By Ahmad Zaki
In AIG’s recently released Q12020 results announcement, CEO Brian Duperreault expressed optimism in the face of the challenges COVID-19 has brought to the industry, commending the compassion, courage and empathy of the frontline healthcare providers. He also revealed that AIG would be donating $5m to the AIG Foundation, which will assist with relief efforts across the globe, as part of its commitment to help.
The US-based insurer reported net income attributable to AIG common shareholders of $1.7bn for the quarter, compared to $654m in the same period last year. The released statement said that the improvement was “primarily due to $3.5bn of pre-tax net realized capital gains largely related to mark-to-market gains from variable annuity and interest rate hedges and the impact of our non-economic non-performance risk adjustment, per GAAP, on the fair value of our liabilities compared to $446m of pre-tax net realized capital losses in the prior year quarter.”
In general insurance, its adjusted pre-tax income of $501m was comprised of an underwriting loss of $87m and net investment income of $588m. The underwriting loss included the impact of $272m of estimated COVID-19 related losses, without which general insurance would have reported an underwriting profit, AIG said.
For life and retirement, the quarter’s adjusted pre-tax income was $574m compared to $924m the prior year quarter. The decrease reflected unfavourable impacts from equity markets.
AIG’s net investment income for Q1 was $2.5bn compared to $3.9bn in the 2019. Net investment income on an adjusted pre-tax income basis decreased approximately $1.0bn to $2.7bn. The decrease reflected lower alternative investment income compared to the prior year quarter and other investment losses in the first quarter of 2020 compared to other investment income in the 2019.
Mr Duperreault’s full statement is below:
“In the face of COVID-19, an unprecedented global catastrophe, our colleagues have shown great resilience and remain focused on what we do best, which is helping our clients manage risk, especially in difficult times.
“It has been heart-breaking to watch this humanitarian crisis unfold over the last few months. At the same time, the courage, compassion and empathy that have emerged, particularly from first responders, healthcare providers and others on the frontlines, has been heart-warming. AIG is committed to assisting with relief efforts across the globe and will be making an inaugural $5m contribution to our recently reinstated AIG Foundation for this purpose.
“AIG was in a strong financial position before this crisis began and remains in a strong financial position today. While we believe COVID-19 will be the single largest CAT loss the industry has ever seen, the significant body of work our team has undertaken since late 2017 has served us well as we navigate through this evolving situation. AIG is well-positioned to emerge as a global insurer of choice with significant financial flexibility.
“In the first quarter of 2020, our core businesses delivered strong results building on the momentum we had coming into the year. In general insurance, the adjusted accident year combined ratio continued to improve, and life and retirement delivered solid results despite unfavourable capital markets and continued low interest rates.
“TheCOVID-19 crisis has created significant uncertainty, and it will take time to understand its broader ramifications. In light of this, AIG is withdrawing previously issued guidance, including that relating to Adjusted Return on Common Equity. However, we do expect to see continued improvement in General Insurance, particularly in the adjusted combined ratio, and in LifeandRetirement, we do not believe that the impact of COVID-19 will result in a material reduction of our long-term return profile.
“While the new normal COVID-19 will create for each of us is still unknown, I am confident that AIG will continue to move forward on its journey to become a top performing company and leading insurance franchise.”
Asia Insurance Review