AIG suffers whopping $6bn loss in 2020; Duperreault bullish over 'progress'

Global insurance conglomerate American International Group (AIG) suffered a whopping loss of $6 billion in 2020 driven by losses related to higher catastrophes and COVID-19 pandemic but mainly due to the sale of Fortitude Re. However, its CEO Brian Duperreault, who will soon transition into the role of executive chair following an  organisational overhaul, insists the company is making "continued progress".

For the full year of 2020, AIG made a net loss of $6 billion, compared with a net profit of $3.3 billion in the prior year. It said the loss was primarily driven by a $6.7 billion after-tax loss from the sale and deconsolidation of Fortitude Group Holdings in June 2020.

However, it noted that the sale, for which AIG received $2.2 billion in consideration at closing, improved the insurer's risk profile and reduced exposure to long-tail runoff liabilities and related interest rate risk.

In the fourth quarter of 2020, the company reported a net loss of $60 million, compared with a net profit of $922 million in the prior year quarter. The Q4 loss was primarily due to $1.2 billion of after-tax net realized capital losses.

The company's core general insurance unit posted a 4 percent increase in adjusted pre-tax income to $809 million compared to the prior year quarter, due to higher net investment income offset by higher catastrophe losses, net of reinsurance, including $1.1 billion of COVID-19 CATs.

General insurance combined ratio worsened by 3 percentage points to 102.8, compared with 99.8 in the prior year quarter. While its gross premiums written was down 2 percent to $7.135 billion in Q4 2020, from $7.306 billion in Q4 2019.

AIG noted "strong improvement" and growth in commercial lines due to improved business mix along with rate increases.

In October 2020, AIG announced its intention to separate its Life and Retirement business from AIG following a "comprehensive review" of its structure.

Commenting on its results, Duperreault said: “AIG’s fourth quarter and full year 2020 operating results demonstrate the continued progress we are making to position AIG for long-term, sustainable and profitable growth.

"We are effectively managing the impacts of COVID-19 and natural catastrophes and remain well capitalized in this environment of unprecedented uncertainty."

He added: “The General Insurance business continues to improve, with a 1.9 point improvement in the accident year combined ratio, as adjusted, compared to 2019 and 5.6 point improvement in the accident year combined ratio, as adjusted, compared to 2018. Life and Retirement delivered strong returns and remains well positioned to meet the ever-growing needs for protection, retirement savings and lifetime income solutions.

“As I transition into my role as Executive Chairman, I want to thank our global colleagues who have shown unyielding resilience, dedication and perseverance in their efforts to serve our clients, distribution partners, communities and other stakeholders – even as their own lives and work situations have been severely disrupted by the COVID-19 crisis. This strength of human spirit is at the core of AIG and visible in all that we do.

"I look forward to supporting Peter Zaffino as he becomes the next Chief Executive Officer of AIG and, along with our world-class team, continues AIG’s journey to become a top performing company and leading insurance franchise.”

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