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AIG posts 99.7% CoR, third straight U/W profit, as cat losses fall to $628mn YoY

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AIG delivered a $20mn underwriting profit for the third quarter, a reversal from last year’s quarterly loss, marking the insurer’s third straight quarterly underwriting gain.

On Thursday, AIG said it earned $0.97 in adjusted earnings per share, a 20% jump from last year, when the company generated $0.81 per share earnings. The company beat analysts’ $0.88-per-share estimate. The overall net income figure soared to $1.66bn, up from $281mn last year.

The carrier cut its combined ratio by 7.5 points to 99.7%, despite the heavy cat quarter. AIG reported $628mn in cat claims, versus $790mn last year, when it registered a $423mn P&C underwriting loss. The underlying loss ratio for the general insurance (GI) unit dropped by 1.5 points, helping mark the 13th straight quarter of underlying combined ratio improvement.

AIG’s underlying combined ratio dropped 2.8 points to 90.5% in the quarter. The expense ratio was 1.3 points lower, totaling 31.3%.

Adjusted pre-tax income rose to $811mn in GI from $416mn last year, though in life and retirement, it fell to $877mn from $1bn last year.

North America had a $166mn underwriting loss overall, down from a $370mn underwriting loss a year ago, but this was offset by a $186mn underwriting gain in international. That was better than the $53mn underwriting loss in international a year ago.

The underwriting loss in North America commercial lines grew to $503mn in the quarter, up from its $153mn loss last year. North America personal lines shifted to a $337mn underwriting gain from a $217mn loss last year. The underwriting loss in international commercial lines narrowed to $94mn, from $148mn a year ago, while the international personal lines business grew underwriting income to $280mn, from $95mn.

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GWP rises by 13% as NA commercial grows NWP by 17%

Gross written premiums (GWP) within GI increased by 13% to $9.3bn. North America commercial lines expanded its net written premiums (NWP) by 18%, to $2.6bn, while its international commercial lines division wrote $2.1bn in net premium, 15% higher than the year before. NA personal lines NWP was up by 11% to $429mn, though international personal lines NWP fell 3% to $1.5bn.

Net investment income in the GI unit fell 6%. AIG said the downturn came from lower returns from fair value option equity and fixed income securities, partially offset by strong alternative investment income from private equity.

AIG’s president and CEO Peter Zaffino hailed the insurer’s momentum and execution on its strategic priorities, saying the carrier had generated “outstanding financial results”, while also noting progress the company had made on its AIG 200 operational efficiency initiative.

“Against the backdrop of a very active cat season and the ongoing global pandemic, AIG colleagues demonstrated continued resilience and are performing at a high level delivering value to our stakeholders and excellence in all that we do,” CEO Peter Zaffino said.

“General insurance delivered very strong results demonstrating the underwriting discipline now embedded in our culture and the benefits of our volatility reduction efforts through a well-articulated risk appetite and reinsurance program that performed well,” he added.

Zaffino told an audience at a fireside chat for Aon’s virtual reinsurance renewal series that establishing a “strong underwriting culture” had been key to the insurer’s turnaround.

“AIG’s performance in the third quarter and through the first nine months of the year validates the strategy we have been executing on over the last few years,” Zaffino added.

“We have vastly improved the quality of our portfolio by delivering superior risk solutions, we continue to embed operational excellence across the organization,” he continued, while also noting the milestones the company has reached in separating its life and retirement business from its P&C operations.

“AIG is well on its way to becoming a top performing company that delivers sustainable profitable growth over the long-term,” he concluded.

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