AIG balances strong underwriting with storm-related CAT losses in 4Q

American International Group celebrated plenty of success in the fourth quarter, exceeding many of the targets set in its revitalization plan, with strong sales of many products and some of its best underwriting.

The bottom-line results did not quite match up due to adverse markets and extreme weather conditions. AIG reported nearly a 24% decline in fourth-quarter profit on Wednesday.

Property damage, floods and power outages from frigid conditions in the United States and Canada in late December left AIG with $235 million in catastrophe losses in the quarter, compared with $189 million a year earlier.

Led by chairman and CEO Peter Zaffino, AIG executives met with analysts Thursday morning. Perhaps not surprisingly, Zaffino sees only good things to come for AIG.

"I could not be more pleased with our team's ability to execute on multiple complex strategic objectives across AIG at once," Zaffino said, speaking of the entire year.

Most notably, AIG continues to complete the spinoff of its life and retirement division. An initial public offering of newly company, Corebridge Financial, in September, raising $1.68 billion. After the initial IPO round, AIG will control almost 78% of Corebridge’s shares, with Blackstone holding about 10%, according to filings.

"Despite the very challenging equity market conditions we had to navigate, notably Corebridge was last year's largest IPO in the U.S., and the largest financial services IPO since 2020," Zaffino said.

The AIG Life and Retirement plans took shape in 2021, when AIG sold a 9.9% equity stake in the segment to Blackstone for $2.2 billion in an all-cash transaction. A March 2022 deal allows BlackRock to manage up to $60 billion of the global AIG investment portfolio and up to $90 billion of the now-Corebridge investment portfolio.

Zaffino did not address the recent firing of Mark Lyons from his position as AIG’s interim chief financial officer and executive vice president, global chief actuary and head of portfolio management. In a Jan. 30 announcement, AIG said that Lyons "violated his confidentiality/non-disclosure obligations to the company."

Sabra Purtill has been named AIG’s interim chief financial officer and Turab Hussain has been named AIG’s interim global chief actuary. Purtill followed Zaffino's opening comments and presented AIG's financial information to analysts.

Falling income

AIG’s net income fell to $264 million from $3.74 billion in the fourth quarter 2021. However, the year-ago quarter included a $3 billion gain from the sale of real estate tied to the life and retirement divestiture. Its adjusted after-tax income declined to $1.02 billion from $1.34 billion.

AIG reported healthy annuity sales in the fourth quarter, driven by "strong fixed annuity and fixed index annuity sales," the insurer said in a news release. Likewise, higher group retirement plan acquisitions helped the life and retirement division post a 2% increase in premiums over the prior-year quarter.

"Individual Retirement sales were $3.8 billion, a 16% increase over the prior-year quarter with fixed annuity sales up 78% and fixed indexed sales up 34%, new record sales for both products," Purtill said. "Group retirement deposits grew 20%, driven by higher out of plan fixed annuity sales and large plan acquisitions."

Still, the life and retirement unit posted a 19% decline in adjusted pre-tax income to $781 million. AIG blamed the decline on lower net investment income as well as lower fee income “due to challenging capital market conditions."

'Continue to grow' underwriting

Zaffino focused his prepared remarks on the general insurance segment, where underwriting income jumped 27% in the fourth quarter to $635 million from $499 million in the year-ago quarter.

"We continue to grow underwriting income in general insurance, which increased approximately $1 billion year over year, the second year in a row with over a billion dollars of growth in underwriting income," Zaffino said.

Earlier this week, AIG announced a deal with Stone Point Capital, a leading private equity firm focused on investing in businesses within the global financial services industry, to form an independent managing general agency to serve high-net-worth markets.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.