AIG Considering A Partner For Life & Retirement Business

American International Group is open to taking on a minority partner for its Life & Retirement business, but the insurer is moving ahead with selling the 19.9% stake through a public offering.

Incoming CEO Peter Zaffino offered the update during a fourth-quarter earnings call with analysts this morning. Currently president of AIG, Zaffino will take the CEO chair from Brian Duperreault on March 1.

"We are pleased with the level of interest in quality potential partners for life and retirement business and believe a sale of a minority stake could be an attractive option for AIG," Zaffino said. "We are carefully weighing the relative merits of this path compared to a minority IPO."

AIG announced the planned sale of its Life & Retirement business in October, succumbing to pressure from high-profile investors to split it off from the insurer's P&C operations. There are no plans to break up the Life & Retirement business, Zaffino has said.

'Rebound' In Annuity Sales

The Life & Retirement segment posted a fourth-quarter gain of nearly 20% in adjusted pretax income, to $1.03 billion. Executives credited increases in its group retirement and institutional markets businesses, along with private-equity returns. Premiums across the life and retirement operations were down 4%, but sales improved from the first half of 2020, said Mark Lyons, chief financial officer.

"Life and retirement continues to see a rebound in retail annuity sales as distribution partners became more accustomed to the new environment, with higher sequential sales for both variable and index annuities," Lyons said.

"Fixed annuity sales were lower sequentially as life and retirement maintain pricing discipline in this challenging rate environment. Although still lower than the prior year, indexed annuity sales continued to grow sequentially, contributing strong positive net flows, helping offset declines in variable and fixed annuity net flows."

AIG's life and retirement business is attractive because it's a diversified portfolio with limited legacy business, Zaffino said. If the insurer opts for a direct sale of the 19.9%, he added, it will be "about positioning the business for more long-term success."

Catastrophic Losses

AIG posted adjusted earnings per share of 94 cents, beating the 93-cent estimate from analysts in a Bloomberg survey. Catastrophe costs totaled $545 million in the fourth quarter, driven by hurricanes and the pandemic, AIG said in a statement.

AIG's core insurance businesses are in P&C. Its General Insurance unit sells coverages to businesses and wealthy households and is one of the nation’s biggest sellers of travel insurance by premium.

In the fourth quarter alone, the insurer recorded underwriting losses of $178 million tied to Covid-19, primarily related to travel insurance, event-cancellation insurance and reinsurance sold through its Validus unit.

In addition, AIG reported $367 million of losses from natural catastrophes including Hurricanes Sally, Zeta, Laura and Delta.

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.