AIG Takes $272 Million in Covid-19 Losses and Withdraws Guidance

American International Group Inc. was hit by about $272 million in costs tied to the coronavirus as the insurance industry braces for what Chief Executive Officer Brian Duperreault said would probably be its “single largest” catastrophe loss ever.

  • The first-quarter pretax losses stem from business lines including travel, commercial property, trade credit and workers’ compensation policies. That drove an $87 million underwriting loss in the sprawling property-casualty operation, New York-based AIG said Monday in a statement.

Key Insights

  • “While we believe Covid-19 will be the single largest CAT loss the industry has ever seen, the significant body of work our team has undertaken since late 2017 has served us well as we navigate through this evolving situation,” Duperreault said in the statement. “AIG was in a strong financial position before this crisis began and remains in a strong financial position today.”
  • AIG withdrew previously issued guidance, including a forecast for 10% adjusted return on common equity by the end of 2021.
  • Still, the firm said it sees “continued improvement” in theP&C business and expects no material reduction in long-term returns in the life and retirement operations because of the virus.
  • The property-casualty operation was hit by $419 million in catastrophe costs, including the virus losses, in the quarter.
  • That business’s adjusted combined ratio, which excludes catastrophe costs, improved during the period.
  • AIG shut a technology-driven unit, Blackboard, at the end of March, and booked a $210 million pretax loss.

Market Reaction

  • AIG shares have dropped 53% this year, compared with a 12% decline in the S&P 500 Index.

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  • The life and retirement business reported a 38% decrease in pretax income as stocks plummeted and spreads in credit markets widened.
  • Earnings per share of 11 cents fell short of the74-cent estimate from analysts in a Bloomberg survey.
  • For AIG’s press release, click here.

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