Global Insurer AIG Swings to Quarterly Loss on Substantial Losses Tied to Pandemic
August 03 2020 - 4:51PM
Dow Jones News
By Leslie Scism and Maria Armental
Global insurance conglomerate American International Group Inc.
swung to a loss for the second quarter driven in part by
substantial costs tied to the pandemic as well as losses on the
sale of most of its Fortitude Group Holdings LLC stake.
AIG, one of the nation's biggest sellers of property-casualty
insurance to businesses, reported $674 million of catastrophe
losses, before taxes, in its core General Insurance unit in the
most recent quarter. That included $458 million of estimated
pandemic-related losses and $126 million of losses tied to
nationwide protests in the wake of the May death of George Floyd in
the custody of Minneapolis police.
AIG also noted that its large Life and Retirement unit
experienced a higher volume of death claims than usual, an increase
tied to the pandemic.
AIG is the latest big insurer to update on the impact of
Covid-19. Industrywide, claims are rolling in from a variety of
policyholders. These include hospitals whose employees became
infected and are collecting workers' compensation benefits;
restaurants and other nonessential businesses seeking payments
under "business-interruption" policy provisions, and sporting
events that had cancellation coverage. Workers' compensation pays
for medical care and wages of employees who are injured on the
job.
Industrywide, property and casualty insurers are posting large,
but not crippling losses, from Covid-19's unprecedented toll on the
U.S. economy. Estimates put the industrywide total of insured
claims tied to Covid-19 for property-casualty carriers at $50
billion to $100 billion.
At the low end, the damage would be equivalent to the nation's
costliest hurricane, Katrina in 2005, with about $53 billion of
insured damages in 2019 dollars, according to trade group Insurance
Information Institute.
AIG said in the earnings release that "impacts from Covid-19
remain manageable." Chief Executive Officer Brian Duperreault said
that the pandemic "remains an earnings, not a capital, event for
AIG."
Overall, AIG swung to a second-quarter loss of $7.94 billion, or
$9.15 a share, from a profit of $1.1 billion, or $1.24 a share, a
year earlier. AIG completed the sale of a 76.6% stake in Fortitude
on June 2, in a move that Mr. Duperreault said "de-risks our
balance sheet," by reducing the company's exposure to long-term
liabilities in products it no longer sells. This so-called runoff
business exposed AIG to interest-rate risk over a large number of
years, as premiums are invested and reinvested over time before
liabilities come due, among other reasons for its divestiture.
On an adjusted basis, profit fell to 66 cents a share from $1.43
a share a year earlier. Analysts surveyed by FactSet expected 50
cents a share.
The New York-based insurer, which nearly collapsed during the
2008 financial crisis and needed one of the largest
federal-government bailouts, has struggled to improve results over
much of the past decade. AIG said in the earnings release that key
commercial lines "continued to show strong improvement" in the
second quarter, citing changes to the business mix and adequate
premium rates.
AIG also is one of the nation's biggest sellers of travel
insurance. Premium volume for the business line plummeted during
the second quarter amid the government stay-at-home orders and
travel restrictions.
At the same time, carriers also have benefited as the
stay-at-home orders kept millions of consumers' cars parked in
their driveways for weeks, reducing wreck claims. And eateries
closed to dine-in service meant fewer slip-and-fall accidents.
Analysts are expected to pepper AIG executives about such
Covid-19 developments at a Tuesday morning earnings call.
For the first quarter, AIG had estimated $272 million of
pandemic-related losses, which drove an underwriting loss for its
General Insurance unit.
Write to Leslie Scism at leslie.scism@wsj.com and Maria Armental
at maria.armental@wsj.com
(END) Dow Jones Newswires
August 03, 2020 16:36 ET (20:36 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
American (NYSE:AIG)
Historical Stock Chart
From Aug 2024 to Sep 2024
American (NYSE:AIG)
Historical Stock Chart
From Sep 2023 to Sep 2024