AIG rides strong annuity sales to another positive quarter

American International Group again posted strong profits in the third quarter, driven by growth at its general insurance and life and retirement units. Also, catastrophic losses declined sharply.

"In the third quarter, AIG continued to deliver exceptional results," President and Chairman Peter Zaffino told analysts on a Thursday morning call. "We've made significant progress in our strategic, operational and financial objectives reflecting continued execution across our entire organization."

In a repeat of the second quarter, AIG again rode the strong success of its exiting life and retirement unit. Now known as Corebridge Financial, the life and retirement business reported adjusted pre-tax income of $971 million for Q3, up 24% from $784 million in the prior-year quarter.

The increase was primarily due to higher base portfolio spread income as a result of improved base portfolio yields and higher alternative investment income, AIG said in a news release.

The insurer continues to underwrite less of the business as Corebridge trends toward becoming a fully standalone company by the end of 2023, Zaffino has said. For now, AIG is reaping the wave of selling success by fixed indexed annuity products.

FIAs "continued to be the top driver of strong sales and Institutional Markets also had strong sales, supported by $1.9 billion of new guaranteed investment contracts, partially offset by lower volume of variable annuities and pension risk transfer deals," AIG said.

Premiums declined 42% from the prior-year quarter to $0.8 billion due to lower pension risk transfer volumes. Premiums and deposits increased 4% to $9.2 billion, AIG reported.

Corebridge reports its quarterly results before the markets open Friday. The offshoot company "significant progress in simplifying its portfolio," Zaffino said.

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, the net proceeds from which will be distributed by a special dividend of approximately $730 million to Corebridge shareholders.

"These transactions will enable Corebridge to concentrate on U.S. Life & Retirement solutions where it has proven market strength and distribution capabilities," Zaffino said.

Reinsurance deal closes

On Wednesday, 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.

"This divestiture streamlines our business model, simplifies our portfolio and further reduces our volatility," Zaffino told analysts.

One of the largest international commercial insurers, AIG reported a 1% increase in net premiums written in its general insurance unit to $6.46 billion. The insurer's general insurance underwriting income rose by $443 million to $611 million.

AIG's catastrophe charges fell 29% from the year-ago quarter, when the industry faced huge bills from Hurricane Ian, to $462 million.

Q3 net income attributable to AIG common shareholders was $2 billion, compared to $2.7 billion in the prior-year quarter.

"The decline was primarily driven by a decrease in net realized gains, both including and excluding Fortitude Re funds withheld assets and embedded derivative, partially offset by higher General Insurance underwriting income and total net investment income," AIG said. "The decrease in net income was also attributable to lower ownership in Corebridge following the Corebridge secondary offering in June."

Fitzsimons remembered

Zaffino closed the analyst call by noting the Friday death of former AIG chief financial officer Shane Fitzsimons, who left the company earlier this year to deal with an unspecified health issue. Fitzsimons was initially replaced on an interim basis by then global chief actuary Mark Lyons.

However, Lyons was fired a short time afterward due to violations of a confidentiality/non-disclosure agreement. Sabra Purtill eventually filled the position on a full-time basis.

"Shane had a brilliant career," Zaffino said. "He was highly thought of in the global business community and quickly earned the trust and respect of the insurance industry, which is not easy to do. He was a cherished colleague here at AIG. Shane brought energy, integrity, and a very positive attitude that was both contagious and inspiring. He's a big reason why AIG is where it is today."

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.