AIG Q2 Profit Falls on Higher Catastrophe Losses, Lower Private-Equity Returns

By | August 4, 2020

Insurer American International Group Inc. on Monday posted a 56% fall in quarterly adjusted earnings, spurred partly by higher catastrophe losses and lower private-equity returns.

Adjusted after-tax income attributable to AIG common shareholders fell to $571 million in the second quarter ended June 30, from $1.3 billion a year earlier.

Excluding items, AIG earned a profit of 66 cents per share compared with $1.43 per share a year earlier, exceeding Factset expectations of 50 cents per share, the company said.

Shares of AIG, one of the largest U.S. insurers, rose 3.7% in after-hours trading.

AIG posted an underwriting loss of $343 million in its general insurance business, compared with a $147 million profit a year earlier.

The loss included $458 million related to COVID-19 and $126 million for civil unrest claims. A decline in travel during the pandemic affected AIG’s travel insurance business.

The loss included $674 million of catastrophes, net of reinsurance, partly reflecting $458 million related to COVID-19 and $126 million for civil unrest claims.

A decline in travel during the pandemic affected AIG’s travel insurance business.

Net adjusted investment income dropped $537 million from a year ago to $3.2 billion. Performance was hurt by $276 million in private-equity losses compared with $238 million in private-equity income a year ago which included a large gain from one of the holdings.

AIG’s general insurance accident year combined ratio excluding changes from losses incurred in past years, was 94.9 for the quarter, compared with 96.1 a year ago.

AIG has been using the metric to gauge the success of a turnaround plan launched by Chief Executive Officer Brian Duperreault upon taking the insurer’s helm in 2017.

A ratio below 100 means the insurer earns more in premiums than it pays out in claims.

Gross premiums written fell 2% to $8.47 billion in the general insurance business.

AIG’s life and retirement unit posted $881 million in adjusted pretax income compared with $1.0 billion a year ago, driven partly by private-equity losses and deaths from COVID-19.

AIG completed selling a 76.6% stake in its run-off company, Fortitude Group Holdings LLC, to Carlyle Group Inc and T&D United Capital Co Ltd on June 2. The deal reduces risk on AIG’s balance sheet, the company said.

(Reporting by Suzanne Barlyn in Washington Crossing, Pa. Editing by Matthew Lewis)

Topics Catastrophe Profit Loss AIG

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