AIG boosts profits as catastrophe losses fall and premiums rise

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Global insurance conglomerate American International Group Inc.

AIG 0.80%

posted strong gains in first-quarter profit, benefiting from reduced catastrophe losses, new business growth and premium rate increases.

Another of the largest publicly traded insurers, Prudential Financial Inc.,

ERP 1.22%

posted a net loss of $31 million for the quarter, compared to net profit of $2.83 billion a year earlier, while its closely watched operating profit fell 25% to $1.22 billion of dollars. The life insurer recorded net realized investment losses and related charges reflecting higher interest rates during the period, while the prior year quarter included substantial realized investment gains, among other year-to-year differences.

AIG’s results reflected the turnaround in the company’s business of selling property and casualty insurance to corporate clients around the world. The overhaul was led by Peter Zaffino, who took over as chief executive in the prior year quarter. AIG is also an insurer of affluent households

AIG reported net income of $4.25 billion, up 9.9% from $3.87 billion in the previous quarter, while its closely watched adjusted after-tax income jumped 16%, to $1.07 billion vs. $923 million. Wall Street analysts are tracking the adjusted numbers, which exclude items considered non-recurring. AIG’s net income for both periods includes realized gains related to a reinsurer in which it holds a minority interest.

AIG cited growth in its global commercial lines, which are policies sold to corporate customers, including more than $1 billion in new business for the fourth consecutive quarter, strong retention from existing customers and rate increases of 9 %.

Along with improved financial results, AIG also detailed additional preparations in the planned separation of its life and pensions business from the rest of the business. AIG will be left with its property and casualty insurance operation when the split takes place in the middle of this year. At the end of March, AIG announced that the new company would be called Corebridge Financial. On the same day, AIG entered into a partnership with BlackRock Inc.,

which will manage up to $150 billion in assets for AIG and Corebridge.

The BackRock arrangement follows a deal last year in which investment firm Blackstone Inc.

bought a 9.9% stake in the life insurance and retirement services unit for $2.2 billion in cash and will manage some of its assets.

AIG’s results showed less pandemic effects from Covid-19 than in previous quarters. AIG said more robust travel demand led to a sharp increase in premium volume in its travel insurance sales business.

Prudential said its first-quarter adjusted after-tax operating profit fell to $1.22 billion from $1.62 billion. Much of the decline occurred in the company’s global asset management unit PGIM, where pretax adjusted operating profit fell 71% to $188 million from $651 million. Prudential cited factors including lower revenue from sources such as “start-up and co-investment income and incentive fees,” as well as higher expenses.

Its US operations reported pretax adjusted operating income of $943 million, up 12%. Enhancing units include its group life insurance and other employee benefits sales business, as well as its individual life insurance business. These operations resulted in a high number of pandemic-related deaths.

Its online data science insurance agency Assurance IQ posted a smaller pretax loss of $37 million, compared with a loss of $39 million in the year-ago quarter.

In general, AIG and other US P&C insurers suffered fewer catastrophe claims in the first quarter of this year than in the same period a year earlier. In 2021, an extended period of freezing weather in February in Texas and other states caused pipes to unexpectedly freeze, resulting in extensive water damage.

In the first quarter of this year, disasters included windstorms in Europe, an earthquake in Japan and flooding in Australia. AIG said its results included $274 million in disaster costs, mostly from flooding in Australia, compared with $422 million in the year-ago quarter.

Write to Leslie Scism at [email protected]

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