American International Group Inc. has been given several approaches to its life and pension business and may choose to sell a minority stake in the business rather than download the stake through an IPO, its incumbent CEO said Wednesday while discussing the insurer's fourth quarter results 2020.
Some of the funds raised from a sale would be used to repurchase shares and possibly for future acquisitions, says Peter Zaffino, the insurer's president and global chief operating officer, who will take over the top job from CEO Brian Duperreault on March 1.
AIG saw significant rate hikes across all commercial lines, except labor compensation, during the fourth quarter and expects to increase premiums by 2021
The insurer reported a loss for the fourth quarter and the entire year, largely due to derivative losses and the sale of one unit.
AIG first announced that it was considering a sale or IPO of up to 19.9% of its life and pension business in November.
Since then, it has been contacted by several unnamed organizations interested in buying the stake, Zaffino said.
“A sale of a minority interest may be an attractive option for AIG, its shareholders and other stakeholders. We carefully weigh the benefits of this route compared to a minority introduction, he says.
Factors being considered include the financial benefit to AIG, the impact of the supervisory and credit rating agency and the long-term outlook for life and retirement, Mr Zaffino said.
Some of the proceeds will be used to repurchase shares and "although this is not currently a priority, over time we may consider inorganic growth opportunities," he said.
AIG reported a loss of $ 60 in the fourth quarter compared to a profit of $ 922 million the previous year, mainly due to $ 1.2 billion in capital losses related to derivatives. For the full year, AIG reported a loss of $ 6 billion, compared to a profit of $ 3.3 billion in 2019, largely driven by a loss after tax related to the sale of Fortitude Group Holdings LLC, a retirement reinsurer, in June last year.  Adjusted income before tax for its general insurance business in the fourth quarter was $ 809 million, an increase of 4% over the previous year, and its life and pension companies reported an adjusted income of $ 1.03 billion, an increase of 19 , 7%.
Net written-off premiums decreased by 5% to $ 5.56 billion during the fourth quarter, primarily due to reduced premiums in their personal business operations due to increased reinsurance purchases. AIG's business operations in North America reported $ 1.99 billion in net premiums for the fourth quarter, a 10% increase.
AIG's total share decreased to 102.8% compared to 99.8% in the fourth quarter of 2019.
Insurance losses included $ 545 million in disaster losses, including $ 367 million in non-COVID-19 disaster losses, largely due to storm losses.
Growth in commercial premiums followed continued interest rate increases during the fourth quarter.
Average rate hikes for commercial operations were 15% and average commercial rate hikes in North America were 21%, compared to 14% in the previous quarter, Zaffino said.
North America's increases were driven by excessive accidents, which saw interest rate increases of 45%; board members 'and officers' responsibilities, up 35% retail properties and wholesale properties, up about 30%; and surplus and surplus lead to accidents, up 25%, he said.
"As we look into 2021, we expect interest rate hikes to continue, we expect these rate hikes to exceed loss costs, we expect these rate hikes to be balanced across our global portfolio and across multiple industries," Zaffino said.
AIG also restructured its reinsurance program during the fourth quarter renewals, reducing the amount of total property limit it purchased, reducing its disaster points per event for most regions in North America and adding a stockpile of accident protection, Zaffino said.
Revenue marked Mr. Duperreault's last as CEO since he returned to lead a turnaround for the insurer in 2017
AIG announced last week that Duperreault, who will become CEO next month, will resign as an executive at the company at the turn of the year.
Mr Duperreault said he and Zaffino have tackled pain some of the "pervasive and fundamental problems" at AIG over the last three and a half years.
The managers modernized the insurer's management, initiated, among other things, insurance reviews of their operations, initiated a cost reduction program and restructured AIG's reinsurance program.
"While there are still jobs to be done, I have full confidence that AIG stakeholders will continue to benefit from the hard work that is going on throughout the organization," Duperreault said. Catalog