AIG Reports Second Quarter 2022 Results
General Insurance combined ratio of 87.4% improved by 5.1 points from the prior year quarter and was the first sub-90% combined ratio in over fifteen years
General Insurance adjusted accident year combined ratio* of 88.5% improved by 2.6 points from the prior year quarter
Global Commercial Lines adjusted accident year combined ratio* of 85.3% improved by 4.0 points from the prior year quarter
Global Commercial Lines Net Premiums Written (NPW) growth of 5% (8% on a constant dollar basis)
Life and Retirement posted its second consecutive quarter with more than $1.3 billion in fixed annuity deposits and overall positive net flows
Net income per diluted common share was $3.78 compared to $0.11 in the prior year quarter
Adjusted after-tax income* (AATI) per diluted common share of $1.19 compared to $1.52 in the prior year quarter, driven by a 73% increase in General Insurance underwriting income, offset by lower alternative investment income
Repurchased $1.7 billion of AIG common stock in the second quarter and $3.1 billion as of June 30, 2022
Redeemed and repurchased $7.6 billion in aggregate principal amount of debt
SECOND QUARTER NOTEWORTHY ITEMS
General Insurance adjusted pre-tax income (APTI) of $1.3 billion reflects a $336 million increase in underwriting income from the prior year quarter with 5.1 points of combined ratio improvement driven by higher premiums marked by higher renewal retentions, positive rate change and strong new business production, focused risk selection and improved terms and conditions as well as more favorable prior year development (PYD).
Life and Retirement APTI of $563 million reflects lower net investment income (NII) due in large part to lower alternative investment returns and lower yield enhancements, partially offset by more favorable mortality compared to the prior year quarter. In the current quarter, the impact of higher new money rates, which reflects benefits from higher interest rates, and wider credit spreads has provided uplift to base portfolio NII. Life and Retirement return on adjusted segment common equity* (Adjusted ROCE) for the second quarter was 7.6%.
Return on common equity (ROCE) and Adjusted ROCE* were 24.1% and 7.0%, respectively, on an annualized basis for the second quarter of 2022.
* Refers to financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Comment on Regulation G and Non-GAAP Financial Measures.
NEW YORK, August 08, 2022--(BUSINESS WIRE)--American International Group, Inc. (NYSE: AIG) today reported financial results for the second quarter ended June 30, 2022.
AIG Chairman & Chief Executive Officer Peter Zaffino said: "AIG had another excellent quarter. General Insurance reported outstanding results and Life and Retirement again delivered a solid performance considering the significant market headwinds in the second quarter.
"Due to the high degree of equity market volatility in May and June, we decided to defer the launch of the Corebridge Financial initial public offering (IPO). Deferring the IPO provided us with an opportunity to further accelerate progress on numerous separation initiatives and to solidify the capital structure of this business as a standalone company. Completing the IPO is a significant priority for us and we remain ready to execute, subject to regulatory approvals and market conditions.
"General Insurance’s culture of underwriting excellence continues to be evidenced in our financial results. Meaningful top-line growth, strong renewal retention and new business, intentional improvements in business mix, rate above loss cost trends, coupled with a disciplined and focused approach to minimizing volatility, led to impressive profitability improvement.
"The combined ratio of 87.4% represents AIG’s first sub-90 quarter in over fifteen years and improved 510 basis points year-over-year. Consistent with our strategy to manage volatility, catastrophe losses were very modest in the quarter coming in at $121 million, or 1.8 points of the combined ratio. The adjusted accident year combined ratio of 88.5% improved for the 16th consecutive quarter – totaling 1,250 basis points of improvement over this period and 2,080 basis points of improvement in Global Commercial Lines. Overall, I am very pleased with our overall performance and the momentum we have heading into the second half of 2022.
"Life and Retirement experienced another solid quarter of sales growth in fixed annuities supported by Blackstone’s origination capabilities. Additionally, Life and Retirement is starting to see a positive impact in its base portfolio net investment income from higher interest rates and credit spreads.
"During the second quarter, we began to transfer certain assets under management to BlackRock in accordance with our recently announced asset management arrangement. We expect the majority of the remainder of the approximately $150 billion of assets under management to be transferred by the end of 2022.
"Lastly, certain capital management priorities were accelerated in the second quarter, including issuing $6.5 billion of Corebridge Financial debt and subsequently redeeming or repurchasing $7.6 billion in aggregate principal debt of AIG. In addition, we returned $2.0 billion to shareholders through $1.7 billion of AIG common stock repurchases and $256 million of dividends.
"Thanks to the outstanding efforts and hard work of our global colleagues, AIG continues to drive excellence across the company that will create long-term value for all our stakeholders."
For the second quarter of 2022, pre-tax income from continuing operations was $4.3 billion, up from $147 million from the prior year quarter. Second quarter of 2022 net income attributable to AIG common shareholders was $3.0 billion, or $3.78 per diluted common share, compared to net income of $91 million, or $0.11 per diluted common share, in the prior year quarter. The pre-tax income increase was primarily due to an increase in net realized gains on the Fortitude Re funds withheld embedded derivative, and overall strong General Insurance underwriting results, including higher premiums earned, margin expansion, and higher favorable PYD, partially offset by lower alternative investment income. The pre-tax income increase was partially offset by income attributable to noncontrolling interest associated with Blackstone’s 9.9% interest in the Life and Retirement business, mitigated by the use of proceeds received in the transaction through debt reduction and share repurchase activities.
AATI was $979 million, or $1.19 per diluted common share, for the second quarter of 2022 compared to $1.3 billion, or $1.52 per diluted common share, in the prior year quarter. The decrease in AATI was primarily due to lower alternative investment income, offset in part by a $336 million pre-tax increase in General Insurance underwriting results.
Total consolidated NII for the second quarter of 2022 was $2.6 billion, down 29% from $3.7 billion in the prior year quarter, primarily due to lower alternative investment income, lower call and tender income and lower returns from fair value option equity securities. Total NII on an APTI basis* was $2.5 billion, a decrease of $678 million compared to the prior year quarter.
Book value per common share was $58.16 as of June 30, 2022, a decrease of 16% from March 31, 2022 and 27% from December 31, 2021, reflecting a reduction in accumulated other comprehensive income (AOCI) as a result of higher market interest rates. Adjusted book value per common share* was $72.23, an increase of 2% from March 31, 2022 and 5% from December 31, 2021 reflecting growth in retained earnings from net income in excess of dividends and share repurchases. Adjusted tangible book value per common share was $66.06, an increase of 2% from March 31, 2022 and 5% from December 31, 2021.
For the second quarter of 2022, AIG repurchased approximately $1.7 billion of common stock or approximately 30 million shares and paid $256 million of common and preferred dividends, resulting in AIG Parent liquidity of $5.6 billion as of June 30, 2022. AIG’s ratio of total debt and preferred stock to total capital at June 30, 2022 was 31.1%, up from 27.8% at March 31, 2022, principally due to the impact of higher interest rates on of AOCI.
Today, the AIG Board of Directors declared a quarterly cash dividend of $0.32 per share on AIG common stock (NYSE: AIG). The dividend is payable on September 30, 2022 to stockholders of record at the close of business on September 16, 2022.
The AIG Board of Directors also declared a quarterly cash dividend of $365.625 per share on AIG Series A 5.85% Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share, which is represented by depositary shares (NYSE: AIG PRA), each representing a 1/1,000th interest in a share of preferred stock. Holders of depositary shares will receive $0.365625 per depositary share. The dividend is payable on September 15, 2022 to holders of record at the close of business on August 31, 2022.
FINANCIAL SUMMARY
Three Months Ended | ||||||
($ in millions, except per common share amounts) | 2021 | 2022 | ||||
Net income attributable to AIG common shareholders | $ | 91 | $ | 3,028 | ||
Net income per diluted share attributable | ||||||
to AIG common shareholders | $ | 0.11 | $ | 3.78 | ||
Adjusted pre-tax income (loss) | $ | 1,708 | $ | 1,359 | ||
General Insurance | 1,194 | 1,257 | ||||
Life and Retirement | 1,124 | 563 | ||||
Other Operations | (610) | (461) | ||||
Net investment income | $ | 3,675 | $ | 2,604 | ||
Net investment income, APTI basis | 3,182 | 2,504 | ||||
Adjusted after-tax income attributable to AIG common | ||||||
shareholders | $ | 1,331 | $ | 979 | ||
Adjusted after-tax income per diluted share attributable | ||||||
to AIG common shareholders* | $ | 1.52 | $ | 1.19 | ||
Weighted average common shares outstanding | ||||||
- diluted(in millions) | 872.9 | 800.7 | ||||
Return on common equity | 0.6 | % | 24.1 | % | ||
Adjusted return on common equity | 10.5 | % | 7.0 | % | ||
Book value per common share | $ | 76.73 | $ | 58.16 | ||
Adjusted book value per common share | $ | 60.07 | $ | 72.23 | ||
Common shares outstanding (in millions) | 854.9 | 771.3 | ||||
* For the three-month period ended June 30, 2022, an option for Blackstone to exchange all or a portion of its ownership interest in Corebridge for AIG common shares was dilutive for the calculation of AATI per common share. The dilutive impact was an additional 42,572,031 shares for the period.
The comparisons on the following pages are against the first quarter of 2021, unless otherwise indicated. Refer to the AIG Second Quarter 2022 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
GENERAL INSURANCE
Three Months Ended June 30, | ||||||||
($ in millions) | 2021 | 2022 | Change | |||||
Gross premiums written | $ | 9,503 | $ | 9,581 | 1 | % | ||
Net premiums written | $ | 6,860 | $ | 6,866 | — | % | ||
North America | 3,156 | 3,401 | 8 | |||||
North America Commercial Lines | 2,655 | 2,918 | 10 | |||||
North America Personal Insurance | 501 | 483 | (4) | |||||
International | 3,704 | 3,465 | (6) | |||||
International Commercial Lines | 2,062 | 2,037 | (1) | |||||
International Personal Insurance | 1,642 | 1,428 | (13) | |||||
Underwriting income (loss) | $ | 463 | $ | 799 | 73 | % | ||
North America | 169 | 406 | 140 | |||||
North America Commercial Lines | 162 | 416 | 157 | |||||
North America Personal Insurance | 7 | (10) | NM | |||||
International | 294 | 393 | 34 | |||||
International Commercial Lines | 218 | 349 | 60 | |||||
International Personal Insurance | 76 | 44 | (42) | |||||
Net investment income, APTI basis | $ | 731 | $ | 458 | (37) | % | ||
Adjusted pre-tax income | $ | 1,194 | $ | 1,257 | 5 | % | ||
Return on adjusted segment common equity | 12.3 | % | 12.0 | % | (0.3) | pts | ||
Underwriting ratios: | ||||||||
North America Combined Ratio (CR) | 93.7 | 86.3 | (7.4) | pts | ||||
North America Commercial Lines CR | 93.0 | 83.6 | (9.4) | |||||
North America Personal Insurance CR | 98.1 | 102.3 | 4.2 | |||||
International CR | 91.8 | 88.5 | (3.3) | |||||
International Commercial Lines CR | 88.7 | 82.4 | (6.3) | |||||
International Personal Insurance CR | 95.2 | 96.9 | 1.7 | |||||
General Insurance (GI) CR | 92.5 | 87.4 | (5.1) | |||||
GI Loss ratio | 61.3 | 56.2 | (5.1) | pts | ||||
Less: impact on loss ratio | ||||||||
Catastrophe losses and reinstatement premiums | (2.1) | (1.8) | 0.3 | |||||
Prior year development, net of reinsurance and prior year premiums | 0.7 | 2.9 | 2.2 | |||||
GI Accident year loss ratio, as adjusted | 59.9 | 57.3 | (2.6) | |||||
GI Expense ratio | 31.2 | 31.2 | — | |||||
GI Accident year combined ratio, as adjusted | 91.1 | 88.5 | (2.6) | |||||
Accident year combined ratio, as adjusted (AYCR): | ||||||||
North America AYCR | 92.4 | 89.9 | (2.5) | pts | ||||
North America Commercial Lines AYCR | 91.2 | 88.2 | (3.0) | |||||
North America Personal Insurance AYCR | 100.1 | 99.7 | (0.4) | |||||
International AYCR | 90.2 | 87.2 | (3.0) | |||||
International Commercial Lines AYCR | 86.9 | 81.4 | (5.5) | |||||
International Personal Insurance AYCR | 94.0 | 95.2 | 1.2 | |||||
General Insurance
Net premiums written in the second quarter of 2022 increased 0.1% (5% on a constant dollar basis) to $6.9 billion and included Global Commercial Lines growth of 5% (8% on a constant dollar basis), reflected continued positive rate change, higher renewal retentions and strong new business production, particularly in Property. This growth was offset by a $232 million decrease in Global Personal Insurance, which had lower production in Warranty and was impacted by underwriting actions taken in Private Client Group to improve risk-adjusted returns, partially offset by growth in Travel and Personal Accident & Health.
Second quarter 2022 APTI increased by $63 million to $1.3 billion from the prior year quarter driven by stronger underwriting results, offset by lower alternative investment income. Underwriting income increased by $336 million and was $799 million in the second quarter of 2022, from $463 million in the prior year quarter. The second quarter of 2022 underwriting income included $119 million of catastrophe losses, net of reinsurance, compared to $118 million in the prior year quarter, which was flat year over year. During the second quarter of 2022 General Insurance had favorable net PYD of $202 million compared to favorable net PYD of $51 million in the prior year quarter.
General Insurance combined ratio was 87.4, a 5.1 point improvement and strong result compared to 92.5 in the prior year quarter, driven by loss ratio improvement that included higher favorable PYD. The General Insurance accident year combined ratio, as adjusted, was 88.5, an improvement of 2.6 points from the prior year quarter primarily as a result of continued earn-in of rate in excess of loss cost trends, favorable business mix and portfolio management strategy execution, resulting in a 57.3 accident year loss ratio, as adjusted*. The expense ratio of 31.2 was unchanged from the prior year quarter.
Commercial Lines underwriting results reflect the quality of the portfolio and its continued profitable growth. The accident year combined ratio, as adjusted, for North America Commercial Lines improved 3.0 points to 88.2, and for International Commercial Lines improved 5.5 points to 81.4 compared to the prior year quarter.
Personal Insurance underwriting results slightly decreased, largely reflecting mix shifts in the business as well as lower premiums in the period. The North America Personal Insurance accident year combined ratio, as adjusted, improved 0.4 points to 99.7 compared to the prior year quarter, reflecting favorable changes in business mix and strong growth in Travel premiums. The International Personal Insurance accident year combined ratio, as adjusted, deteriorated by 1.2 points to 95.2 due to an increased accident year loss ratio, driven by mix of business changes, increased claims, as well as a higher acquisition ratio.
LIFE AND RETIREMENT
Three Months Ended | |||||||
June 30, | |||||||
($ in millions, except as indicated) | 2021 | 2022 | Change | ||||
Adjusted pre-tax income | $ | 1,124 | $ | 563 | (50) | % | |
Individual Retirement | 617 | 204 | (67) | ||||
Group Retirement | 347 | 164 | (53) | ||||
Life Insurance | 20 | 117 | 485 | ||||
Institutional Markets | 140 | 78 | (44) | ||||
Premiums and fees | $ | 2,417 | $ | 1,862 | (23) | % | |
Individual Retirement | 273 | 267 | (2) | ||||
Group Retirement | 134 | 119 | (11) | ||||
Life Insurance | 887 | 931 | 5 | ||||
Institutional Markets | 1,123 | 545 | (51) | ||||
Premiums and deposits | $ | 9,035 | $ | 7,099 | (21) | % | |
Individual Retirement | 3,978 | 3,620 | (9) | ||||
Group Retirement | 2,255 | 1,772 | (21) | ||||
Life Insurance | 1,161 | 1,157 | — | ||||
Institutional Markets | 1,641 | 550 | (66) | ||||
Net flows | $ | (306) | $ | 80 | NM | % | |
Individual Retirement* | (77) | 628 | NM | ||||
Group Retirement | (229) | (548) | (139) | ||||
Net investment income, APTI basis | $ | 2,376 | $ | 1,989 | (16) | % | |
Return on adjusted segment common equity | 16.4 | % | 7.6 | % | (8.8) | pts | |
*2021 includes $0.6 billion of net outflows from Retail Mutual Funds that were transferred or liquidated in the third quarter of 2021. | |||||||
Life and Retirement
Life and Retirement reported APTI of $563 million for the second quarter of 2022, compared to $1.1 billion in the prior year quarter, primarily due to the impact of higher interest rates, lower equity markets, and NII. Declining equity markets together with rising interest rates and widening credit spreads drove accelerated deferred policy acquisition cost (DAC) amortization, higher policyholder reserves, and lower fee income in Individual Retirement and Group Retirement, as well as lower NII, including alternative investments returns, lower income from fair value options bonds and lower call and tender activity. Accelerated DAC amortization and increased SOP 03-1 reserves resulted in lower asset values which led to a non-cash impact of approximately $202 million compared to the prior year quarter.
These decreases are partially offset by less adverse mortality; the adverse mortality experience in Life Insurance is in line with the previously disclosed estimate of exposure sensitivity of $65 million to $75 million per 100,000 population deaths based on the reported second quarter COVID-related deaths in the United States.
OTHER OPERATIONS
Three Months Ended | ||||||||||||
June 30, | ||||||||||||
($ in millions) | 2021 | 2022 | Change | |||||||||
Corporate and Other | $ | (617) | $ | (494) | 20 | % | ||||||
Asset Management | 101 | 163 | 61 | |||||||||
Adjusted pre-tax loss before consolidation and eliminations | (516) | (331) | 36 | |||||||||
Consolidation and eliminations | (94) | (130) | ... | |||||||||