Main takeaway: American International Group (AIG) reported a nearly $4 billion net income loss in the second quarter, its first quarter without its life and retirement division.
During a meeting with Wall Street analysts Thursday, CEO Peter Zaffino said the strategy to spin off the life and retirement division into Corebridge Financial began in 2020 and is part of a larger strategy to maximize value for shareholders.
“We remain committed to fully selling down a remaining ownership stake in Corebridge over time, subject to market conditions and other considerations,” CEO Peter Zaffino said. “It’s been quite a journey and we have accomplished a tremendous amount.”
Corebridge reported massive annuity sales Thursday during a strong second quarter.
The separation leaves AIG as one of the world’s largest commercial insurers. The company is also moving into high-net-worth markets through its Private Client Select business.
AIG announced a deal last week to establish a distribution partnership in which Ryan Specialty will become PCS’s exclusive wholesale broker in the high and ultra-high-net-worth markets in the United States.
“We like the business and we’re committed to it,” Zaffino said of PCS. “We’ve invested over $100 million in infrastructure and digital capabilities for our high-net-worth business over the past several years, and we believe the business is well-positioned for the future.”
Additional takeaways
AIG’s general insurance underwriting income declined 28% from $594 million for the second quarter 2023 to $430 million. However, accounting for the 2023 sales of Crop Risk Services and Validus Re, AIG said underwriting income actually increased 2%.
AIG reported overall catastrophe losses of $325 million with convective storms in the U.S. accounting for most of $156 million in North American CAT losses. About $169 million in CAT losses were booked internationally.
AIG has not hesitated to pull its commercial insurance offerings from areas hardest hit by severe weather events. Most notably, the insurer stopped writing policies in California at the end of 2021 following a year in which the state experienced four of the 20 largest wildfires in its history, with 8,000 wildfires burning over 2.5 million acres.
“The outlook for the second half of 2024, particularly with respect to natural catastrophes is uncertain,” Zaffino said. “The five leading forecasters are predicting above-average hurricane activity for the 2024 season. While there was a lot of positive sentiment across the industry following modest natural CAT loss activity in the first quarter, I’ve learned over my career to wait until the wind and typhoon seasons are over before declaring how the year will be impacted by natural disasters. It’s simply too unpredictable.”
Management Commentary
“I’m very pleased with our ability to continue to deliver outstanding financial performance and I’m equally pleased with the progress we’re making on multiple strategic initiatives.”
– CEO Peter Zaffino
Financial Overview
Net Income: a loss of $4 billion ($1.5 billion in Q2 2023)
Earnings Per Share: a loss of $5.96 ($2.03 in Q2 2023)
Operating Income: $475 million ($833 million in Q2 2023)
Share repurchases: $1.7 billion
Dividend declared: $261 million (40 cents per share)
Stock price movement: AIG shares were down 1% Friday morning to $74.12
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