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AIG Reports Third Quarter 2013 Net Income Attributable To AIG Of $2.2 Billion And Diluted Earnings Per Share Of $1.46

Stocks in this article: AIG

The third quarter 2013 combined ratio was 101.6, reflecting a 3.4 point improvement. Catastrophe losses were $222 million compared to $261 million. Net adverse development was $72 million (net of premium adjustments), primarily in the U.S. Commercial Insurance business, compared to $145 million (net of premium adjustments) for the third quarter of 2012. The third quarter 2013 accident year loss ratio, as adjusted, improved to 63.7, compared to 66.5, reflecting the continued effect of the execution of AIG’s strategic initiatives and positive pricing trends, partially offset by an increase of $71 million in severe losses. The third quarter 2013 acquisition ratio increased 0.2 points to 19.7, reflecting a change in business mix and higher costs in growth-targeted lines of business. The general operating expense ratio was 14.6, a 0.5 point increase, as a result of increased personnel-related costs and a lower net premiums earned base, partially offset by lower bad debt expenses and reduced costs for infrastructure projects.

Third quarter 2013 net premiums written, excluding the effects of foreign exchange, a change in the timing of recognizing excess of loss ceded premiums and loss sensitive premium adjustments, increased 3 percent, reflecting growth of new business and rate increases. Net premiums written decreased 1 percent to $8.7 billion on a reported basis. Excluding the effects of foreign exchange, a change in the timing of recognizing excess of loss ceded premiums and loss sensitive premium adjustments, Commercial Insurance and Consumer Insurance third quarter 2013 net premiums written grew 2 and 4 percent, respectively. Commercial Insurance continues to focus on growing higher value lines of business and rate strengthening while Consumer Insurance continues to grow across product lines, expanding direct marketing as part of its multi-channel distribution strategy.

   

COMMERCIAL INSURANCE UNDERWRITING

 
Three Months Ended

September 30,

($ in millions)     2013     2012     Change
Net premiums written $   5,222     $   5,099     2 %
Net premiums earned 5,142 5,239 (2)
Underwriting loss     $   (8)     $   (317)     97 %
Underwriting ratios:
Loss ratio 71.8 78.0 (6.2)

 pts

Acquisition ratio 15.8 15.6 0.2
General operating expense ratio         12.6         12.4     0.2

Combined ratio

        100.2         106.0     (5.8)
Accident year loss ratio, as adjusted         66.2         70.8     (4.6)
Accident year combined ratio, as adjusted         94.6         98.8     (4.2)

 pts

 

The Commercial Insurance combined ratio improved 5.8 points to 100.2. The third quarter 2013 accident year loss ratio, as adjusted, improved 4.6 points to 66.2, reflecting the continued execution of AIG’s multi-faceted strategy to enhance risk selection, pricing discipline, exposure management, and claims processing, partially offset by higher severe losses in Property and Specialty totaling $211 million, compared to $120 million in the third quarter of 2012. The third quarter 2013 acquisition ratio increased 0.2 points to 15.8, primarily as a result of a change in the business mix. The general operating expense ratio increased 0.2 points to 12.6 primarily due to increased personnel-related costs and a lower net premiums earned base, partially offset by decreases in bad debt expenses.

   

CONSUMER INSURANCE UNDERWRITING

 

 

Three Months Ended

September 30,

($ in millions)     2013     2012     Change
Net premiums written $   3,441     $   3,630     (5) %
Net premiums earned 3,270 3,473 (6)
Underwriting income     $   4     $   43     (91) %
Underwriting ratios:
Loss ratio 58.8 58.3 0.5

 pts

Acquisition ratio 26.1 25.7 0.4
General operating expense ratio         15.0         14.8     0.2
Combined ratio         99.9         98.8     1.1
Accident year loss ratio, as adjusted         58.5         57.7     0.8
Accident year combined ratio, as adjusted         99.6         98.2     1.4

 pts

 

The Consumer Insurance combined ratio increased 1.1 points to 99.9, and the accident year loss ratio, as adjusted, increased 0.8 points to 58.5, primarily due to higher retail warranty losses, partially offset by improvements in automobile and personal property as a result of rate and underwriting actions. The third quarter 2013 acquisition ratio increased 0.4 points to 26.1 due to a change in business mix and higher costs in growth-targeted lines of business. The general operating expense ratio increased 0.2 points primarily due to increased personnel-related costs.

   

AIG LIFE AND RETIREMENT

 
Three Months Ended

September 30,

($ in millions)     2013     2012     Change
Premiums and deposits     $   8,422     $   4,785     76

 %

Net investment income         2,467         2,597     (5)
Pre-tax operating income:            
Retail 846 548 54
Institutional         298         278     7
Total pre-tax operating income         1,144         826     38
Assets Under Management     $   304,399     $   275,479     10

 %

 

AIG Life and Retirement pre-tax operating income increased 38 percent to $1.1 billion. The business generated strong sales of variable annuities and retail mutual funds, and also experienced a significant increase in fixed annuity deposits in the quarter. Net flows showed continued positive momentum, increasing nearly $3.0 billion from the prior-year period. Increased flows and higher account balances resulted in higher fee income in the quarter. Results also benefitted from AIG Life and Retirement’s ongoing strategy of active spread management. Offsetting these improvements, net investment income declined modestly, principally due to lower returns on alternative investments and the impact of historically low market interest rates. Pre-tax operating income also reflected positive adjustments netting to $118 million related to a review of estimated gross profit assumptions, while the prior-year period reflected $196 million in charges for reserve-related and other items.

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