1.60 billion during the same period one year ago.
The net investment income for Chartis improved to $1.22 billion, up from $1.18 billion one year ago.
The combined ratio for the quarter was 102.1 percent, improving from 118.6 percent one year ago. The combined ratio excluding current-year catastrophe losses and prior-year loss development was 100.4, compared to 98.3 one year ago. The loss ratio improved, thanks to a shift to higher-value businesses, pricing improvements, and risk selection — but it was offset by higher expenses, the insurer stated.
Chartis’ net premiums written were $8.82 billion, down 3.7 percent from $9.17 billion reported one year ago. But the company said the decline is an intended result of restructuring and improvement in risk selection. The insurer said factors that contributed to the decline include: continued restructuring of loss sensitive businesses to improve capital efficiency; the impact of a multi-year financial lines policy that produced net premiums written of $148 million in the prior year period; and initiatives to improve risk selection, particularly in the casualty lines of business.
Chartis said its specialty premiums increased in the quarter, consistent with its strategy to shift its mix of business to more higher-value products. It also continued to expand its commercial business in growth economy nations.
The commercial insurance segment posted operating income of $565 million, improving from an operating loss of $384 million one year ago. The combined ratio for this segment was 103.4 percent, down from 122.2 percent one year ago. The combined ratio excluding catastrophe losses was 101.1, compared to 99.1 in the first quarter of 2011.
The consumer insurance segment reported operating income of $234 million, in contrast to an operating loss of $255 million during the same period last year. The combined ratio was 96.7 percent, improving from 110.2 percent one year ago. The combined ratio excluding catastrophe losses was 97.0, compared to 95.6 in the first quarter of 2011.
SunAmerica Unit Reports $1.3B Operating Income
AIG’s U.S. life insurance unit, SunAmerica, reported operating income of $1.3 billion in the first quarter of 2012, up from operating income of $1.2 billion one year ago. The insurer said the 2012 first quarter results benefited from the reinvestment of cash during 2011 and rising stock markets in the first quarter of 2012. But partially offsetting these improvements were lower returns from hedge fund and private equity investments.
Aircraft Leasing Unit Posts $119M Operating Income
AIG’s aircraft leasing unit, ILFC, reported first quarter 2012 operating income of $119 million, up slightly from operating income of $117 million one year ago.
Additionally, United Guaranty Corporation, AIG’s residential mortgage guaranty operations, reported operating income of $8 million for the first quarter, compared to operating income of $14 million during the same period one year ago.
Profits From Core Insurance Units
AIG CEO Robert Benmosche said that “AIG has again delivered another strong quarter with our core insurance businesses all posting profits.”
“We also continue to make good on our promise to help the U.S. Government profit from its investment in AIG,” he said.
“At Chartis, where we had very low natural catastrophe claims, we’re already seeing the benefits of the realigned consumer and commercial geographic structure and our emphasis on growth economies,” Benmosche said.
“Chartis’ results also demonstrated progress in strategic initiatives to improve its mix of business, loss ratio and risk selection ultimately increasing the intrinsic value of the franchise.”
He added that SunAmerica is benefiting from its broad portfolio of competitive products, diverse and strong distribution relationships, and continued discipline in product pricing.
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