AIG preparing to say goodbye to life and retirement segment for good

American International Group (AIG) continues to shed assets in a streamlining led by CEO Peter Zaffino. One of those exiting business segments, life and retirement, remains a big moneymaker.

AIG executives met this morning with Wall Street analysts to provide color and detail on its fourth-quarter and full-year earnings. The venerable insurer is down to a 52% ownership stake in Corebridge Financial, its separated life and retirement division.

Corebridge will release its earnings report and hold an earnings call Thursday morning. The separation of Corebridge is expected to be completed by the end of the year, Zaffino has said. In the meantime, it continues to deliver strong annuity sales.

AIG reported fourth-quarter earnings of $93 million. The insurer posted revenue of $9.83 billion in the period. Its adjusted revenue was $12.72 billion, beating Street forecasts. Three analysts surveyed by Zacks Investment Research expected $11.6 billion.

For the year, the company reported profit of $3.64 billion, or $4.98 per share. Revenue was reported as $49.59 billion.

Annuity sales up 55%

Life and retirement premiums grew 19% from the prior-year quarter to $2.5 billion due to higher pension risk transfer volumes, AIG said in a news release. Premiums and deposits increased 20% to $10.6 billion. Fixed and fixed index annuity sales for the quarter were up 55% and the insurer reported $1.9 billion in pension risk transfer transactions. Those strong sales were partially offset by lower sales of variable annuities, the release said.

Adjusted pre-tax income in the segment increased $105 million from the prior-year quarter to $957 million.

"The increase was primarily due to higher base portfolio spread income as a result of higher base portfolio yields, partially offset by lower alternative investment income and higher mortality in the Life Insurance segment," the release stated.

In the fourth quarter, AIG completed two secondary offerings of Corebridge common stock, receiving proceeds of $1.7 billion and reducing AIG’s ownership to 52.2%.

The next transaction "may likely result in deconsolidation" of Corebridge, said Sabra Purtill, executive vice president and chief financial officer.

"When we deconsolidate, we will report Corebridge as as an investment with dividends reported in net investment income and Corebridge shares included in parent investments," she explained. "Corebridge's balance sheet and income statement will no longer be in our financials."

AIG Next

As Zaffino put it, "2023 was an extraordinary year for AIG." The insurer shed several several businesses and launched its new independent managing general agent, Private Client Select Insurance Services, finalizing an agreement with funds managed by private equity firm Stone Point Capital.

In September, Corebridge sold AIG Life Limited to Aviva for £460 million [$563 million]. On October 31, Corebridge closed the sale of Laya Healthcare to AXA for 650 million Euros.

In November, Bermuda-based reinsurer RenaissanceRe finalized the previously announced acquisition of Validus Re, AIG's treaty reinsurance operation. AIG received $3.3 billion in cash, including a pre-closing dividend, and roughly $275 million in RenRe common shares.

AIG retains both Talbot Underwriting and Western World, acquired as part of its takeover of Validus Holdings in 2018.

The moves are all part of the AIG Next program to create a leaner and more nimble company, Zaffino explained. He described the "key principles" as:

• Driving global consistency and local relevancy across end-to-end processes to improve operational efficiency and effectiveness.
• Reducing organizational complexity to create a better and differentiated experience for clients and colleagues.
• Creating an agile and scalable organization to support business growth.
• Optimizing the AIG ecosystem to modernize data analytics, digital and technology capabilities.
• Clarifying roles responsibilities, while eliminating duplication and increasing speed of execution.

The insurer plans to spend $500 million in a one-time spend on AIG Next, but the "simplification and efficiencies" created will result in a sustained $500 million annual savings, Zaffino said.

"As part of AIG Next, we are creating a leaner parent company with a target cost structure of one to one-and-a-half percent of net premiums earned," Zaffino said. "Some of the current costs and other operations will be eliminated, contributing to the $500 million savings and others will be moved into the business where the service is utilized."

InsuranceNewsNet 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.