BREAKING NEWS: AIG commercial insurance earnings up, company repurchases $3.0 Bn of stock

BREAKING NEWS: AIG commercial insurance earnings up, company repurchases $3.0 Bn of stock

BREAKING NEWS: AIG commercial insurance earnings up, company repurchases $3.0 Bn of stock Pre-tax income has jumped to $729 million after alternative investment income performance and asset valuation following accounting treatments. Personal insurance growth was far more marginal, growing just 3% year on year. After –tax operating income was $1.1 Billion for the third quarter this year – over $400m more than the previous quarter.

“We continue to execute on the strategic initiatives announced in January,” said Peter D. Hancock, AIG President and Chief Executive Officer in a release. “The strategic divestitures that we announced this quarter, our portfolio management decisions, actions to run-off the legacy portfolio and capital allocation all exemplify our guiding principle of building economic value. We are successfully shaping and sculpting our company to be a leaner and more focused insurer. We remain committed to our 2017 financial targets, are ahead of plan in expense management, and continue to target a 6 point reduction in our Commercial accident year loss ratio, as adjusted, despite volatile quarterly results.”
 
COMMERCIAL INSURANCE          
           
    Three Months Ended
September 30,
     
($ in millions)     2016       2015     Change  
Net premiums written   $ 4,357     $ 5,275     (17 ) %
Net premiums earned     4,495       5,040     (11 )  
Underwriting loss     (236 )     (118 )   (100 )  
Net investment income     965       710     36    
Pre-tax operating income   $ 729     $ 592     23    
Underwriting ratios:                  
Loss ratio     77.7       72.8     4.9   pts
Catastrophe losses and reinstatement premiums     (5.7 )     (1.8 )   (3.9 )  
Prior year development net of premium adjustments     (6.9 )     (3.5 )   (3.4 )  
Net reserve discount charge     (0.3 )     (0.8 )   0.5    
Accident year loss ratio, as adjusted     64.8       66.7     (1.9 )  
Acquisition ratio     15.5       16.5     (1.0 )  
General operating expense ratio     12.1       13.0     (0.9 )  
Expense ratio     27.6       29.5     (1.9 )  
Combined ratio     105.3       102.3     3.0    
Catastrophe losses and reinstatement premiums     (5.7 )     (1.8 )   (3.9 )  
Prior year development net of premium adjustments     (6.9 )     (3.5 )   (3.4 )  
Net reserve discount benefit (charge)     (0.3 )     (0.8 )   0.5    
Accident year combined ratio, as adjusted     92.4       96.2     (3.8 )  
Catastrophe-related losses   $ 253     $ 88     188   %
Severe losses     95       209     (55 )  
Prior year unfavorable reserve development,                  
net of reinsurance and premium adjustments     306       186     65    
Net reserve discount charge     17       41     (59 )  
 

Commercial Insurance pre-tax operating income increased to $729 million, primarily reflecting the higher returns on alternative investment income, and an increase in the fair market value of assets accounted for under the fair value option, partially offset by an increase in underwriting loss in the current quarter driven by higher catastrophe losses and higher net adverse prior year loss reserve development. The current quarter loss ratio included net adverse prior year loss reserve development, net of return premiums of $306 million primarily from program business within Specialty, partially offset by favorable Property development. In addition, catastrophe losses increased to $253 million from $88 million in the prior-year quarter. Pre-tax operating income also benefited from an improvement in accident year losses, a lower net loss reserve discount charge and lower expenses.

The improvement in the accident year loss ratio, as adjusted, reflected the continued execution of our strategy to enhance risk selection, improve underwriting discipline and manage exposures, including the use of reinsurance, and lower overall severe losses. The accident year loss ratio, as adjusted, improved in Casualty, reflecting the non-renewal of certain underperforming classes of business, as well as the effect of reinsurance. Property improved due to lower severe losses. These declines in the accident year losses were partially offset by an increase in Specialty and competitive market conditions.

The expense ratio declined 1.9 points driven by decreases in both acquisition ratio and the general operating expense ratio. The acquisition ratio declined by 1.0 points, particularly in Casualty, primarily driven by lower net commission expenses reflecting the effect of reinsurance arrangements. The General operating expense ratio declined 0.9 points due to lower employee-related costs resulting from ongoing actions to streamline our management structure and general cost containment measures commenced in 2015.

In line with our planned portfolio optimization efforts, net premiums written decreased 17%. This decrease was primarily due to the continued execution of our strategy to enhance risk selection in our Casualty and Property product portfolios, the non-renewal of certain underperforming classes of business, the increased use of reinsurance, and adherence to our underwriting discipline in competitive market conditions.



With files from Businesswire