Catastrophe losses prevented American International Group from having a third quarter in a row of property/casualty underwriting profit this year, following many years of losses.
AIG said that its General Insurance unit (property/casualty) generated $249 million in underwriting losses for the 2019 third quarter, driven by net pre-tax catastrophe losses of $497 million. Much of that came from Typhoon Faxai, which produced $254 million of that number, and Hurricane Dorian, which left AIG with a $135 million exposure.
As a result, AIG booked a 103.7 combined ratio, which included 7.5 points of catastrophe losses net of reinstatement premiums. AIG noted that the number reflected an improvement compared to a 124.4 combined ratio (and a $1.7 billion underwriting loss) over the same period a year ago. AIG President and CEO Brian Duperreault has previously insisted that its General Insurance unit will generate an underwriting profit “on average” for all of 2019, regardless of whether catastrophes hit. It was unclear whether the insurer’s Q3 General Insurance results would harm those plans.
Duperreault, in prepared remarks, asserted that AIG’s strategy remains on track.
“Results are in line with our expectations, particularly in General Insurance, which demonstrated a significant improvement over the prior-year quarter driven by our focus on underwriting excellence, expense discipline and enhanced reinsurance strategy,” Duperreault said.
The AIG CEO added the insurer remains confident it “will deliver underwriting profitability for the full year 2019.”
Overall, AIG booked $648 million in net income during the 2019 third quarter, or $0.72 per diluted common share. That compares to a $1.3 billion net loss, or $1.41 per common share, in the same year ago quarter. The insurer credited its results as coming primarily from pre-tax net realized capital gains of $929 million versus pre-tax net realized capital losses of $511 million in the 2018 third quarter.
AIG reported consolidated net investment income of $3.4 billion during the 2019 third quarter, basically flat compared to the same period in 2018, due to higher interest and dividends and other investment income (though this was partially offset by lower alternative investment returns).
AIG’s gross written premiums for General Insurance were at $8.58 billion during Q3 compared to more than $8.6 billion in the 2018 third quarter. Net premiums written came in at $6.6 billion, down from $6.8 billion a year ago.
Net premiums written grew during Q3 in commercial lines compared to Q3 2018, but they declined in personal insurance.
AIG tallied a gain in net premiums written in North America due to its Glatfelter acquisition and growth within its Validus business, though this was partially offset by continued impact from pricing and underwriting decisions, plus higher ceded premiums due to changes in 2019 reinsurance programs.