By: Luke Jones, Published on February 15, 2017 05:08 PM, Last Update on March 1, 2017 09:31 AM
American International Group, Inc. (AIG) has posted its full year 2016 and fourth quarter 2016 financial results. The company reports net losses for both timeframes, although CEO Peter Hancock remains bullish on the back of reforms made last year. That new strategic plan was launched in January 2016, and Hancock insists the actions will help “dramatically reduce uncertainty and deliver higher quality, more sustainable earnings in the future.”
AIG saw a net loss of US$3,041 million during the period ending Dec. 31, 2016 (Q4). This number was a further decline on the US$1,841 loss reported through Q4 2015. In a statement, the company reported after-tax operating loss of US$2,787 million during Q4, a year-on-year increase from US$1,318 million in 2015.
For full-year 2016, AIG’s new loss was at US$849 million. This highlights a difficult year for the company as it managed a net income of US$2,196 million throughout 2015. After-tax operating income stood at US$406 million for 2016 compared to US$2,872 million in 2015.
In its Commercial Insurance business, AIG says it tried to improve underwriting in U.S. casualty lines, with the company saying these lines are a “primary driver of recent adverse development.” The statement adds that net premiums written are down 39% since the start of 2016.
Earlier this year, the company announced a reinsurance agreement with National Indemnity Company (NICO), a Berkshire Hathaway subsidiary, will cover the majority of its U.S. Casualty reserves. AIG will pay NICO US$9.8 billion by June 30, 2017, with interest at 4% per annum from Jan. 1, 2016.
In addition, the statement notes, it “covers roughly half of total Commercial Insurance loss reserves at the company and should generate a deferred pre-tax gain before discounting of approximately US$2.6 billion in the first quarter of 2017.”
“The loss ratio was 211.5 in the quarter and included 125.2 points attributable to prior-year adverse reserve development and 8.1 points attributable to catastrophe losses,” AIG reports. For full-year 2016, the “loss ratio was 104.0, which included 30.8 points of adverse reserve development.”
“Personal Insurance had a strong quarter reflecting improved current accident year loss and expense ratio performance, together with favourable prior-year loss reserve development, partially offset by higher catastrophe losses,” AIG adds.
Other announced results include the following: