AIG sees growth in casualty, E&S lines; reports results

American International Group Inc. said Tuesday that it’s seeing significant growth in its liability and excess and surplus lines business, as it reported third-quarter results that were affected by previous divestments.

The insurer also reported favorable prior-year reserve development, although there were increases for some prior-year losses.

AIG posted net income of $459 million in the quarter, compared with $2.02 billion in the same period last year, which included results from discontinued operations, including its life and pension business. On an adjusted basis, AIG reported income of $798 million for the quarter, up 7%.

The insurer reported $973 million in investment income, up 13.7% from the same period last year.

In general insurance, its main property/casualty division, AIG reported gross premium written of $8.64 billion, a 2.6% decrease from the same period last year. Net premium written fell 1.3% to $6.38 billion. The decline was primarily due to the sale of Validus Re last year. On an adjusted basis, net premium increased 6%.

The company reported $417 million in catastrophe-related charges for the quarter. It estimates its losses from Hurricane Milton, which hit Florida’s Gulf Coast early in the fourth quarter, will be between $175 million and $275 million.

AIG’s combined ratio deteriorated to 92.6% from 90.5% in the same period last year.

In its North American commercial lines business, AIG reported $2.45 billion in net premium written, down 3.9% from the same period last year due to divestitures. On an adjusted basis, net premium written increased 11.2%.

The combined ratio of the business deteriorated to 95.5% from 88.9% in last year’s third quarter. On an adjusted basis, the combined ratio worsened 2.1 points to 85.1%.

The insurer saw significant growth in several lines, Chairman and CEO Peter Zaffino said on a call with analysts.

Liability premium increased 9%, excluding a “closeout transaction” it completed in the quarter, he said.

Glatfelter, its program business, increased 8% and Lexington, its E&S business, increased 7%.

“New-business growth in the quarter was simply outstanding,” Mr. Zaffino said. “On a year-over-year basis, we had 22% growth in new business, led by Lexington with 24% growth.”

Liability submissions to Lexington were up 70%, and property submissions increased 20% compared with the year-earlier period, he said.

In addition, financial lines business was up by “double digits,” Mr. Zaffino said.

“This was due almost exclusively to a rebound in (mergers and acquisitions) following a slow new-business quarter for financial lines in the same period last year,” he said.

Lexington reported average rate increases of 16%, and North American retail casualty reported 13%, said Sabra Purtill, AIG’s chief financial officer.

“These are well above our casualty loss cost trends,” she said.

AIG reported $153 million in favorable prior-year development, though it reported $181 million of adverse development in U.K. and European liability and financial lines and a $72 million increase in U.S. excess liability reserves “due to a large settlement of a legacy mass tort claim … related to years 2019 and prior,” she said.