AIG Reports First Quarter 2021 Financial Results
- General Insurance adjusted pre-tax income (APTI) increased 69% from the prior year quarter reflecting better underwriting results
- Commercial Lines net premiums written grew 25% (22% on a constant dollar basis) from the prior year quarter driven by both North America and International
- Life and Retirement APTI increased 57% from the prior year quarter supported by diverse products and improving market conditions
- Repurchased approximately $362 million of AIG common stock during the quarter
FIRST QUARTER NOTEWORTHY ITEMS
- General Insurance APTI of $845 million included better underwriting results and higher net investment income; the combined ratio was 98.8, a 2.7 point improvement from the prior year quarter, despite 7.3 points of catastrophe losses, net of reinsurance (CATs), or $422 million, primarily from winter storms.
- The General Insurance accident year combined ratio, as adjusted*, was 92.4, a 3.1 point improvement from the prior year quarter due to improved North America and International Commercial Lines underwriting results.
- Life and Retirement APTI was $941 million due to strong net investment income, offset in part by an adjusted pre-tax loss (APTL) in Life Insurance; return on adjusted segment common equity – Life and Retirement* for the first quarter was 14.2%, on an annualized basis.
- Strong consolidated net investment income of $3.7 billion was up 46% from the prior year quarter, driven by alternative investments and other investment income.
- Net income attributable to AIG common shareholders was $3.9 billion, or $4.41 per diluted common share, compared to $1.7 billion, or $1.98 per diluted common share, in the prior year quarter.
- Adjusted after-tax income attributable to AIG common shareholders* (AATI) was $923 million, or $1.05 per diluted common share, compared to $105 million, or $0.12 per diluted common share, in the prior year quarter.
- As of March 31, 2021, book value per common share was $72.37, a decrease of 5.3% from December 31, 2020. Adjusted book value per common share* was $58.69, an increase of 2.9% from December 31, 2020.
- Return on common equity (ROCE) and Adjusted ROCE* were 24.2% and 7.4%, respectively, on an annualized basis for the first quarter of 2021.
- The AIG Board of Directors declared quarterly cash dividends of $0.32 per share on AIG common stock and $365.625 per share on AIG preferred stock.
* Refers to financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Comment on Regulation G and Non-GAAP Financial Measures.
NEW YORK–(BUSINESS WIRE)–American International Group, Inc. (NYSE: AIG) today reported financial results for the first quarter ended March 31, 2021.
“AIG had an excellent start to the year and that is reflected in our first quarter results with growth in General Insurance and continued strong performance in Life and Retirement,” said Peter Zaffino, AIG’s President and Chief Executive Officer.
“In General Insurance, we delivered strong growth in net premiums written, driven by our North America and International Commercial businesses, and underwriting profitability. The combined ratio was 98.8 inclusive of catastrophe losses and 92.4, as adjusted. The successful repositioning of our global portfolio over the last three years allowed us to pivot from remediation to profitable growth, which we expect to continue throughout the year.
“Life and Retirement delivered another solid quarter, with adjusted pre-tax income growth driven by diversified product offerings and increased investment returns. With strong sales and profitability, this business continues to be a market leader in the protection and retirement savings industry.
“Our strong balance sheet and financial flexibility allow us to continue to invest in growth and core operating fundamentals with capital returns to shareholders when appropriate. During the first quarter we repurchased $362 million of common stock and ended the quarter with $7.9 billion of liquidity.
“I am immensely proud of our global colleagues and what we have accomplished together. Our first quarter results reflect significant momentum as we continue our pursuit to become a top performing company.”
For the first quarter of 2021, net income attributable to AIG common shareholders was $3.9 billion, or $4.41 per diluted common share, compared to $1.7 billion, or $1.98 per diluted common share, in the prior year quarter. The increase was primarily due to higher net investment income reflecting higher income on alternative investments and fair value option (FVO) equity securities, which was driven primarily by stronger equity market performance; improved General Insurance underwriting income, due to underwriting discipline and strong premium rate increases, as well as changes in business mix; lower Variable Annuity deferred acquisition costs (DAC) and sales inducement assets (SIA) amortization and reserves due to stronger equity market performance. The increase was partially offset by higher mortality from COVID-19 and lower net realized capital gains.
AATI was $923 million, or $1.05 per diluted common share, for the first quarter of 2021 compared to $105 million, or $0.12 per diluted common share, in the prior year quarter. The increase was primarily due to higher net investment income, across all segments, driven by higher income on alternative investments, improved underwriting income in General Insurance, and lower Variable Annuity DAC and SIA amortization net of fee income and changes in reserves in Life and Retirement due to stronger equity market performance. The increase was partially offset by higher mortality from COVID-19. In addition, the increase reflects the impact of Fortitude Group Holdings, LLC (Fortitude), which was sold and deconsolidated in the second quarter of 2020 and had an APTL of $317 million in the first quarter of 2020.
Total consolidated net investment income for the first quarter of 2021 was $3.7 billion, up 46% from $2.5 billion in the prior year quarter, due to higher income on alternative investments and FVO equity securities. Total net investment income on an APTI basis* of $3.2 billion increased 18% compared to the prior year quarter, despite the impact of Fortitude in the first quarter 2020, due to higher income on alternative investments. Excluding the net investment income on an APTI basis associated with Fortitude in the first quarter of 2020, first quarter 2021 total net investment income on an APTI basis* increased 24%, or $611 million, reflecting higher private equity returns and positive hedge fund income.
Book value per common share was $72.37 as of March 31, 2021, a decrease of 5.3% from December 31, 2020 primarily due to a decrease in net unrealized mark-to-market gains on fixed maturity securities as a result of the increase in interest rates during the first quarter of 2021. Adjusted book value per common share was $58.69, an increase of 2.9% from December 31, 2020 reflecting growth in retained earnings from net income in excess of dividends and share repurchases.
As of March 31, 2021, AIG Parent liquidity was approximately $7.9 billion, down from $10.5 billion at December 31, 2020 principally reflecting debt repayment, share repurchases and shareholder dividends. In February 2021, AIG repaid $1.5 billion aggregate principal amount of its 3.300% Notes Due 2021. Additionally, AIG repurchased approximately 8 million shares of AIG Common Stock during the first quarter for an aggregate purchase price of $362 million. As of May 6, 2021, approximately $1.1 billion remained under the share repurchase authorization. AIG’s total debt and preferred stock leverage at March 31, 2021 was 28.4%. Excluding the impact of accumulated other comprehensive income adjusted for the cumulative unrealized gains and losses related to Fortitude’s funds withheld assets, total debt and preferred stock leverage at March 31, 2021 was 29.7%.
Today, the AIG Board of Directors declared a quarterly cash dividend of $0.32 per share on AIG Common Stock (NYSE: AIG), par value $2.50 per share. The dividend is payable on June 29, 2021 to stockholders of record at the close of business on June 15, 2021.
The AIG Board of Directors also declared a quarterly cash dividend of $365.625 per share on AIG Series A 5.85% Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share, which is represented by depositary shares (NYSE: AIG PRA), each representing a 1/1,000th interest in a share of preferred stock. Holders of depositary shares will receive $0.365625 per depositary share. The dividend is payable on June 15, 2021 to holders of record at the close of business on May 31, 2021.
FINANCIAL SUMMARY
|
| Three Months Ended March 31, | |||||||
| ($ in millions, except per common share amounts) | 2021 |
| 2020 | |||||
| Net income attributable to AIG common shareholders | $ | 3,869 |
| $ | 1,742 |
| ||
| Net income per diluted share attributable to |
|
| ||||||
| AIG common shareholders | $ | 4.41 |
| $ | 1.98 |
| ||
|
|
|
| ||||||
| Adjusted pre-tax income (loss) | $ | 1,256 |
| $ | 180 |
| ||
| General Insurance |
| 845 |
|
| 501 |
| ||
| Life and Retirement |
| 941 |
|
| 601 |
| ||
| Other Operations |
| (530 | ) |
| (922 | ) | ||
|
|
|
| ||||||
| Net investment income | $ | 3,657 |
| $ | 2,508 |
| ||
| Net investment income, APTI basis |
| 3,191 |
|
| 2,699 |
| ||
|
|
|
| ||||||
| Adjusted after-tax income attributable to AIG common shareholders | $ | 923 |
| $ | 105 |
| ||
| Adjusted after-tax income per diluted share attributable to AIG common shareholders | $ | 1.05 |
| $ | 0.12 |
| ||
|
|
|
| ||||||
| Weighted average common shares outstanding – diluted (in millions) |
| 876.3 |
|
| 878.9 |
| ||
|
|
|
| ||||||
| Return on common equity |
| 24.2 | % | 11.2 | % | |||
| Adjusted return on common equity |
| 7.4 | % | 0.8 | % | |||
|
|
|
| ||||||
| Book value per common share | $ | 72.37 |
| $ | 69.30 |
| ||
| Adjusted book value per common share | $ | 58.69 |
| $ | 60.55 |
| ||
|
|
|
| ||||||
| Common shares outstanding (in millions) |
| 859.4 |
|
| 861.3 |
| ||
All comparisons are against the first quarter of 2020, unless otherwise indicated. Refer to the AIG First Quarter 2021 Financial Supplement, which is posted on AIG’s website in the Investors section, for further information.
GENERAL INSURANCE
|
| Three Months Ended March 31, |
|
|
| |||||||
| ($ in millions) | 2021 |
| 2020 |
| Change | ||||||
| Gross premiums written | $ | 10,731 |
| $ | 10,086 |
| 6 | % | |||
|
|
|
|
|
|
| ||||||
| Net premiums written | $ | 6,479 |
| $ | 5,921 |
| 9 | % | |||
| North America |
| 2,930 |
|
| 2,699 |
| 9 |
| |||
| North America Commercial Lines |
| 2,787 |
|
| 2,154 |
| 29 |
| |||
| North America Personal Insurance |
| 143 |
|
| 545 |
| (74 | ) | |||
| International |
| 3,549 |
|
| 3,222 |
| 10 |
| |||
| International Commercial Lines |
| 1,982 |
|
| 1,648 |
| 20 |
| |||
| International Personal Insurance |
| 1,567 |
|
| 1,574 |
| – |
| |||
|
|
|
|
|
|
| ||||||
| Underwriting income (loss) | $ | 73 |
| $ | (87 | ) | NM | % | |||
| North America |
| (202 | ) |
| (103 | ) | (96 | ) | |||
| North America Commercial Lines |
| (136 | ) |
| (18 | ) | NM |
| |||
| North America Personal Insurance |
| (66 | ) |
| (85 | ) | 22 |
| |||
| International |
| 275 |
|
| 16 |
| NM |
| |||
| International Commercial Lines |
| 186 |
|
| (24 | ) | NM |
| |||
| International Personal Insurance |
| 89 |
|
| 40 |
| 123 |
| |||
|
|
|
|
|
|
| ||||||
| Net investment income, APTI basis | $ | 772 |
| $ | 588 |
| 31 | % | |||
| Adjusted pre-tax income | $ | 845 |
| $ | 501 |
| 69 | % | |||
| Return on adjusted segment common equity |
| 8.5 | % |
| 4.3 | % | 4.2 | pts | |||
|
|
|
|
|
|
| ||||||
| Underwriting ratios: |
|
|
|
|
| ||||||
| North America Combined Ratio (CR) |
| 108.4 |
|
| 103.8 |
| 4.6 | pts | |||
| North America Commercial Lines CR |
| 106.7 |
|
| 100.9 |
| 5.8 |
| |||
| North America Personal Insurance CR |
| 118.8 |
|
| 111.0 |
| 7.8 |
| |||
| International CR |
| 92.2 |
|
| 99.5 |
| (7.3 | ) | |||
| International Commercial Lines CR |
| 90.0 |
|
| 101.4 |
| (11.4 | ) | |||
| International Personal Insurance CR |
| 94.6 |
|
| 97.6 |
| (3.0 | ) | |||
| General Insurance (GI) CR |
| 98.8 |
|
| 101.5 |
| (2.7 | ) | |||
|
|
|
|
|
|
| ||||||
| GI Loss ratio |
| 65.6 |
|
| 66.8 |
| (1.2) | pts | |||
| Less: impact on loss ratio |
|
|
|
|
| ||||||
| Catastrophe losses and reinstatement premiums |
| (7.3 | ) |
| (6.9 | ) | (0.4 | ) | |||
| Prior year development |
| 0.9 |
|
| 0.9 |
| 0.0 |
| |||
| GI Accident year loss ratio, as adjusted |
| 59.2 |
|
| 60.8 |
| (1.6 | ) | |||
| GI Expense ratio |
| 33.2 |
|
| 34.7 |
| (1.5 | ) | |||
| GI Accident year combined ratio, as adjusted (AYCR) |
| 92.4 |
|
| 95.5 |
| (3.1 | ) | |||
|
|
|
|
|
|
| ||||||
| Accident year combined ratio, as adjusted (AYCR): |
|
|
|
|
| ||||||
| North America AYCR |
| 95.6 |
|
| 97.7 |
| (2.1) | pts | |||
| North America Commercial Lines AYCR |
| 93.9 |
|
| 97.6 |
| (3.7 | ) | |||
| North America Personal Insurance AYCR |
| 105.9 |
|
| 98.0 |
| 7.9 |
| |||
| International AYCR |
| 90.2 |
|
| 93.6 |
| (3.4 | ) | |||
| International Commercial Lines AYCR |
| 86.8 |
|
| 91.7 |
| (4.9 | ) | |||
| International Personal Insurance AYCR |
| 94.0 |
|
| 95.5 |
| (1.5 | ) | |||
General Insurance
- Net premiums written in the first quarter of 2021 increased 9% to $6.5 billion due to North America Commercial Lines and International Commercial Lines growth of 29% and 20% (13% on a constant dollar basis), respectively, reflecting continued strong rate increases across most lines, improved retention and higher new business volumes. North America and International Personal Insurance net premiums written decreased 74% and 0.4% (6% on a constant dollar basis), respectively. The decrease in North America Personal Insurance net premiums written reflects the combined impact of the creation of Syndicate 2019 and cessions placed on AIG’s Private Client Group (PCG) business, which occurred in the second quarter of 2020, and the impact of COVID-19 on Travel premiums.
- First quarter of 2021 APTI was $845 million, an increase of 69% from $501 million in the prior year quarter due to better underwriting results and higher net investment income. Underwriting income was $73 million in the first quarter of 2021 compared to an underwriting loss of $87 million in the prior year quarter, and net investment income increased 31% to $772 million from the prior year quarter. The underwriting income included $422 million of CATs, primarily related to winter storms, compared to $419 million in the prior year quarter; first quarter 2021 CATs do not include any estimated COVID-19 losses whereas the prior year quarter reflected $272 million of estimated COVID-19 losses. In addition, the underwriting income also included favorable net prior year loss reserve development, net of reinsurance (PYD), of $56 million including $52 million of favorable amortization from the Adverse Development Cover (ADC), essentially flat compared to the prior year quarter.
- The General Insurance combined ratio was 98.8, a 2.7 point decrease from 101.5 in the prior year quarter principally due to General Insurance International. The General Insurance accident year combined ratio, as adjusted, was 92.4, an improvement of 3.1 points from the prior year quarter and was comprised of a 59.2 accident year loss ratio, as adjusted* and an expense ratio of 33.2. The General Insurance total expense ratio improved 1.5 points from the prior year quarter and was comprised of an acquisition ratio of 20.2 and general operating expense (GOE) ratio of 13.0. General Insurance GOE decreased 2% to $761 million compared to the prior year quarter reflecting continued expense discipline.
- Commercial Lines continued to show strong improvement due to improved business mix along with rate increases that drove better General Insurance underwriting results. The accident year combined ratio, as adjusted, for North America Commercial Lines improved 3.7 points to 93.9 and for International Commercial Lines improved 4.9 points to 86.8.
- Personal Insurance also improved driven by International. The International Personal Insurance accident year combined ratio, as adjusted, was 94.0, a 1.5 point improvement reflecting improved attritional losses and expense discipline. The North America Personal Insurance accident year combined ratio, as adjusted, increased 7.9 points to 105.9 compared to the prior year quarter due to the impact of COVID-19 most notably on the Travel business and changes in business mix driven by changes to AIG’s PCG business as described above.
LIFE AND RETIREMENT
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
|
| |||||||
| ($ in millions, except as indicated) | 2021 |
| 2020 |
| Change | ||||||
| Adjusted pre-tax income (loss) | $ | 941 |
| $ | 601 |
| 57 | % | |||
| Individual Retirement |
| 532 |
|
| 305 |
| 74 |
| |||
| Group Retirement |
| 307 |
|
| 143 |
| 115 |
| |||
| Life Insurance |
| (40 | ) |
| 78 |
| NM |
| |||
| Institutional Markets |
| 142 |
|
| 75 |
| 89 |
| |||
|
|
|
|
|
|
| ||||||
| Premiums & fees | $ | 1,383 |
| $ | 2,000 |
| (31 | )% | |||
| Individual Retirement |
| 257 |
|
| 248 |
| 4 |
| |||
| Group Retirement |
| 128 |
|
| 115 |
| 11 |
| |||
| Life Insurance |
| 912 |
|
| 834 |
| 9 |
| |||
| Institutional Markets |
| 86 |
|
| 803 |
| (89 | ) | |||
|
|
|
|
|
|
| ||||||
| Premiums and deposits | $ | 6,402 |
| $ | 7,009 |
| (9 | )% | |||
| Individual Retirement |
| 3,373 |
|
| 3,116 |
| 8 |
| |||
| Group Retirement |
| 1,818 |
|
| 1,855 |
| (2 | ) | |||
| Life Insurance |
| 1,131 |
|
| 1,062 |
| 6 |
| |||
| Institutional Markets |
| 80 |
|
| 976 |
| (92 | ) | |||
|
|
|
|
|
|
| ||||||
| Net flows | $ | (1,467 | ) | $ | (2,167 | ) | 32 | % | |||
| Individual Retirement* |
| (574 | ) |
| (1,580 | ) | 64 |
| |||
| Group Retirement |
| (893 | ) |
| (587 | ) | (52 | ) | |||
|
|
|
|
|
|
| ||||||
| Net investment income, APTI basis | $ | 2,353 |
| $ | 2,066 |
| 14 | % | |||
| Return on adjusted segment common equity |
| 14.2 | % | 8.9 | % | 5.3 | pts | ||||
| * Includes Retail Mutual Funds |
|
|
|
|
| ||||||
Life and Retirement
- Life and Retirement reported APTI of $941 million for the first quarter of 2021, up 57% from $601 million in the prior year quarter due to higher net investment income, which contributed to increased APTI in Individual and Group Retirement and Institutional Markets. The increase in net investment income, across all businesses, was generated primarily from higher private equity returns, which are reported on a one quarter lag, and higher call and tender income and FVO bond income due to lower interest rates and tighter credit spreads. Group Retirement and Individual Retirement APTI benefitted from lower Variable Annuity DAC and SIA amortization net of fee income and changes in reserves, partially offset by base spread compression. Life Insurance had an APTL of $40 million reflecting elevated mortality primarily driven by COVID-19.
- Premiums were $600 million, a decrease of 53% compared to $1,267 million in the prior year quarter. Premiums and deposits decreased 9%, or $607 million, from the prior year quarter to $6.4 billion as the prior year quarter had high Pension Risk Transfer and Guaranteed Investment Contract activity. Partially offsetting the decrease in premiums and deposits were improved Variable Annuity sales, which continue to recover from the broad industry sales disruption caused by COVID-19.
- Net outflows were $1.5 billion, a significant improvement from the prior year quarter driven by lower Retail Mutual Fund outflows. Excluding Retail Mutual Funds, Individual Retirement net flows were $50 million compared to net outflows of $84 million in the prior year quarter. In the Group Retirement business, net outflows were $893 million, up 52% from $587 million in the prior year quarter, reflecting higher group surrenders.
OTHER OPERATIONS
|
| Three Months Ended |
| |||||||||
|
| March 31, |
| |||||||||
| ($ in millions) | 2021 |
| 2020 | Change | |||||||
| Corporate and Other | $ | (552 | ) | $ | (879 | ) | 37 | % | |||
| Asset Management |
| 198 |
|
| 44 |
| 350 |
| |||
| Adjusted pre-tax loss before consolidation and eliminations |
| (354 | ) |
| (835 | ) | 58 |
| |||
| Consolidation and eliminations |
| (176 | ) |
| (87 | ) | (102 | ) | |||
| Adjusted pre-tax loss | $ | (530 | ) | $ | (922 | ) | 43 | % | |||
Other Operations
- First quarter APTL was $530 million, including $176 million of reductions from consolidation and eliminations, compared to APTL of $922 million, including $87 million of reductions from consolidation and eliminations, in the prior year quarter. The increase in consolidation and eliminations APTL reflects the impact of consolidated investment entities.
- Before consolidation and eliminations, the decrease in APTL primarily reflects the impact of Fortitude, which was sold and deconsolidated in the second quarter of 2020 and had an APTL of $317 million in the first quarter of 2020.
CONFERENCE CALL
AIG will host a conference call tomorrow, Friday, May 7, 2021 at 8:30 a.m. ET to review these results. The call is open to the public and can be accessed via a live listen-only webcast in the Investors section of www.aig.com. A replay will be available after the call at the same location.
Additional supplementary financial data is available in the Investors section at www.aig.com.
Certain statements in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, the conference call (including the financial results presentation material) and the financial supplement may include, and officers and representatives of AIG may from time to time make and discuss, projections, goals, assumptions and statements that may constitute “forward-looking statements”. These projections, goals, assumptions and statements are not historical facts but instead represent only a belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal” or “estimate.” These projections, goals, assumptions and statements may relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, the effect of catastrophes, such as the COVID-19 crisis, and macroeconomic events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, or successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results.
It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:
- changes in market and industry conditions, including the significant global economic downturn, volatility in financial and capital markets, fluctuations in interest rates, prolonged economic recovery and disruptions to AIG’s operations driven by COVID-19 and responses thereto, including new or changed governmental policy and regulatory actions;
- the occurrence of catastrophic events, both natural and man-made, including COVID-19, other pandemics, civil unrest and the effects of climate change;
- AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses, including any separation of the Life and Retirement business from AIG and the impact any separation may have on AIG, its businesses, employees, contracts and customers;
- the adverse impact of COVID-19, including with respect to AIG’s business, financial condition and results of operations;
- AIG’s ability to effectively execute on AIG 200 transformational programs designed to achieve underwriting excellence, modernization of AIG’s operating infrastructure, enhanced user and customer experiences and unification of AIG;
- the impact of potential information technology, cybersecurity or data security breaches, including as a result of cyber-attacks or security vulnerabilities, the likelihood of which may increase due to extended remote business operations as a result of COVID-19;
- disruptions in the availability of AIG’s electronic data systems or those of third parties;
- changes to the valuation of AIG’s investments;
- changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill;
- availability and affordability of reinsurance;
- the effectiveness of our risk management policies and procedures, including with respect to our business continuity and disaster recovery plans;
- nonperformance or defaults by counterparties, including Fortitude Reinsurance Company Ltd. (Fortitude Re);
- changes in judgments concerning potential cost-saving opportunities;
- c
Contacts
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