AIG CEO Says Catastrophe Losses To Cost Between $750 Million To $800 Million In Q4

The fourth quarter of 2018 so far has been very bad for American International Group Inc (AIG) which is an amount of between $750 million and $800 million for losses because of natural catastrophe, said the chief executive officer of the company.

AIG CEO Brian Duperreault said at the Goldman Sachs U.S. Financial Services Conference in New York that despite this amount that the company would have to shell out in insurance, the performance of the company’s general insurance unit so far for the year of 2018 is set to allow the company to start 2019 “at a slight underwriting profit.”

Duperreault said that any catastrophe of December is not included in the number provided by the company.

Ever since taking charge of the company back in 2017, Duperreault has been pressing hard to devise and implement strategies to turn the company around. The most important challenge that he is attempting to address is bring in a complete change in the underwriting culture at the company which has for years strived to generate more revenues without any use of an appropriate method for weighing risks.

Duperreault said that going into 2019, an overall eight percent adjusted return on equity is being expected by the company would be driven partly by the slight underwriting profit hat has been generated by its general insurance business.

“But let me be clear. We are not satisfied with an eight percent,” Duperreault said.

He added that attaining a double-digit adjusted return on equity is the ultimate aim of the company in the short run and also put an approximate time frame of about three tears to achieve that.

Duperreault said that the company anticipates that the net earned premium for 2019 for the unit would be similar to the levels that the company had reached in 2018.

Duperreault said that for the fourth quarter, anything between $150 million and $175 million to AIG’s net pretax losses would be added by the expenses for reinsurance for the California wildfires. He added that about $60 million pretax loss for the wildfires would be incurred by Validus Holdings Ltd unit of the company which had been acquired by the reinsurer in July, AIG expects.

Duperreault said that partly because of issues related to investment in new business and “growth initiatives,” there would be a decrease in the earnings for AIG’s Life and Retirement business for the second half of 2019.

The insurer’s fourth quarter effective tax rate will be around 26 percent because of global catastrophes and a shift in business mix, he said.

(Adapted from ChannelNewsAsia.com)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s