AIG sees property rates falling, excess casualty prices keep rising

Commercial insurance pricing ranged from double-digit increases in some liability lines to double-digit decreases for some property lines, American International Group Inc.’s top executive said Friday, discussing the insurer’s first-quarter financial results.

AIG reported a lower profit for the quarter, in part due to unusually high catastrophe losses.

The company has yet to see a significant impact from increased tariffs, but higher import taxes could increase the cost of replacement materials, Peter Zaffino, chairman and CEO, said on a call with analysts.

Rates increases in the quarter varied significantly, with several major lines seeing decreases at renewals, he said.

In North America, excess casualty rates rose 16% during the quarter, financial lines decreased 5%, retail property fell 7%, and excess and surplus lines property rates fell 10%.

AIG has significantly shrunk its financial lines business over the past four years, and it now represents 19% of its North American commercial premium, compared with 30% in 2021, Mr. Zaffino said.

AIG reported net income of $698 million for the quarter, a 41.5% decrease from the same period last year. The decline was largely due to the deconsolidation of Corebridge Financial Inc., its life insurance and retirement business, AIG’s earnings statement said.

Adjusted after-tax income fell 18.6% to $702 million as the insurer reported $520 million in catastrophe losses from the California wildfires that began in January, which were partially offset by favorable prior-year reserve developments.

Net investment income increased 12.9% to $1.11 billion for the quarter.

In its core property/casualty business, general insurance, AIG reported net written premium of $4.53 billion, up slightly from the same period last year.

Its general insurance combined ratio deteriorated to 95.8% from 89.8% in last year’s first quarter. Catastrophe losses and reinsurance reinstatement premium accounted for 9.1 points of the combined ratio, compared with 1.9 points in the year-earlier period. Its expense ratio improved to 30.5% from 31.8% as it continued to implement its “lean parent” operating strategy.

Looking forward, Mr. Zaffino said increased tariffs could increase insurers’ loss costs if construction materials, for example, become more expensive.

“You could have catastrophe losses that have been modeled that will be significantly more depending on what happens with supply,” he said.

But it is too early to tell what the effect of higher tariffs will be overall, Mr. Zaffino said.

“Tariffs create uncertainty, which may lead to lower levels of transactional activity in the near term, impacting certain commercial businesses, but it’s premature to predict any specific outcomes related to these emerging macro trends,” he said.