AIG: Annuity Sales Showing ‘Strong Rebound’ Off Poor 2Q

By John Hilton

Projections of COVID-19 losses were as bad as projected, American International Group execs told analysts Tuesday morning, but there are positive signs.

In particular, annuity sales picked up as the quarter wound down, said Kevin Hogan, chief executive officer for life & retirement.

"Toward the end of the quarter, we began to see improvement in retail annuity activity, as our distribution partners responded to the new environment," Hogan said. "As of today, based on early indications, we have seen a strong rebound in sales compared to June and our retail new business pipeline continues to build, suggesting improving volumes from historically low second-quarter levels."

A slide accompanying the presentation shed light on AIG's annuity business struggles in the second quarter:

Across the industry, second-quarter annuity sales were down nearly 25%, the LIMRA Secure Retirement Institute reported last week.

One of the largest U.S. insurers, AIG reported a $9.7 billion net loss for the second quarter off $9.4 billion in revenue. Its life and retirement business was a big bright spot overall, reporting $650 million in adjusted pre-tax income on $4.5 billion in revenue.

"Our broad position across products and channels has been especially advantageous during these times," Hogan said. "For example, as retail annuity sales languished in the second quarter, we expanded our pension risk transfer business, concluding several significant reinsurance transactions."

On the life side, AIG recorded increased revenue from higher international life premiums, Hogan said. The company estimates that about 40% of its COVID-19-related death claims "reflect an acceleration of claims we would have otherwise experienced in the next five years," he added.

The company is undertaking a review of actuarial assumptions in the third quarter.

"We do not currently expect COVID-19 losses to have a large impact on our long-term mortality assumptions," Hogan said.

Major Pandemic Losses

AIG posted a 56% fall in quarterly adjusted earnings, largely because of $458 million in pandemic losses in its general insurance business.

During its first-quarter call, AIG execs warned analysts to expect losses that could top Hurricane Katrina, which produced $61.9 billion in insured catastrophe losses in the U.S – the highest annual insured catastrophe loss tally ever.

AIG's total COVID-19 losses for the year stand at $730 million, said CEO Brian Duperreault. AIG expects to recover some of its losses through reinsurance, executives said.

"While our overall new business is down, primarily in our large account risk management business due to COVID-19, we did see new business growth in North America in lines such as retail property, excess casualty and financial lines," said Peter Zaffino, president and chief operating officer for the company.

The impact was felt across several lines of business, Zaffino said, including travel, property, trade credit, marine, casualty, workers' compensation, accident and health, financial lines, contingency, as well as AIG's reinsurance business, Validus Re.

InsuranceNewsNet Senior Editor John Hilton has 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.