AIG’s latest quarterly results show what appears ti be a split business. Commercial lines outside North America are growing strongly. At home in the US, hailstorms and a shrinking property book have cut into profits.
The insurer’s International Commercial division, which writes AIG’s commercial business outside North America, lifted net premiums written by 13% to US$2.4 billion in the three months to 30 September. AIG said the growth was broad-based across regions. Its North America Commercial business, by comparison, grew just 2%, according to AIG’s third-quarter results filed with the US Securities and Exchange Commission.
The release doesn’t break out AIG’s Australian business separately, but the international numbers have arrived during a pricing cycle that local brokers know well. Marsh’s Global Insurance Market Index shows commercial rates across the Pacific fell 12% in the September quarter. That was the region’s 11th straight quarterly fall, and property rates dropped 14%.
International Commercial, however, stayed comfortably profitable. Its combined ratio rose to 88.3% from 84.9%, mainly because of higher catastrophe costs and smaller reserve releases. Excluding those items, the underlying ratio improved slightly, to 85.8%.
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For the group as a whole, earnings beat the forecasts. Adjusted after-tax income came in at US$2.06 a share, against an analyst consensus of US$1.89 compiled by LSEG and reported by Reuters. That figure was still below the US$2.20 AIG earned a year earlier. General insurance underwriting profit fell 29% to US$564 million.
Chief executive Eric Andersen said the result reflected the benefits of AIG’s “diverse, global portfolio.” He also said the insurer was tracking toward the financial targets it set out at its 2025 investor day. Measured over nine months, the picture looks healthier. Adjusted earnings per share were up 20.2% at US$6.18, and the combined ratio improved by 1.4 percentage points to 89.2%.
Catastrophe-related charges almost tripled, to US$283 million from US$100 million. AIG blamed severe convective storms in North America for the increase, and described the prior-year loss level as extraordinarily low. Reserve releases also halved, to US$91 million. Together, those two factors pushed the group combined ratio up to 91.3% from 86.8%.
The damage was concentrated in North America Commercial. Underwriting income in that segment fell 57% to US$167 million, and its combined ratio climbed above 92%. Casualty and financial lines were still growing there, but AIG wrote less property business. Excluding property, North American commercial premiums rose 6%.
AIG wasn’t alone in taking storm losses this reporting season. The Swiss Re Institute estimates convective storms caused about US$28 billion of insured losses worldwide in the first half of the year, most of it in the US. Large US competitors have also been reining in property and large-account business. Chubb has pulled back from accounts it regards as underpriced, and Travelers has reported cooling commercial pricing.
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Global Personal, which includes high-net-worth and accident and health cover, had a stronger quarter. Premiums rose 6%, or 9% once currency movements are stripped out. Underwriting income in the segment climbed 44% to US$114 million, and its combined ratio improved by two points to 93.2%.
These were only Andersen’s second quarterly results as chief executive. The former Aon president joined AIG as CEO-elect earlier this year and replaced Peter Zaffino in the top job on 1 June. Zaffino has moved to executive chair.
More change is on the way. Jon Hancock, who runs AIG’s global general insurance operation, will step down at the end of December, and a successor has not been announced. Andersen has also overhauled how AIG manages its broker relationships, hiring another senior Aon executive to lead that work.
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Net investment income jumped to US$1.1 billion from US$772 million, but that comparison overstates the improvement. The prior-year figure was reduced by a US$288 million fair-value loss on equities and AIG’s former Corebridge stake. On AIG’s adjusted operating measure, investment income rose by about 5%, to US$1.075 billion. Within general insurance, it rose 9% to US$1.0 billion.
AIG has now fully exited Corebridge, having sold its remaining shares in May. That means the dividends it once received from that holding have stopped. Core operating return on equity slipped to 11.1% from 13.6%, while adjusted book value per share rose 5% to US$81.25. Statutory net profit attributable to shareholders reached US$844 million, compared with US$519 million a year earlier.
During the quarter, the insurer returned US$787 million to shareholders through buybacks and dividends, and it declared a further dividend of US$0.50 a share, payable on 30 December.
For Australian brokers, the results show an insurer that is growing outside the US and cautious on property. That combination matters in a local market where capacity is abundant and price is often what wins the placement. The bigger unknown is who will lead AIG’s global P&C business from January, and whether that person keeps the same appetite for growth outside North America.
