May 2, 2024

AIG boosts income off life and retirement, low catastophic losses in Q1

American International Group focused on reducing risk in recent years and it helped deliver strong financial results in the first quarter.

One of the biggest international commercial insurers, AIG reported adjusted earnings for the quarter of $1.2 billion, beating analysts’ expectations. The insurer continued its separation of the life and retirement division, even as it continued powering up the bottom line.

“Life and retirement’s solid financial results benefited from higher base portfolio spread income and strong sales with total premiums and deposits of $10.7 billion for the first quarter of 2024 and were among the highest results in the past decade,” Chairman and CEO Peter Zaffino said.

Life and retirement premiums increased 7% from the prior-year quarter to $2.4 billion and premiums and deposits increased 2% to $10.7 billion, AIG said in a news release. Fixed annuities sales for the quarter were up 16% from the prior year quarter and institutional markets’ sales were up 20%, driven in part by $1.8 billion of pension risk transfer transactions, AIG said.

These gains were partially offset by lower sales of variable and fixed index annuities.

AIG is spinning its life and retirement division into Corebridge Financial in a multi-year process. In its February quarterly call with analysts, AIG reported its ownership stake in Corebridge had dropped to 52% and full separation would likely be completed by the end of the second quarter. Zaffino hedged on that timeline, but said it is still likely.

“Corbridge has done a significant amount of work, working with AIG and independently to position itself to be a separate public company,” he said. “We’ve completed most of our transition service agreements, which just means they’re more operationally prepared to go and, subject to market conditions, I think my guidance I gave last quarter stands.”

Corebridge will release its Q1 earnings and host a call with analysts Friday morning.

Profit up 19%

AIG’s general insurance business reported an underwriting profit of $596 million, up 19% from the year-ago quarter. Catastrophe charges were $106 million, a 230-basis-point improvement year over year, Zaffino noted.

The improved CAT losses is significant given the market environment. Travelers Companies, a main competitor, missed estimates for first-quarter profit last month as severe storms in the United States contributed to doubling its catastrophe losses.

When businesses that AIG sold last year are considered, the increase was 67%, the insurer said. However, net premiums for the quarter were $4.5 billion, down 35% from the near-$7 billion recorded in the year-ago quarter. The insurer blamed changes to AIG structure, including the sale of reinsurer Validus Re.

In November, Bermuda-based reinsurer RenaissanceRe finalized the previously announced acquisition of Validus Re, AIG’s treaty reinsurance operation. AIG received $3.3 billion in cash, including a pre-closing dividend, and roughly $275 million in RenRe common shares.

AIG retains both Talbot Underwriting and Western World, acquired as part of its takeover of Validus Holdings in 2018.

AIG early retirement program

The moves to shed companies are all part of the AIG Next program to create a leaner and more nimble company, Zaffino explained. AIG Next includes a new voluntary retirement program offered in April to U.S.-based employees who meet eligible criteria. AIG employs about 25,000 people in the U.S.

“Participants will have the opportunity to accelerate their retirement from AIG with enhanced retirement benefits,” Zaffino said. “The population of eligible participants represents approximately 25% of our U.S. workforce. About half of the eligible participants are located in the high-cost New York metropolitan area.”

AIG projects a 50% take-up rate for a one-time savings of $225 million, Zaffino said.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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