AIG's Profit Surprises Estimates Strong Underwriting Trumps Catastrophe Losses

Title AIG's Profit Surprises Estimates Strong Underwriting Trumps Catastrophe Losses

In a surprise move, American International Group (AIG) exceeded estimates for its fourth-quarter profit, largely due to strong underwriting performance that offset catastrophe losses tied to hurricanes in Florida. As the insurance industry continues to navigate uncertain economic times, AIG's results provide a glimmer of hope for the future.

The Insurance Industry Proves Resilient

Despite concerns about inflation and high interest rates affecting discretionary spending, insurance premiums have remained steady. This is largely due to businesses recognizing the importance of protecting their assets against risks such as natural disasters, cyberattacks, and health emergencies. As a result, demand for insurance coverage has continued to drive growth in the industry.

AIG's Q4 Results Shine

General insurance net premiums written rose 7% year-over-year to $6.1 billion, while the adjusted general insurance accident year combined ratio improved to 88.6%. A ratio below 100 indicates that the insurer earned more from premiums than it paid out in claims, a testament to strong underwriting performance.

Catastrophe Losses Mitigated by Underwriting Gains

Higher catastrophe losses in the quarter were largely offset by gains in underwriting. The industry has faced significant payouts for climate-related disasters in recent years, and AIG's $325 million in catastrophe losses in Q4 was no exception. However, the insurer's strong underwriting performance helped to mitigate these losses.

Net Investment Income Surges

AIG's net investment income rose 44% year-over-year to $1.3 billion, driven by dividends from Corebridge and gains on the sale of shares. The company had spun off life and retirement insurer Corebridge in 2022.

Adjusted After-Tax Profit Exceeds Estimates

AIG reported adjusted after-tax income attributable to common shareholders of $1.30 per share in Q4, beating analysts' estimates of $1.23 per share. For the full year, the company's adjusted after-tax profit surged 28% on a comparable basis to $4.95 per share.

Looking Ahead

As the industry continues to evolve and adapt to changing market conditions, AIG's strong performance provides a positive outlook for the future. With its focus on underwriting and investment income, the insurer is well-positioned to navigate uncertain times and capitalize on opportunities as they arise.

Keywords AIG, insurance, underwriting, catastrophe losses, net investment income, adjusted after-tax profit

Edward Lance Arellano Lorilla

CEO / Co-Founder

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