American International Group reported adjusted earnings of $709 million for the third quarter, exceeding Wall Street projections as rate improvements and improved investment returns outweighed heavy catastrophe losses for the carrier.
The U.S.’ largest commercial insurance underwriter on Thursday reported adjusted earnings of $0.81 per diluted common share, beating the average analyst estimate of $0.54 provided by Marketwatch. The result was also 45% over adjusted earnings of $0.56 per share in the same period a year earlier.
AIG’s adjusted earnings growth was driven largely by the insurer’s life and retirement business, a unit the company said in October it was looking to split off as part of a plan to bolster liquidity and streamline operations. The New York-based insurer also named current President Peter Zaffino to take over as CEO in March.
"Our recent leadership transition and corporate structure announcements marked an important milestone for AIG made possible by the significant foundational work our colleagues have successfully executed on over the last three years," said outgoing AIG CEO Brian Duperreault.
The life and annuity insurance organization posted $975 million in adjusted pre-tax earnings, up from $646 million in the prior-year period. While squeezed by a slowdown in annuity sales and the impacts of COVID-19 mortality, AIG said, the unit was boosted by higher private equity returns, a “strong” equity market performance and lower global operating expenses.
“Life and retirement’s results continue to demonstrate that it is a market-leading franchise, with a strong improvement in adjusted pre-tax income from last year,” Duperreault said.
AIG’s general insurance business reported $416 million in adjusted pre-tax income, a slide of nearly 18% year over year. The unit took an underwriting loss of $423 million stemming from a slew of windstorms, hurricanes and wildfires in addition to pandemic-related hits to the travel insurance segment. In all, catastrophe losses grew to $13.5 million, compared to $7.5 million in the comparable quarter of 2019.
Still, the insurer said, underlying operational efficiency had improved in the general insurance lines.
Adjusted to exclude catastrophe losses and related reinstatement premiums, the division’s accident year combined ratio improved 2.6 points year over year to 93.3. It was the unit's ninth consecutive quarterly improvement in the efficiency metric, according to Duperreault.
AIG posted $89 million in adjusted pre-tax income from its legacy operations, down from $93 million in the prior-year quarter, largely as gains on fair value option portfolios offset the carrier’s June sale of Fortitude Group Holdings.
Excluding the impact of Fortitude, AIG’s net investment income on an adjusted pre-tax basis grew $271 million compared to the third quarter of 2019. The insurer said the gain resulted from higher private equity and hedge fund returns over the period.