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Home / Insurance / AIG Sees More Property Rate Hikes; planning company review

AIG Sees More Property Rate Hikes; planning company review



American International Group Inc. achieved significant increases in retail and wholesale property prices in the first quarter and expects further rate hikes this year, the insurer’s top executive said Friday.

Going forward, AIG, which reported lower first-quarter profit late Thursday but higher underwriting revenue, plans to simplify its corporate structure and cut costs further as it continues its successful turnaround since replacing its top management in 2017.

On a conference call with analysts Friday to discuss AIG’s results, Chairman and CEO Peter Zaffino said rates in AIG’s North American commercial business rose 7% in the first quarter, but there were variations across lines.

Wholesale real estate prices rose 35%, retail real estate rose 32% and international real estate rose 1

1%, he said.

In the second quarter, real estate rate increases are even higher, Zaffino said.

In contrast, high excess public directors and officers liability fell by more than 20%, he said. In its financial businesses overall, “net premium income decreased 9% due to increased competition putting pressure on pricing, as well as a continued decline in (mergers and acquisitions) and other transactional business.”

AIG, which has focused on turning around its property/casualty business, separating its life and pension operations and overhauling its operating structure in recent years, will continue to evolve its business model and will move away from its conglomerate structure, Mr. Zaffino said.

“We will eliminate duplication and significantly reduce centralized infrastructure across the enterprise, which will lead to a more agile business model,” he said.

Future parent costs are likely to be 1% to 1.5% of the premium, which today would represent about $250 million to $350 million, Zaffino said.

“As we develop our future government business model, we expect to achieve approximately $500 million in cost reduction for the AIG parent company and a cost to achieve of approximately $400 million,” he said.

AIG expected to complete a secondary offering of its life and retirement business Corebridge Financial Inc. in the first quarter but chose not to proceed with the offering due to volatile stock markets, Zaffino said.

AIG still intends to proceed with a secondary offering but will “explore other options aligned with the best interests of shareholders,” he said.

Earlier this week, AIG announced that it had agreed to sell its crop insurance business to American Financial Group Inc. for $240 million.

AIG reported $23 million in net income in the first quarter, compared with $4.17 billion in the same period last year. Much of the difference relates to the 2019 sale of its majority stake in reinsurer Fortitude Group Holdings. It sold the business on a co-insurance basis, which continues to affect AIG’s mark-to-market or fair value valuation.

The insurer reported $1.64 billion in adjusted pre-tax earnings, down 4.7% from the same period last year. Its main property and casualty business, its general insurance unit, reported adjusted pre-tax earnings of $1.25 billion, up 3.1%, and insurance income of $502 million, up 12.6%.

Casualty reported gross premium income of $12.03 billion for the quarter, up 4.5% year-over-year, and net premium income of $6.97 billion, up 5%.

AIG’s North America business reported $3.37 billion in net premium income, an increase of 14.1% compared to the same period in 2022. International Commercial Lines reported $2 billion in net premium income, a decrease of 4.3%.

Non-life insurance reported a total expense ratio of 91.9%, an improvement over the 92.9% reported in last year’s first quarter. Catastrophe losses totaled $264 million for the quarter.

Net investment income increased to $3.53 billion, an increase of 9.1% compared to the same period last year.

AIG also increased its dividend by 12%, the first increase since 2016.

“The board was comfortable raising the dividend for the first time in many, many years because of the significant turnaround in GI Guarantee results over the past five years,” said Sabra Purtill, vice president and acting chief financial officer of AIG.


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