American International Group Inc. reported slightly lower adjusted income for the second quarter, as catastrophe losses rose and commercial insurance pricing varied with property rates slowing as some liability lines continued to rise above loss trends.
In addition, Chairman and CEO Peter Zaffino, on a call with analysts Thursday, outlined the company’s recently developed strategy for implementing artificial intelligence capabilities.
AIG reported a net loss of $4.0 billion for the quarter compared with net income of $1.5 billion in the prior-year quarter, primarily due to the recognition of a $4.7 billion loss due to the deconsolidation of its life and retirement business Corebridge. The company also announced the sale of its travel insurance business to Zurich Insurance Group Ltd. during the quarter.
Adjusted after-tax income was $775 million, down less than 1% from the same period last year, reflecting higher investment income – up 18% to $990 million – but offset by lower underwriting income in general insurance due to previous divestitures and higher catastrophe losses, AIG said.
Catastrophe losses for the quarter were $325 million, compared with $236 million in the same period last year, taking into account the sale of Crop Risk Services and Validus Reinsurance Ltd. last year.
AIG reported $9.89 billion in general insurance gross premium written for the quarter, a 4.9% decrease from the same period last year, and $6.93 billion in net premium written, down 8%, largely due to the divestitures. On a comparable basis, gross and net written premium increased 7%.
North America commercial net premium written increased 10.3% on a comparable basis to $2.75 billion. International commercial lines net premium written increased 6.1% on a comparable basis to $2.28 billion.
AIG’s excess and surplus lines unit Lexington reported a 16% increase in net premium for the quarter, led by wholesale casualty at 35%, Mr. Zaffino said.
The insurer reported a 92.5% combined ratio, deteriorating from 90.9% in last year’s second quarter.
Global commercial insurance pricing, including rate and exposure changes, increased 5% in the quarter, excluding workers compensation and financial lines, said Sabra Purtill, AIG’s chief financial officer.
In North America commercial, rates increased 2% during the quarter and 4% excluding comp and financial lines, she said.
Property rate increases were “below trend” in the second quarter following cumulative increases of more than 150% since 2018, she said.
“In North America casualty lines, in particular excess casualty, we continue to get rate in excess of loss trends,” she said.
Mr. Zaffino also provided an update on AIG’s AI strategy.
The insurer is building a system “that provides faster, more thorough, deeper analysis and improved customer service in quoting, binding and policy issuance by enabling increased underwriting productivity through the automation of manual processes,” he said.
The company is developing a mechanism using large language models to filter policy underwriting submissions, he said.
The technology will give underwriters “the ability to assess many more submissions that meet our defined underwriting criteria, objectives and risk appetite,” Mr. Zaffino said.
AI will also be used to analyze market conditions, enabling “dynamic adjustments” to pricing and the deployment of limits, he said.
