AIG Posts $7.9 Billion Loss Driven by Deal to Unload Risks

American International Group Inc. posted a $7.9 billion second-quarter loss driven by the sale of a majority stake in a business of runoff policies, as well as costs from the pandemic and civil unrest.

  • The sale of the Fortitude Group Holdings stake, which was announced in late 2019 and completed in June, was used to de-risk the balance sheet, Chief Executive Officer Brian Duperreault said in a statement Monday. Adjusted net income of 66-cents a share beat the 48-cent estimate of analysts in a Bloomberg survey, as the company improved profitability in property-casualty underwriting.

Key Insights

  • The Fortitude sale accounted for a $6.7 billion loss, as AIG divested old policies to free up capital. Chief Financial Officer Mark Lyons had warned investors in May that the portfolio’s results from 2019 and 2020 would be included in the final tally.
  • Investors shouldn’t focus on the loss charge, since the move ultimately will help make the insurer’s balance sheet less risky, analyst David Havens at Imperial Capital LLC said in a note Monday.
  • The company’s property-casualty business faced $674 million of catastrophe costs before taxes, with the bulk of those from claims related to Covid-19. Costs resulting from civil unrest totaled $126 million, and natural disasters were $90 million.
  • AIG’s property-casualty business, which has been the focus of a turnaround effort from Duperreault and his team, posted an improvement in a key measure of profitability in the quarter. The adjusted accident year combined ratio, which excludes catastrophe costs, decreased to 94.9 from 96.1 a year earlier.
  • The life and retirement operation posted a 16% decline in adjusted pretax income due to losses from private-equity investments and spread compression. The business also had to pay out more death benefits because of the pandemic.

Market Reaction

  • AIG fell 1.4% to $31.70 at 5:34 p.m. in late trading in New York.

Get More

  • To see AIG’s statement, click here.

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