American International Group Inc. reported a significant profit increase late Monday on its earlier sale of a reinsurer and strong underwriting results, but said it had delayed the planned second-quarter IPO of its life and pension business because of market conditions.
AIG announced in 2020 plans to separate its life and pensions business, which will be renamed Corebridge Financial, from its core property/casualty business and filed for an IPO earlier this year. After the recent decline in share prices, the next “window” for the IPO will be September, Peter Zaffino, chairman and CEO of AIG, said on a call with analysts on Tuesday.
AIG posted a net profit of $3 billion in the second quarter, compared with a profit of $91million in the same period last year. The sharp increase was partly due to an increase in net realized gains on an embedded derivative related to its sale in 2019 of Fortitude Group Holdings.
AIG reported a combined ratio of 87.4%, compared with 92.5% in the same period last year, marking the first time in more than 15 years that the insurer has reported a combined ratio below 90%, Zaffino said.
Net premium income rose slightly to $6.87 billion. In its North America business, net premium income increased 9.9% to $2.92 billion, and insurance income for the business more than doubled to $406 million. Within the segment, AIG’s surplus and excess business saw a 31% increase in premium, Zaffino said.
International commercial lines net premium income fell 1.2% to $2.04 billion, but insurance income increased 60.1% to $349 million.
Net investment income fell 37.3% to $458 million.
Average global insurance premiums increased 7% and continued to outpace loss costs, Zaffino said.
“This is the fourth year in a row that we’ve hit a pace above the loss cost trends,” he said.
Commercial in North America saw an average rate increase of 7%, but some sectors saw significantly higher increases, Zaffino said. For example, professional liability increased by an average of 34%, led by cyber liability where rates increased by an average of 52%.
The number of accidents increased by 10% on average, Zaffino said.
Meanwhile, AIG has moved much of its private property insurance business for wealthy individuals from the admitted market to the non-admitted market “particularly in cat-exposed states,” Zaffino said. The decision to do so was largely due to higher reinsurance costs and regulatory restrictions on making coverage changes on assumed policies, he said.
“As part of our high net worth strategy going forward, we will be moving homeowner and potentially other products and more states into the unlicensed market,” he said.