AIG Buoyed by Higher Premiums on Business Insurance

AIG showed continued improvement in its core business-insurance operations, but a weaker and shrinking share of income from a life-insurance unit being divested kept its operating income relatively flat.

Source: WSJ | Published on May 5, 2023

AIG Q1 net income

American International Group showed continued improvement in its core business-insurance operations, but a weaker and shrinking share of income from a life-insurance unit being divested kept its operating income relatively flat.

AIG’s so-called adjusted after-tax income, which excludes items judged nonrecurring and noneconomic, dropped 1.4% to $1.21 billion from $1.23 billion, although on a per-share basis, which is what Wall Street analysts closely watch, it rose 9.4% to $1.63. The per-share gain was primarily driven by a 10% reduction in weighted average diluted shares, as well as the strong property-casualty results and higher net investment income, AIG said.

The company’s net income fell 99% to $23 million. AIG said the steep decline was mostly due to net realized losses in mark-to-market accounting tied to a reinsurer in which it holds a tiny stake, as well as mark-to-market accounting of interest-rate and other hedging programs in the life-insurance operations.

The company’s General Insurance unit, which is one of the world’s biggest sellers of property-and-casualty policies to corporate clients worldwide, posted a 13% increase in underwriting income, to $502 million. The unit’s adjusted pretax income increased 3% to $1.25 billion from the prior-year quarter, including higher investment income on fixed-maturity securities.

It was the unit’s strongest first-quarter performance in 15 years, and comes after a multiyear turnaround effort under Peter Zaffino, who became chief executive officer in 2021. Mr. Zaffino noted that premium rates increased 8% in the quarter in many product lines in North America and internationally, “in each case exceeding loss-cost trends.” His comments were the latest by an industry CEO to signal to businesses that pricing conditions generally still favor insurers.

AIG’s Life and Retirement unit, which the company began divesting in 2021, began publicly trading in the third quarter as Corebridge Financial. The unit’s adjusted pretax income was $886 million, down 5%. AIG books 77% of that amount, in line with its current ownership stake. In the year-earlier period, it booked 90%.

Like some other life-insurance businesses this quarter, Corebridge posted record sales of certain types of retirement-savings annuities. Conservative savers have been flocking to fixed-rate annuities as an alternative to bank certificates of deposit, in the midst of the banking industry’s turmoil.

AIG’s board increased the company’s common-stock cash dividend by 12.5% to 36 cents a share beginning with the second-quarter dividend. It is the first increase since 2016.