American International Group will attempt a delayed initial public offering next month for its Life and Retirement division.
Executives announced the new timeline today during a second-quarter call with analysts. The Life and Retirement segment was rebranded as Corebridge Financial earlier this year and was to go public during the second quarter.
Plans changed due to market conditions, explained Peter Zaffino, president and CEO of AIG. For starters, equity markets were down 16% in the second quarter, with only three weeks seeing positive market returns.
"While completing the IPO is a significant priority for us and something we are laser focused on, we believe this is an attractive business and did not want to execute a transaction that would be detrimental to stakeholders in the long run," Zaffino said. "Absent something we don't see today, we remain ready to execute on the IPO, subject to regulatory approvals and market conditions, and the next window will be in September."
Once the Corebridge business plan is fully executed, AIG still expects to retain a greater than 50% stake, Zaffino said.
The 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 Life and Retirement investment portfolio.
AIG is already seeing results, executives said. Fixed annuity sales increased 48% year-over-year, said Shane Fitzsimons, executive vice president and chief financial officer, and fixed indexed annuities posted solid sales. Variable annuity sales declined "consistent with market conditions," he added.
Life and Retirement reported pre-tax income of $563 million for the second quarter, compared to $1.1 billion in the prior year quarter, "primarily due to the impact of higher interest rates, lower equity markets, and net investment income," AIG said in a news release.
The second quarter represented the lowest COVID mortality figures since the pandemic began, Fitzsimons said, which helped offset some of the losses.
"Non-COVID mortality also favorable in the period," he said. "Premiums and deposits also continued to benefit from the solid international life sales, which comprise approximately 45% of new sales activity."
Pulling out of more states
One of the world's largest commercial insurers, AIG reported a strong quarter financially. Net premiums written in the company's General Insurance business rose 5% on a constant currency basis in the quarter to $6.9 billion, while underwriting income climbed 73%.
Executives touted the General Insurance combined ratio of 87.4, a 5.1 point improvement compared to 92.5 in the prior-year quarter. A complicated formula, a lower combined ratio is a measure of higher profitability. The 87.4 figure is AIG's first sub-90 combined ratio in more than 15 years, Zaffino said.
"Consistent with our strategy to manage volatility, catastrophe losses were very modest in the quarter coming in at $121 million, or 1.8 points of the combined ratio," he added. The adjusted accident year combined ratio of 88.5% improved for the 16th consecutive quarter – totaling 1,250 basis points of improvement over this period and 2,080 basis points of improvement in Global Commercial Lines.
"Overall, I am very pleased with our overall performance and the momentum we have heading into the second half of 2022."
AIG is one of the biggest sellers of P/C insurance to business clients around the world. But the insurer continues to shift its coverage in certain areas. Late last year, the insurer informed about 9,000 high net worth California homeowners that their policies will not be renewed. AIG is concerned about wildfires that are causing massive destruction in the state.
More states will be phased into what Zaffino called a "hybrid" model of property coverage that is shared and hedged.
"As part of our go-forward, high net worth strategy, we're going to move homeowners and possibly other products and more states to the non-admitted market," Zaffino explained. "And we plan to set up a structure that, over time, we expect to be supported by third-party capital providers, in addition to AIG."
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.