After years of losses and just 12 months of underwriting income, American International Group’s property/casualty business has lost money again. For that, COVID-19 is to blame.
AIG said the P/C arm it lists as General Insurance experienced an $87 million underwriting loss in the 2020 first quarter, due largely to $272 million in estimated COVID-19 related losses. COVID-19 hits came from Travel, Contingency, Commercial Property, Trade Credit, Workers Compensation and Validus Re-related losses.
AIG CEO Brian Duperreault said that the insurer was in a strong position before COVID-19 and remains strong now. At the same time, he acknowledged future uncertainty stemming from the pandemic.
“The COVID-19 crisis has created significant uncertainty, and it will take time to understand its broader ramifications,” Duperreault said in prepared remarks. “In light of this, AIG is withdrawing previously issued guidance, including that relating to Adjusted Return on Common Equity.”
At the same time, Duperreault said the insurer expects to see continued improvement in General Insurance, and in its Life and Retirement arm, outside of added catastrophe costs. He also said that AIG doesn’t expect COVID-19 will cause “a material reduction of our long-term return profile.”
AIG’s General Insurance division booked $419 million in pretax catastrophe losses in Q1, and COVID-19 losses were part of the total. According to AIG, the rest were mostly weather-related. Overall, AIG’s P/C business posted a 101.5 combined ratio versus 97.4 in the 2019 first quarter.
AIG made money overall, reporting $1.7 billion in net income, or $1.98 per diluted common share for the 2020 first quarter. That compares to $654 million, or $0.75 per diluted common share in the 2019 first quarter. AIG said the results were driven mostly by $3.5 million in pre-tax net realized capital gains versus $446 million in pre-tax net realized capital losses over the same period last year.
Net investment income reached $2.5 billion, but that was a huge drop compared to $3.9 billion in Q1 2019.
AIG also said it decided to place its tech-driven subsidiary Blackboard into runoff and is recognizing a pre-tax loss of $210 million as a result. Blackboard started life as Hamilton USA. AIG snatched it up in 2017 and changed the name when Duperreault, Hamilton’s then CEO, left to become AIG’s new leader. Blackboard, run by CEO Seraina Macia, is built around the idea that it can transform commercial insurance through the use of digital technology, data analytics and automation, and AIG runs it as a startup.
Here are additional highlights of AIG’s Q1 results.