AIG American International Group Inc

By Leslie Scism 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 2, 2019).

Global insurer American International Group Inc. swung to a profit in third-quarter net income, as catastrophes took significantly less of a bite out of earnings than the year before.

AIG's flagship business of selling property-casualty insurance to companies world-wide gained more ground in its multiyear turnaround effort. The unit managed to post a profit, even as Asian typhoons and some other costly weather events marred results. It was the third consecutive quarter of improvement for AIG in the basics of property-casualty insurance: selecting insurance risks that can be properly priced to make money.

The New York company posted overall net profit of $648 million, reversing a year-earlier loss of $1.26 billion. In the year-earlier third quarter, AIG was weighed down by policyholders' claims from Asian typhoons, California mudslides and Hurricane Florence in the U.S. Southeast.

Net catastrophe losses declined to $404 million in AIG's most-recent quarter, or 45 cents a share, compared with $1.3 billion, or $1.45 a share, in the prior-year quarter.

AIG's closely watched adjusted after-tax income, which excludes items judged nonrecurring, tallied $505 million, or 56 cents a share. That is an upward swing from a loss of $301 million, or 34 cents a share, in the year-earlier quarter.

Analysts monitor such adjusted results as a measure of the health of continuing operations. The adjusted earnings were short of analysts' expectations of about $1 a share. Some of the gap reflects catastrophe claims unanticipated by analysts from the Asian typhoons.

AIG also conducts an annual "actuarial assumption" update in the third quarter. The current quarter included a $143 million charge for this annual review, compared with a $98 million charge for the annual update in the prior-year quarter.

The charge reflects a decline in U.S. interest rates this year, among other factors. Life-insurance products are particularly hard hit by lower yields on bonds, because insurers derive much of their profit from investing premiums in high-quality securities until needed to pay claims.

AIG's management has struggled to deliver above-average bottom-line results since the 2008 financial crisis, when it nearly collapsed into bankruptcy-court protection and needed one of the biggest federal-government bailouts. To fully repay taxpayers, AIG divested a crown jewel Asian life-insurance unit and many other businesses to roughly halve itself by assets.

Chief Executive Brian Duperreault, who took over as CEO in May 2017, has hired dozens of new and experienced executives from across the industry. He also has overhauled insurance packages, reduced overall expenses, added reinsurance coverage to make results less volatile, and acquired two insurers.

Write to Leslie Scism at leslie.scism@wsj.com

(END) Dow Jones Newswires

November 02, 2019 02:47 ET (06:47 GMT)

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