AIG Exceeds Expectations with Strong Q3 Insurance and Investment Performance
American International Group (NYSE:AIG) reported a significant third-quarter profit that exceeded Wall Street expectations, thanks to strong insurance performance and increased investment returns. The insurer's net written premiums in general insurance rose by 6% in the quarter to reach $6.38 billion, despite the effects of disposals.
The company's general insurance accident year combined ratio was reported at 88.3% on an adjusted basis, showing a slight increase from the 86.9% recorded in the same period last year. This ratio is critically important as it reflects profitability; a figure below 100 indicates that the premiums collected by the insurer exceed the claims paid out.
Investment income also proved to be a strong area for AIG, with net investment income rising by 14% to $973 million. This increase was attributed to dividends from Corebridge, a life and retirement insurer spun off by AIG in 2022, higher returns from alternative investments, and gains from equity and fixed-income securities.
Despite the positive news in insurance and investments, AIG also faced higher catastrophe losses, which are becoming increasingly common for insurers due to more frequent and severe climate-related disasters. AIG reported $417 million in catastrophe losses for the quarter, with $324 million coming from North American events, primarily due to wind and hail storms.
CEO Peter Zaffino commented on the company's resilience in what has been a challenging year for natural disasters: "In a difficult catastrophe environment, this performance is noteworthy; insured losses in the industry are expected to exceed $125 billion for the total of 2023."
For the three months ending September 30, AIG reported adjusted after-tax income attributable to common shareholders of $1.23 per share, an increase from $1.04 per share in the same period last year. This result significantly exceeded the analyst consensus estimate of $1.10 per share compiled by LSEG.
The relative stability of the insurance sector amidst economic fluctuations and a strong equity market has played a role in enabling firms like AIG to achieve higher returns from their investment portfolios.