AIG Reports Lower-than-Expected Increase in Profit According to Reuters

American International Group (AIG) reported a second-quarter profit increase that fell short of expectations, impacted by decreased underwriting income in its general insurance segment due to divestitures and elevated catastrophe losses.

Adjusted after-tax income attributable to common shareholders rose to $1.16 per share, up from $1.06 the previous year. In contrast, analysts had anticipated earnings of $1.30 per share, based on data from LSEG.

Following the earnings announcement, AIG’s shares decreased by 1.3% in after-hours trading.

AIG’s CEO, Peter Zaffino, noted that the core fundamentals were strong, despite the complexities of accounting related to deconsolidation and previous divestitures.

The insurer, regarded as one of the largest commercial insurers globally, indicated that net premiums written in its general insurance division experienced a 7% increase on a comparable basis for the quarter ending June 30, fueled by growth in worldwide commercial lines.

Increased spending on insurance policies by individuals and businesses has enabled insurers to attract and retain clients, even amidst rising prices in some areas. Furthermore, investment income for insurers has benefitted from robust U.S. equity markets, supported by a stable economy and expectations for interest rate reductions.

AIG’s total consolidated net investment income grew by 18% to $990 million, largely due to higher earnings from fixed-maturity securities, loans, and dividends from its life and retirement business, Corebridge Financial, which was spun off in 2022 after pressures from activist investors.

AIG’s general insurance underwriting income saw a decline of 28%, attributed to the previous year’s divested businesses, although it increased by 2% on a comparable basis. Catastrophe losses amounted to $325 million, primarily due to storms in the United States and heavy rainfall in the Middle East.

In comparison, fellow insurer Travelers reported $1.51 billion in catastrophe losses, net of reinsurance, resulting from severe wind and hail storms in the U.S.

AIG’s general insurance accident year combined ratio was 87.6%, slightly improved from 88% a year ago. This metric, which excludes catastrophe losses, indicates that the insurer is earning more from premiums than it is paying out in claims if it remains below 100.