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Severe losses hit AIG result

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AIG’s general insurance business suffered a 46% drop in second-quarter adjusted pre-tax net income to $US568 million ($771.1 million), due to losses and lower investment income.

“Severe losses” totalled $US293 million ($397.8 million), more than double the long-term average, and the loss ratio moved to 65.7% from 64%.

The business recorded an underwriting loss of $US89 million ($120.8 million), down from a $US149 million ($202.3 million) surplus in the corresponding period last year.

Gross written premium gained 4% to $US8.65 billion ($11.74 billion) and the combined operating ratio blew out to 101.3% from 97.7%.

“In the second quarter we continued to take actions across general insurance to establish a culture of underwriting excellence and added stellar talent,” CEO Brian Duperreault said.

“Our efforts are taking hold and we remain committed to achieving an underwriting profit as we exit [the year].”

He says the $US5.56 billion ($7.5 billion) acquisition of Bermuda-based (re)insurer Validus, which completed last month, will strengthen AIG’s underwriting expertise.

AIG’s overall net income fell to $US937 million ($1.27 billion) in the quarter from $US1.13 billion ($1.53 billion).