AMERICAN International Group (AIG) booked a loss in the second quarter due to accounting charges tied to the formal separation of life and retirement business Corebridge Financial.
AIG lost about US$4 billion after earning US$1.5 billion a year earlier, according to a statement on Wednesday (Jul 31). The property and casualty insurer recognised an “accumulated other comprehensive loss” of US$7.2 billion as it sold down its 48.4 per cent stake in Corebridge, hitting an ownership threshold that required it to recognise unrealised losses on Corebridge’s corporate bond portfolio. That reflects how bonds written when interest rates were lower are worth less money today.
Those losses offset a US$2.5 billion gain on Corebridge assets it retained.
“The quarter marked one of the most notable accomplishments in AIG’s history with the deconsolidation of Corebridge, a process which began in 2020 and significantly advanced our multi-year strategy to position AIG for the future,” chief executive officer Peter Zaffino said on Wednesday.
AIG spun off Corebridge in 2022 and has been paring its interest. Nippon Life Insurance agreed in May to acquire a 20 per cent stake in Corebridge for about US$3.8 billion.
The “core fundamentals” of the firm were strong in the second quarter outside of the “complex accounting treatment” of Corebridge as well as last year’s divestitures of its crop risk services unit and Validus Re, Zaffino said.
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For instance, net premiums written, an important industry metric of revenue growth, were up 7 per cent year over year to US$6.9 billion, adjusted for those two divestitures, according to the statement. Underwriting income was also up 2 per cent, to US$430 million, by that same metric, the statement showed.
Adjusted after-tax income was relatively flat compared with the year-before period, coming in at US$775 million, compared with US$777 million a year earlier. That number, which excludes the Corebridge adjustment, worked out to about or US$1.16 a share, up from US$1.06 a year earlier, but below analyst estimates.
The general insurance unit reported a combined ratio of 92.5 per cent, meaning it spent about 92.5 US cents covering losses for every premium US dollar brought in, which was higher than analyst expectations of about 91.3 per cent.
AIG also returned almost US$2 billion to shareholders in the quarter via stock repurchases and dividends. BLOOMBERG
