AIG facing $790m COVID-19 and catastrophe charge in third quarter

American International Group (AIG) is expecting a $790 million hit from catastrophe losses in the third quarter of 2020, including $185 million of estimated losses for COVID-19-related claims.

The estimated losses in the company’s general insurance segment are pre-tax and net of reinsurance.

AIG said COVID-19-related losses are stemming mainly from its travel, event cancellation, trade credit, property, agriculture and casualty books of business.

While the non-COVID-19 losses of $605 million reflect windstorms and tropical storms in the Americas and Japan, as well as wildfires on the west coast.

The insurer also revealed the results of its annual actuarial assumption update for the life & retirement and legacy segments.

AIG recorded a third quarter 2020 charge of $7 million after-tax ($9 million pre-tax) to its net income, reflecting a charge of $22 million pre-tax in the life & retirement segment and a benefit of $13 million pre-tax in the legacy segment.

The $22 million charge is comprised of a charge of $120 million pre-tax, included in adjusted pre-tax income (APTI), and a benefit of $98 million pre-tax, reflected in net realised capital losses and deferred acquisition costs related to guaranteed minimum withdrawal benefits. The impact to APTI for the legacy segment was a benefit of $13 million.

Meanwhile, the company has announced its plans to separate its life & retirement business following a "comprehensive review" of its structure, as well as change its top management with the appointment of a new chief executive officer. Peter Zaffino will succeed Brian Duperreault as the CEO of AIG from March next year.

Duperreault, AIG’s chief executive officer, said: “The third quarter experienced a high frequency of global catastrophe events with low to moderate severity, including the ongoing impact of COVID-19. These events have had a limited impact on AIG as a result of our underwriting discipline, reinsurance programmes, revamped risk appetite and the strength of our balance sheet.”