AIG discloses catastrophe hit of $790M for Q3 including pandemic losses

October 26, 2020.
The Glass Fire burns a hillside above Silverado Trail in St. Helena, Calif., on Sept. 27, 2020. Recent catastrophic events such as the COVID-19 pandemic and the California wildfires have led to a surge in cat bond offerings. (AP Photo/Noah Berger, File)

The Glass Fire burns a hillside above Silverado Trail in St. Helena, Calif., on Sept. 27, 2020. Recent catastrophic events such as the COVID-19 pandemic and the California wildfires have led to a surge in cat bond offerings. (AP Photo/Noah Berger, File)

American International Group, the largest U.S. commercial insurance underwriter, disclosed that it was hit with catastrophe losses of $790 million in the third quarter, including $185 million related to COVID-19.

The global insurer said on Monday that it took $605 million in losses, net of reinsurance, from non-pandemic-related events, including windstorms and tropical storms in the Americas and Japan, and wildfires on the west coast of the U.S. Losses stemming from the COVID-19 pandemic cut across a number of business lines, namely travel, event cancellation, trade credit, property, agriculture and casualty.

took $511 million in pre-tax catastrophe losses over the same period last year, and $1.6 billion in losses in the third quarter of 2018. The company is expected to disclose its full third-quarter earnings after market close on Nov. 5. The losses were revealed the same day the New York-based insurer unveiled major corporate changes including the appointment of a new CEO and possible plans to split off its life insurance business.

“The third quarter experienced a high frequency of global catastrophe events with low to moderate severity, including the ongoing impact of COVID-19,” said Brian Duperreault, AIG's current CEO. “These events have had a limited impact on AIG as a result of our underwriting discipline, reinsurance programs, revamped risk appetite and the strength of our balance sheet.”

Insurers have weathered an abnormally active Atlantic storm season, which has done between $23 billion and $26 billion in insured losses, according to research firm Artemis. Tropical Storm Zeta is expected to add to that total. Everest Re estimated it would have $300 million in third-quarter catastrophe losses due mainly to natural disasters. 

Duperreault will be replaced by Chief Operating Officer Peter Zaffino on March 1, the company said on Monday. He is slated to stay on as executive chairman. The company also said it would split off its life and retirement business. 

Structural changes were suggested by the company in August. AIG is working to slim its operating expenses by $1 billion, a goal it set in 2019.

The insurance group was also hit hard in the second quarter, when it took an overall loss of $7.9 billion, due to investment struggles and $674 million in pre-tax catastrophe losses, $458 million of which was related to the coronavirus.

Last week, AIG agreed to forfeit over $400 million in foreign tax credits to end a dispute with the U.S. Department of Justice, which said that the company had gained the credits through cross-border transfers with “no economic substance.”

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