AIG said that the Q2 2020 net loss was largely due to a $6.7bn after-tax loss from the divestiture and deconsolidation of Fortitude

800px-Los_Angeles_Valley,_Warner_Center,_AIG_Towers

The AIG Towers of Los Angeles. (Credit: HanSangYoon/Wikipedia.org)

American International Group (AIG) has reported a net loss attributable to shareholders of $7.93bn, or $9.15 per diluted share, for the second quarter of 2020, compared to net profit of $1.1bn, or $1.24 per diluted share, for the same quarter of 2019.

The US-based insurance major said that the Q2 2020 net loss was largely due to a $6.7bn after-tax loss from the divestiture and deconsolidation of Bermuda domiciled composite reinsurer Fortitude.

AIG’s net loss was also due to $1.8bn of after-tax net realized capital losses, which were associated primarily to mark-to-market losses from variable annuity and interest rate hedges.

In the general insurance business, AIG reported $175m in the adjusted pre-tax income for Q2 2020, which was 82% down compared to $980m made in the prior-year quarter. This was driven by an underwriting loss of $343m, while the net investment income was $518m.

The gross premiums written for the general insurance business came down by 2% in the reported quarter from $8.65bn in Q2 2019 to $8.47bn.

According to AIG, the combined ratio of the general insurance unit was 106.0, which includes 11.9 points of CATs and reinstatement premiums, of which 8.2 points are associated with Covid-19 losses.

In the life and retirement business, the adjusted pre-tax income for Q2 2020 was down by 16% to $881m compared to $1.04bn in Q2 2019. The insurer said that the decrease was because of private equity losses, continued spread compression, and increased mortality owing to the Covid-19 pandemic.

The premiums and fees of the life and retirement unit jumped 72% to $2.3bn from $1.33bn in Q2 2019.

AIG CEO comments on Q2 2020 results

AIG CEO Brian Duperreault said: “While unprecedented and on-going, COVID-19 remains an earnings, not a capital, event for AIG. We also increased our financial flexibility ending the second quarter with over $10 billion in liquidity.

“Our core businesses performed well in the second quarter. In General Insurance, the underlying underwriting profitability improvement was driven by our focus on portfolio remediation and expense discipline.

“Life and Retirement benefited from its diversification and agility, and continues to meet client needs despite an uncertain economic environment.”