AIG delivers strong Q2 results off exiting life and retirement unit

American International Group continues a slow offload of its life and retirement unit, a business that delivered crucial second-quarter premiums and deposits exceeding $10 billion.

The life and retirement business, now known as Corebridge Financial, saw a 42% increase in premium and deposits compared to the prior-year quarter. The business delivered adjusted pretax income of $991 million, up 33% from the prior year quarter.

That growth was driven by record sales in fixed index annuities, AIG said, accompanied by continued expansion of base net investment spread.

After a secondary offering of Corebridge stock, AIG reduced its ownership to 65.3%. Corebridge is expected to be a fully standalone company by the end of 2023, said AIG Chairman and CEO Peter Zaffino.

Corebridge will release its own second-quarter earnings report after the market closes Thursday.

"The scale of what AIG colleagues accomplished in the second quarter is extraordinary," Zaffino said. "I am more confident than ever in AIG’s promising future as we continue our journey to be a top performing company delivering excellence in all that we do and creating sustainable long-term value for our stakeholders."

One of the largest commercial insurers in the world, AIG also benefitted from less-than-expected catastrophe [CAT] losses of $250 million. Net premiums written in its general insurance business for the quarter grew 10% to $7.5 billion.

Still, AIG's general insurance underwriting income fell 26%, hurt by CAT charges mainly related to U.S. storms and Typhoon Mawar, which hit the Western Pacific Island of Guam in May.

Total consolidated net investment income rose 37% to $3.6 billion, helped by higher income from fixed maturity securities and loan portfolios due to the higher reinvestment rates. AIG executives held a conference call to discuss the Q2 results with analysts this morning.

The Q2 results were different in the first quarter, when AIG's commercial business bailed out less-than-expected life and retirement results.

AIG in motion

The Corebridge offload is not the only business AIG is moving. The insurer is in the midst of completing, or has completed, several deals to shed different businesses. Zaffino provided updates on those moves:

Validus Reinsurance. In May, AIG announced the sale of Validus Re, including subsidiary reinsurance businesses, to RenaissanceRe Holdings. The deal, for approximately $2.74 billion in cash and $250 million in RenaissanceRe common stock, represents "another significant milestone in AIG’s strategic repositioning of its global portfolio, reducing overall volatility and creating capital efficiencies." AIG said in its Q2 news release.

The sale is expected to close during the fourth quarter. AIG acquired Validus Re in 2018 and it provided the insurer with business diversification, Zaffino explained. Talbot Underwriting and Western World will remain under AIG ownership.

"We transformed Validus Re, underwriting the portfolio, leading to significant premium growth and improved profitability," Zaffino said. "In addition, we dramatically changed the business mix of the portfolio to achieve a more attractive balance among property, casualty and specialty businesses, improved geographic diversity, and decreased peak zone exposures."

In order to move forward with AIG's long-term plans, however, the insurer needs to reduce volatility by reducing its exposure to the reinsurance business, Zaffino said.

Stone Point Capital. In February, 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.

The MGA is known as Private Client Select Insurance Services, which has officially launched, Zaffino said. The high-net-worth market comes with risks that include inflation, cost pressures and increased CAT exposure through increased total insured values, he explained.

"Because we will be assuming risk on our balance sheet, we've established the MGA's risk framework, which is designed to improve financial performance in 2023 and as we enter 2024," Zaffino said. "Overall, we are pleased with the progress we've made with Stone Point Capital on this MGA structure and we're well positioned to accelerate the business plan through the remainder of the year."

Crop Risk Services. In another second-quarter deal, American Financial Group will pay AIG $240 million in cash for CRS, a primary crop insurance general agent based in Decatur, Ill. with 2022 gross written premiums of approximately $1.2 billion.

AIG wrote business for the 2023 spring crop season, which ended June 30. Starting in the third quarter, AIG began acting as a "fronting partner" for AFG during a transitional period for full-year 2023.

"Over the remainder of the 2023 crop season, AIG will continue to benefit from earned premium for crop business booked since the start of the year," Zaffino said. "But as we enter 2024 this business will no longer have an impact at AIG financial results."

Laya Healthcare. During AIG's first-quarter call, Zaffino broke the news that AIG will pursue the sale of Laya Healthcare, the second-largest health insurer in Ireland. Laya is part of the Corebridge portfolio.

That sale process is proceeding, Zaffino said today.

"We expect to announce a positive outcome from this process in the near term, and expect that the proceeds from this divestiture will largely be used for special dividends to corporate shareholders," he said.

In addition, AIG has hired advisors to provide alternatives for the UK Life business that is also part of Corebridge.

"The dispositions of Laya and UK Life will streamline the Corebridge portfolio and allow its management team to focus on core life and retirement products and solutions in the United States," Zaffino explained.

Senior Editor John Hilton 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.