AIG Surprises With Loss Tied to Costs From Storms in U.S., Japan

(Bloomberg) -- American International Group Inc. reported a surprise third-quarter loss as natural disasters, old and new, hurt results.

• It was the fifth straight quarter that AIG’s results have fallen short of analysts’ expectations. The adjusted loss was 34 cents a share, while analysts had been expecting a profit of nearly 6 cents.

Key Insights

• Both Hurricane Florence and the typhoons in Japan hit AIG harder than its rivals. The insurer reported $1.6 billion in catastrophe costs for the period, the midpoint of the range AIG had announced earlier this month. The loss is about three times larger than initial forecasts from Morgan Stanley analysts.
• Old disasters also came back to haunt AIG. The insurer added $170 million to reserves in the third quarter, as costs from last year’s wildfires in California climbed higher than the insurer anticipated.
• Even with the setbacks, Chief Executive Officer Brian Duperreault said the insurer remains on track for a key metric in his turnaround effort: an underwriting profit by year-end.

Market Reaction

• AIG shares climbed 0.4 percent in the third quarter and had plunged 31 percent this year through Wednesday’s close.

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• AIG broke out the catastrophe costs from one of its newest additions, Validus. That unit’s losses from storms totaled about $200 million and were mostly tied to Japan.
• Private equity returns are providing a lift to insurers such as AIG and Travelers Cos. They helped fuel a 1.4 percent gain in AIG’s net investment income, which includes legacy insurance portfolios, to $3.4 billion.
• For more details on the results, click here.
• Read the statement here.

To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Dan Reichl, Daniel Taub

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