American International Group’s road to profitability continues to be both slow and challenging. High catastrophe losses in the fourth quarter presented yet another obstacle.
The property/casualty insurance giant lost $622 million, or $0.70 per share, for the 2018 fourth quarter, thanks largely to significant catastrophe losses. General Insurance remained a money-loser, booking a $1 billion underwriting loss (versus a $846 million underwriting loss in Q4 2017).
The troubled General Insurance division experienced pre-tax catastrophe losses (net of reinsurance) of $826 million, stemming from last fall’s Hurricane Michael and the California wildfires. AIG said that the division’s combined ratio hit 115, up from 113.3 in Q4 2017. The General Insurance combined ratio in North America was even higher, at 125.3 compared to 111.5 the year before.
One bright spot: Net premiums written for General Insurance in North America grew 14 percent. AIG said that was largely due to its acquisitions of Validus and Glatfelter, plus lower ceded premiums due to changes in the 2018 reinsurance programs.
AIG President and CEO Brian Duperreault has faced General Insurance underwriting losses ever since he came on board in mid-2017. He has insisted AIG will turn to an underwriting profit in 2019. In prepared remarks issued with the Q4 2018 results, Duperreault focused on “significant foundational work” the insurer pursued to set the stage for an underwriting and profit-making rebound.
“Throughout 2018, significant foundational work was undertaken to remediate AIG’s core underwriting capabilities. While many issues and challenges were uncovered, we moved quickly to reduce risk and volatility, as well as implement strategies that we believe will accelerate our progress in 2019,” Duperreault said. “The world-class talent that joined AIG throughout 2018 was a highlight, and our team is not taking short cuts in building a top-performing enterprise, nor are we settling for easy fixes. Our work continues to restore AIG as the leading insurance company in the world, and I remain confident we are on the right path to achieve long-term, sustainable and profitable growth.”
Duperreault added that General Insurance has generated some positive improvements, “reflecting actions we took throughout the year to reposition and strengthen the business.”
Here are further highlights of AIG’s financial results:
AIG’s board of directors boosted the share repurchase authorization to $2 billion in Q4, including $512 million that remained under the previous authorization.