Strong commercial helps AIG withstand shaky Life & Retirement results in Q1

By John Hilton

American International Group celebrated strong first-quarter financials today, bottom-line results that were depressed by inconsistent sales in AIG's separating Life and Retirement business.

The results validated AIG's decision to separate Life and Retirement, which rebranded as Corebridge Financial. The separation effort began in 2021 and AIG is underwriting a decreasing amount of the business.

Like many other life insurers, AIG/Corebridge sales of fixed and fixed-indexed annuities thrived during the quarter. Spooked by troubling economic trends, retirement investors flocked to protection-focused annuities in 2022. That trend continued into 2023.

"Life and Retirement reported very good results with premiums and deposits of $10.4 billion dollars in the first quarter, a 44% increase year over year, supported by record sales in fixed annuity and fixed indexed annuity products," said chairman and CEO Peter Zaffino. "Flows into the general account from individual retirement where approximately $1.3 billion."

However, the unit's adjusted pretax income of $886 million declined 5% from the first quarter 2022. The APTI for both the group retirement and life insurance lines decreased 20% to 30%.

The decline was "due to lower alternative investment income and lower fee income, partially offset by higher base portfolio income and improved mortality experience," AIG said in a news release.

Overall, AIG reported first-quarter profit of $30 million. Earnings, adjusted for non-recurring costs, came to $1.63 per share, results that exceeded Wall Street expectations. The insurer posted revenue of $10.98 billion in the period. Its adjusted revenue was $12.38 billion.

Strong commercial lines

AIG is one of the largest commercial property insurers in the world. Those policies belong to its General Insurance unit, which booked a 13% increase in underwriting income, to $502 million.

"The team has done an incredible job of underwriting the property line of business across all of AIG over multiple years," Zaffino said, signaling out Lexington Insurance Co. an AIG subsidiary and a leading U.S.-based surplus lines insurer.

"Lexington has been hitting it out of the park on just about every aspect, whether it's top-line growth, retention, new business, rates, like how they actually are more relevant in the marketplace," he said.

Zaffino, who took over in 2021, has been busy on the transaction front adding and subtracting from the AIG network of companies. He mentioned several moves of note over the past week:

1. 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. That deal closed last week.

"We are excited about the prospects for [private client services] and are confident of the value of this new operating structure will deliver for clients, brokers and other stakeholders," Zaffino said.

2. The sale of Crop Risk Services to American Financial Group. In a deal announced this week, AFG will pay AIG $240 million in cash at closing, subject to certain closing adjustments.

CRS is a primary crop insurance general agent based in Decatur, Ill., with 2022 gross written premiums of approximately $1.2 billion. AIG will continue to write business for the 2023 spring crop season, which ends June 30, Zaffino said. Starting in the third quarter, AIG will act as a "fronting partner" for AFG during a transitional period for full-year 2023, he explained.

"CRS is a well run and attractive business led by a high-quality management team," Zaffino said. "In American Financial Group, we have found a high-quality partner for CRS and its employees and believe the business will benefit for being part of a larger combined platform."

3. A potential sale of Laya Healthcare. 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.

"After a comprehensive review of the health product offering, we decided to evaluate strategic alternatives and a potential sale of Laya Healthcare," Zaffino said. "We believe this will help to streamline the Corebridge portfolio and allow it to focus on life and retirement products and solutions."

'Our objective has not changed'

An initial public offering of Corebridge in September raised $1.68 billion. After the initial IPO round, AIG controlled 78% of Corebridge’s shares, with Blackstone holding about 10%, according to filings.

The AIG 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 now-Corebridge investment portfolio.

Corebridge will announce its first-quarter results next week.

"Our objective has not changed, which is for AIG to reduce its ownership stake in Corebridge over time," Zaffino said. "Corebridge has done a terrific job since we announced that we were going to commence upon doing an IPO getting themselves positioned to be an independent public company."

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.

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.