American International Group reported third-quarter earnings that exceeded Wall Street forecasts, as growth in premiums and a sharp rise in investment income outweighed a jump in catastrophe losses from severe storms across North America. The New York-based insurer released the results after US markets closed on Tuesday, 3 November.
Adjusted after-tax income came to $2.06 per share for the three months to 30 September, ahead of the $1.89 analysts had expected, according to LSEG data cited by Reuters. Net premiums written in the general insurance business rose 7% to $6.65 billion, supported by growth in both commercial and personal lines.
The results matter beyond AIG because they show how large commercial insurers are leaning on investment returns as catastrophe costs climb and pricing in parts of the property market becomes more competitive. Underwriting income in general insurance fell 29% to $564 million, a reminder that weather-related claims remain a significant pressure on profitability.
Key Takeaways
- AIG posted adjusted earnings of $2.06 per share for the third quarter, beating the LSEG consensus estimate of $1.89.
- General insurance net premiums written rose 7% to $6.65 billion on commercial and personal lines growth.
- Catastrophe charges climbed to $283 million from $100 million a year earlier, lifting the combined ratio to 91.3%.
- Net investment income rose 42.5% to $1.1 billion, offsetting a 29% fall in underwriting income.
Storm Losses Weigh on Underwriting
Catastrophe-related charges rose to $283 million in the quarter from $100 million a year earlier, driven mainly by severe convective storms in North America, the company said. Such storms, which bring hail, tornadoes and damaging winds, have become a recurring source of losses for US property insurers in recent years.
The general insurance combined ratio, which measures claims and expenses as a share of premiums earned, rose to 91.3% from 86.8% in the same period last year. A reading below 100% indicates an underwriting profit. According to Reuters, the increase reflected both the higher catastrophe losses and a smaller benefit from favourable development on claims reserves from prior years.
The decline in underwriting income contrasts with recent results elsewhere in the sector. London-listed specialist insurer Hiscox, for example, reported higher premiums this week even as reinsurance rates softened and retail growth accelerated, highlighting the uneven conditions facing insurers heading into the year-end renewal season.
Investment Income Provides a Cushion
Net investment income increased 42.5% to $1.1 billion, helped by changes in the value of investments and higher income from fixed-maturity securities, Reuters reported. Market commentary from Finimize noted that the insurer has been reinvesting maturing bonds at higher yields, which has strengthened recurring income from its portfolio.
The stronger investment contribution was the main reason AIG beat consensus despite the weaker underwriting result. Analysts have suggested that investors may increasingly examine how sensitive the company’s earnings are to interest rates and portfolio performance, particularly if yields move lower over the coming year.
The quarter also echoes a pattern seen in earlier AIG reporting periods, when profit beat estimates on strong underwriting gains. This time, however, the balance of contributions has shifted towards investments rather than core insurance margins.
New Leadership Keeps Targets Intact
The results are among the first full quarterly reports under Eric Andersen, the former Aon executive who succeeded Peter Zaffino as chief executive in June. Mr Andersen said that underwriting “remained strong despite a more challenging market environment”, according to Reuters.
The company said it remains on track to meet the financial objectives it set out at its investor day. AIG has spent recent years simplifying its structure, including completing its exit from life and retirement business Corebridge Financial, leaving it more concentrated on commercial and personal property and casualty insurance.
Executives were scheduled to discuss the results with analysts on a conference call on Wednesday morning in New York, where questions are expected to focus on pricing trends, catastrophe exposure and capital returns. Readers can follow wider developments across the sector in our insurance coverage.
Market Conditions Turn More Competitive
Industry panellists quoted by trade publication The Insurer have signalled that the January reinsurance renewals may produce a divided market, with some property lines facing price softening while casualty and other classes remain firm. For primary insurers such as AIG, cheaper reinsurance can lower costs, but softer rates in their own property books may slow premium growth.
At the same time, inflation in claims costs and the increasing frequency of severe weather continue to pressure margins across the industry. AIG’s results suggest that large, diversified carriers can still deliver earnings growth in this environment, though with a greater reliance on investment income than in previous years.
Looking ahead, investors will watch whether AIG can sustain premium growth as competition intensifies in property lines, and whether fourth-quarter catastrophe activity remains elevated. The trajectory of interest rates will also be important, as any decline in bond yields could reduce the investment tailwind that supported this quarter’s earnings beat.
