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Insurer AIG's quarterly loss narrows on reinsurance benefit
[BENGALURU] American International Group Inc reported a smaller quarterly loss on Wednesday as reinsurance pacts helped offset steep catastrophe losses in Japan and North America.
The insurer posted a net loss of US$1.26 billion, or US$1.41 per share, for the third quarter ended Sept 30, compared with a loss of US$1.74 billion, or US$1.91 per share, a year earlier.
AIG recorded net pretax catastrophe losses of US$1.6 billion in the quarter, mainly related to typhoons in Japan and Hurricane Florence, that were largely in line with the insurer's preview of those losses in mid-October.
The figures, far worse than analysts were expecting, helped spur a 13 per cent drop in AIG shares during recent weeks. The shares were down 1.1 per cent in after-hours trade on Wednesday.
AIG's revised estimates for California mudslides also contributed to its losses.
AIG chief executive Brian Duperreault, who took charge in May 2017, has vowed to turn the company around and post an underwriting profit as soon as year-end.
But some analysts are not convinced his plan is working. "The third quarter results do not suggest progress in and of themselves," Sandler O'Neill analyst Paul Newsome said in an interview.
AIG has not made much progress in improving underwriting profit in its commercial property and casualty insurance business, even without the catastrophe losses, Mr Newsome said. But there are some signs that AIG's loss ratio is improving, he said.
AIG estimated it has exhausted about US$700 million of the US$750 million available through its North American catastrophe reinsurance program following the mudslides, Hurricane Florence and loss estimate from Hurricane Michael, which crashed into Florida earlier this month.
The adjusted pretax loss from the general insurance business narrowed 72 per cent to US$825 million, while the underwriting loss narrowed to US$1.73 billion from US$3.8 billion a year ago.
Adjusted pretax income from the life and retirement business fell 38 per cent to US$713 million, driven by changes to some actuarial assumptions following an annual review.
The company's combined ratio fell to 124.4 per cent from 157.1 per cent. A ratio below 100 per cent means the insurer earns more in premiums than it pays out in claims.
Loss ratio fell to 88.6 per cent from 124.1 per cent in the year-ago quarter, when it recorded pretax catastrophe losses of US$3 billion related to hurricanes Harvey, Irma and Maria.
On an adjusted basis, it lost 34 cents per share. Analysts on average were expecting a profit of 12 cents, according to I/B/E/S data from Refinitiv. It was not immediately clear if the numbers were comparable.