AIG and P/C Underwriting Post Profit for Q4

February 13, 2020

American International Group reported fourth quarter 2019 net income of $922 million compared to a net loss of $622 million in the prior-year quarter. The results reflected improvement in its closely-watched General Insurance (property/casualty) division where the insurer posted an underwriting income of $12 million for the quarter, compared with a loss of $1.07 billion for the same period in 2018.

For the full year of 2019, net income was $3.3 billion, compared to a net loss of $6 million in the prior year. The improvement was primarily due to a reduction in net catastrophe losses of $1.7 billion compared to the prior year; favorable General Insurance underwriting and reinsurance actions; an increase in net investment income of $2.1 billion.

General Insurance

In the fourth quarter, General Insurance produced net investment income of $766 million to go along with its underwriting income of $12 million. Catastrophe-related losses, net of reinsurance, totaled $411 million, including $233 million from Typhoon Hagibis and $146 million from Texas tornadoes and California wildfires. That was about half the catastrophe loss in the fourth quarter of 2018.

The General Insurance combined ratio was 99.8. The accident year combined ratio was 95.8, comprised of a 61.6 accident year loss ratio (an improvement of 230 basis points from the prior-year quarter) and an expense ratio of 34.2 (improvement of 70 basis points). The insurer said the decrease in accident year loss ratio reflected underwriting and reinsurance actions taken to improve the General Insurance book of business.

For full year 2019, General Insurance posted a combined ratio of 99.6 and an accident year combined ratio of 96.0, compared to 111.4 and 99.7, respectively, in the prior year.

For the third quarter of last year, General Insurance reported a $249 million underwriting loss, much of it due to catastrophe losses from Typhoon Faxai and Hurricane Dorian.

More on General Insurance results for the fourth quarter of 2019:

General Insurance North America – Commentary

  • Net premiums written decreased by 4% to $2.8 billion primarily due to underwriting actions and changes in reinsurance programs in 2019.
  • A pre-tax underwriting loss of $19 million included $313 million of catastrophe losses, net of reinsurance, of which $193 million were in North America commercial lines and $120 million in North America personal insurance. Favorable net prior year loss reserve development was driven by favorable 2017 catastrophe loss reserve development and favorable workers’ compensation loss reserve development, partially offset by unfavorable loss reserve development for U.S. financial lines and primary construction wrap run-off business.
  • The North America combined ratio of 100.6 included 9.8 points of catastrophe losses and reinstatement premiums and (3.1) points of favorable net prior year loss reserve development. The accident year combined ratio, as adjusted, was 94.6, comprised of a 65.7 accident year loss ratio, as adjusted, and a 28.9 expense ratio. The 0.2 points improvement in the accident year loss ratio, as adjusted, reflected the beneficial impact of underwriting and reinsurance actions, partially offset by higher crop losses.
  • The 1.8 points decrease in the expense ratio was largely driven by 2.0 points reduction in acquisition ratio due to changes in business mix, partially offset by 0.2 points increase in the GOE ratio.

General Insurance – International

  • Net premiums written decreased 13% on a reported and constant dollar basis due to underwriting and changes in reinsurance programs in 2019.
  • Pre-tax underwriting income of $31 million included $98 million of catastrophe losses, net of reinsurance, of which $51 million related to international personal lines and $47 million related to international commercial lines. Favorable net prior year loss reserve development was $44 million, with $61 million of favorable net prior year loss reserve development in international personal insurance, partially offset by $17 million of unfavorable net prior year loss reserve development in international commercial lines.
  • The International combined ratio was 99.1, down from 105.4 in the prior-year quarter. The accident year combined ratio, as adjusted, of 97.1 was comprised of a 57.7 accident year loss ratio, as adjusted, and a 39.4 expense ratio. The 4.4 points decrease in the accident year loss ratio, as adjusted, was primarily driven by Specialty Lines, Talbot Holdings, Ltd. and Japanese Personal Auto.
  • The expense ratio increased 0.8 points primarily due to a 0.7 points increase in the GOE ratio and 0.1 points increase in the acquisition ratio.

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