American International Group’s (AIG) profitability took a hit this past quarter, but growth in key businesses is painting a rosier outlook for the future.
In the three months ending on September 30, net income attributable to AIG common shareholders was US$281 million (around CA$367.5 million), a huge drop from the US$648 million (around CA$847.7 million) during the same period last year. However, adjusted after-tax income attributable to AIG common shareholders rose to $709 million (around CA$927 million) compared to the $505 million (around CA$660.6 million) the year prior.
Total consolidated net investment income also climbed to $3.8 billion (around CA$4.97 billion) from $3.4 billion (around CA$4.44 billion) in 2019, but net investment income on an adjusted pre-tax basis of $3.2 billion (around CA$4.18 billion) decreased by approximately $277 million (around CA$362.4 million), primarily because of the sale of Fortitude last June.
For the third quarter, its general insurance line reported $790 million (around CA$1.03 billion) in pre-tax CATs net of reinsurance, or 13.5 combined ratio points, resulting in a combined ratio of 107.2, an increase from last year’s 103.7. Its adjusted general insurance accident year combined ratio, however, jumped to 93.3, a 2.6-point improvement year-on-year, benefiting from the actions AIG has taken to improve underwriting performance.
Life and retirement adjusted pre-tax income increased 51% to $975 million (around CA$1.27 billion). According to AIG this reflects a “strong equity market performance, favourable short-term impacts from lower interest rates and tighter spreads, and lower general operating expenses, partially offset by base spread compression and unfavourable impacts from COVID-19 mortality.”
Recently, the insurer revealed its intention to separate from its life and retirement business – a decision the company hopes will result in two “market-leading stand-alone entities.”
“We are pleased to report AIG’s solid third quarter results as we embark on an important phase of our journey to become a top performing company,” said Brian Duperreault, AIG’s chief executive officer. “In general insurance, the accident year combined ratio, as adjusted, improved for the ninth consecutive quarter, and the high frequency of natural catastrophes and COVID-19 had a limited impact on financial results.”
“Life and retirement’s results continue to demonstrate that it is a market-leading franchise, with a strong improvement in adjusted pre-tax income from last year,” he added. “Our recent leadership transition and corporate structure announcements marked an important milestone for AIG made possible by the significant foundational work our colleagues have successfully executed on over the last three years.”