Catastrophe losses could top $200 billion this year: Zaffino

With significant losses from California wildfires already on the books, insurers could see $200 billion in catastrophe losses this year, American International Group Inc.’s top executive said Wednesday.

Adding losses from an “active but not abnormal” hurricane season, with the top end of loss estimates for the fires of $50 billion and other catastrophe losses, insured losses could significantly exceed the already elevated losses of the past several years, AIG Chairman and CEO Peter Zaffino said.

“This could recalibrate the entire industry,” he said on a conference call with analysts Wednesday to discuss AIG’s fourth-quarter results.

AIG, which reduced its business in California starting in 2022, estimates it will pay $500 million for the wildfire losses, Mr. Zaffino said.

AIG reported $898 million in net income for the quarter, compared with $86 million in the prior-year period, which was affected by accounting for past divestitures. Adjusted after-tax income was $817 million, down 11.1%. The drop reflected prior-year divestitures and lower underwriting income in general insurance, AIG said in its earnings statement.

AIG reported a 92.5% combined ratio for the quarter, compared with 89.1% in the prior-year period.

The company reported $6.08 billion in net written premium in its core general insurance business, up 5.6%. Its North American commercial net written premium increased 5.4% to $2.22 billion.

AIG posted a loss of $1.43 billion for the full year, compared with a $3.61 billion profit in 2023. On an adjusted basis, after-tax income increased 1.5% to $3.25 billion. General insurance net written premium fell 10.5% to $23.9 billion.

Mr. Zaffino said AIG is now “largely done” with divestitures. In the fourth quarter, it deconsolidated its life insurance business, Corebridge, and completed the sale of its global personal travel insurance business.

Rate trends varied by line in the quarter, said Keith Walsh, chief financial officer.

North America commercial lines renewal rates increased by 3%, he said. Excluding workers compensation and financial lines, rates increased 7%.

“Property market conditions were under pressure in the fourth quarter due to increased competition across both the admitted and (excess and surplus lines) markets, while the underwriting margin remained healthy,” Mr. Walsh said.

North America casualty rates continued to outpace loss costs with increases in the “mid-teens” for wholesale and excess casualty.

In North America financial lines, AIG continued to experience “headwinds” but saw indications that rate reductions are moderating, he said.