February 12, 2016 by Canadian Underwriter
American International Group Inc. reported Thursday its catastrophe-related losses in commercial property & casualty dropped 3% from 2014 to 2015 but the loss ratio deteriorated by 14.6 points after the New York City-based firm strengthened its loss reserves in long-tail classes of commercial liability insurance.
AIG, which released its financial results Thursday, reported its net premiums written, in p&c, dropped from $33.43 billion in 2014 to $32.02 billion in 2014. Those are the aggregate results of commercial p&c, consumer-personal (including accident and health premiums from AIG’s non-life companies) and p&c run-off business reported in corporate and other. All figures are in United States dollars.
In a press release, the firm noted that since 2014, the U.S. dollar has strengthened against the euro, the British pound and the Japanese yen.
The combined ratio in p&c deteriorated by 10.2 points, from 102.2% in 2014 to 112.4% in 2015.
During the quarter ending Dec. 31, 2015, AIG reported a combined ratio of 161.5% in commercial p&c, up 58.1 points from 103.4% during the same period in 2014. The loss ratio deteriorated by 57.9 points, from 75% in Q4 2014 to 132.9% in the latest quarter. A major factor was the strengthening of loss reserves by $3 billion.
“This reserve strengthening was primarily in the long-tail classes of business, particularly U.S. excess and primary casualty and financial lines, reflecting adverse development on prior accident years, particularly in accident years 2010 and prior,” AIG noted.
In commercial p&c, AIG reported net premiums written of $20.4 billion in 2015, down from $21.02 billion in 2014. Broken down by line of commercial business, net written premiums in 2015 were $6.957 billion in casualty, $5.16 billion in property, $3.653 billion in specialty and $4.666 billion in financial lines.
Broken down by geography, net written premiums in commercial p&c in 2015 were $13.57 billion in the Americas, $4.9 billion in Europe, the Middle East and Africa (EMEA) and $1.9 billion in Asia-Pacific.
During the fourth quarter, net written premiums in commercial p&c dropped 2%, from $2.866 billion in 2014 to $2.719 billion in the most recent quarter, “primarily” due to the strengthening of the American dollar against the euro, pound and yen.
The underwriting loss in commercial p&c was $3 billion in 2015, compared to an underwriting loss of $50 million in 2015. The loss ratio increased 14.6 points, from 71.6% in 2014 to 86.2% last year, while the combined ratio increased 14.8 points, from 100.2% in 2014 to 115% last year.
Company-wide, AIG reported net income of $2.22 billion on revenues of $58.3 billion in 2015, compared to net income of $7.524 billion on revenue of $64.4 billion in 2014. Those results include p&c, life, health and annuities, among other products. In the latest quarter, AIG had a net loss of $1.849 billion on revenues of $13.8 billion, while during Q4 2014, AIG recorded net income of $710 million on revenues of $15.4 billion.
Catastrophe-related losses in commercial p&c were $581 million in 2015, down 3.1% from $600 million in 2014. In 2015, $209 million in cat losses were recorded in Q2 and $213 million were recorded in Q4.
In consumer insurance – personal insurance, AIG reported net premiums written of $11.58 billion in 2015, of which $5.59 billion was in personal lines and $4.99 billion was in accident and health. The consumer insurance – personal insurance segment includes auto, property, warranty service program and accident and health and group benefits of AIG’s non-life insurance companies. Net written premiums had been $12.41 billion in 2014. The combined ratio in that segment was 101.3% in 2015, up 0.4 points from 99.9% in 2014.
During Q4, AIG “increased global commercial property limits to $2.5 billion per occurrence from $1.5 billion, in response to increased demand for capacity and services from clients managing complex global risks and increasing property values,” the company stated Feb. 11, 2016. “This increase was the result of recent investments in engineering and analytical capabilities, which in turn allowed AIG to secure meaningful support from a panel of long-standing reinsurers.”
In 2015, AIG reported revenues of $9.2 billion in retirement operations and operating revenues of $6.4 billion from life. AIG reported total assets under management of $224 billion in retirement.
Company-wide, general operating expenses for Q4 dropped 6% year-over-year, and for the full year, general operating expenses dropped 3% from 2014 to 2015, stated Peter D. Hancock, chief executive officer of AIG, in a release.
Hancock was appointed to his current position in September, 2014, replacing Robert Benmosche, who had been diagnosed in 2010 with lung cancer and died Feb. 27, 2015. A former Metlife CEO, Benmosche joined AIG in 2009. Benmosche was credited with overseeing the largest turnaround in the history of corporate America, when AIG repaid $182 billion to the U.S. government, which essentially took control after the financial crisis of 2008. In 2008, AIG was America’s largest issuer of life and health and annuities and was unable to pay collateral calls on credit default swaps. At one point the U.S. government owned the majority of AIG. The Federal Reserve Bank of New York’s assistance to AIG was terminated in January, 2011 and at the end of 2012, the U.S. government announced the sale of the remainder of its interest in the firm.