Saturday, 24 June 2017

Ogden hits AIG commercial underwriting performance

AIG commercial underwriting performance dips but company returns to profit

AIG returned to profit in the first quarter of 2017, but a $102m (£79m) Ogden discount rate charge helped push its commercial insurance business into underwriting loss.

AIG announced last month that it was expecting a $100m hit in the first quarter from the cut in the Ogden discount rate to -0.75%.

AIG’s commercial combined operating ratio (COR) deteriorated by 4.5 percentage points to a loss-making 102.2% in the first quarter of 2017 from a profitable 97.7%% in the first quarter of 2016.

The dip in the AIG commercial underwriting performance was driven by an 8.6 point jump in the liability and financial lines COR to 105.4% from 96.8%.

This in turn was partly caused by a $102m charge related the Ogden discount rate cut in the UK, partly offset by a $41m gain related to AIG’s adverse development reinsurance cover from Berkshire Hathaway’s National Indemnity.

The underwriting deterioration in liability and financial lines was partially offset by a 1.4 point improvement in the commercial property COR to 97.7% from 91.1%.

Return to profit

Despite the underwriting dip, the commercial unit grew its pre-tax operating profit by 28% to $849m (Q1 2016: $662m) thanks to “strong alternative investment returns and expense reduction”, AIG said.

Personal lines operating profit increased by 1% to $212m (Q1 2016: $210m) despite a two point deterioration in the COR to 96.6% (Q1 2016: 94.6%).

Overall, AIG returned to profit in the first quarter of 2017. It posted a profit after tax of $1.2bn, compared with a loss of $183m in the same quarter last year.

Outgoing chief executive Peter Hancock (pictured) said: “Our first quarter results highlight the success of the actions we have taken to execute on our strategy, strengthen our balance sheet, and improve earnings quality.”

Have your say

Please add your comment. Remember that submission of comments is governed by our Terms and Conditions. You can include links, but HTML is not permitted.

Mandatory
Mandatory
Mandatory
Mandatory
Mandatory
Stay informed. The latest news direct to your inbox.



Meet the Team | Insurance Times