AIG Reports First Quarter 2021 Financial Results

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(Neutral)

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(Positive)

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earnings

Rhea-AI Summary

American International Group (NYSE: AIG) reported a robust performance for Q1 2021, with net income attributable to common shareholders at $3.9 billion, or $4.41 per diluted share, up from $1.7 billion, or $1.98 per share a year prior. General Insurance saw strong growth in net premiums and improved underwriting income, yielding a combined ratio of 98.8. Life and Retirement also performed well with a 46% increase in net investment income, totaling $3.7 billion. AIG repurchased $362 million in stock and maintained a liquidity of $7.9 billion. A quarterly dividend of $0.32 per share was declared.

Positive

Net income increased to $3.9 billion, a 124% rise from $1.7 billion in Q1 2020.
General Insurance combined ratio improved to 98.8, indicating strong underwriting profitability.
Life and Retirement net investment income rose 46% to $3.7 billion, driven by strong market performance.
AIG repurchased $362 million in common stock, enhancing shareholder value.
Quarterly dividend of $0.32 per share declared, reinforcing commitment to capital returns.

Negative

Book value per common share decreased 5.3% to $72.37 due to rising interest rates.
Liquidity dropped to $7.9 billion from $10.5 billion primarily due to debt repayment and share buybacks.
Increased mortality rates attributed to COVID-19 impacted overall financial performance.

05/06/2021 - 04:16 PM

American International Group, Inc. (NYSE: AIG) today reported financial results for the first quarter ended March 31, 2021.

“AIG had an excellent start to the year and that is reflected in our first quarter results with growth in General Insurance and continued strong performance in Life and Retirement,” said Peter Zaffino, AIG’s President and Chief Executive Officer.

“In General Insurance, we delivered strong growth in net premiums written, driven by our North America and International Commercial businesses, and underwriting profitability. The combined ratio was 98.8 inclusive of catastrophe losses and 92.4, as adjusted. The successful repositioning of our global portfolio over the last three years allowed us to pivot from remediation to profitable growth, which we expect to continue throughout the year.

“Life and Retirement delivered another solid quarter, with adjusted pre-tax income growth driven by diversified product offerings and increased investment returns. With strong sales and profitability, this business continues to be a market leader in the protection and retirement savings industry.

“Our strong balance sheet and financial flexibility allow us to continue to invest in growth and core operating fundamentals with capital returns to shareholders when appropriate. During the first quarter we repurchased $362 million of common stock and ended the quarter with $7.9 billion of liquidity.

“I am immensely proud of our global colleagues and what we have accomplished together. Our first quarter results reflect significant momentum as we continue our pursuit to become a top performing company.”

For the first quarter of 2021, net income attributable to AIG common shareholders was $3.9 billion, or $4.41 per diluted common share, compared to $1.7 billion, or $1.98 per diluted common share, in the prior year quarter. The increase was primarily due to higher net investment income reflecting higher income on alternative investments and fair value option (FVO) equity securities, which was driven primarily by stronger equity market performance; improved General Insurance underwriting income, due to underwriting discipline and strong premium rate increases, as well as changes in business mix; lower Variable Annuity deferred acquisition costs (DAC) and sales inducement assets (SIA) amortization and reserves due to stronger equity market performance. The increase was partially offset by higher mortality from COVID-19 and lower net realized capital gains.

AATI was $923 million, or $1.05 per diluted common share, for the first quarter of 2021 compared to $105 million, or $0.12 per diluted common share, in the prior year quarter. The increase was primarily due to higher net investment income, across all segments, driven by higher income on alternative investments, improved underwriting income in General Insurance, and lower Variable Annuity DAC and SIA amortization net of fee income and changes in reserves in Life and Retirement due to stronger equity market performance. The increase was partially offset by higher mortality from COVID-19. In addition, the increase reflects the impact of Fortitude Group Holdings, LLC (Fortitude), which was sold and deconsolidated in the second quarter of 2020 and had an APTL of $317 million in the first quarter of 2020.

Total consolidated net investment income for the first quarter of 2021 was $3.7 billion, up 46% from $2.5 billion in the prior year quarter, due to higher income on alternative investments and FVO equity securities. Total net investment income on an APTI basis* of $3.2 billion increased 18% compared to the prior year quarter, despite the impact of Fortitude in the first quarter 2020, due to higher income on alternative investments. Excluding the net investment income on an APTI basis associated with Fortitude in the first quarter of 2020, first quarter 2021 total net investment income on an APTI basis* increased 24%, or $611 million, reflecting higher private equity returns and positive hedge fund income.

Book value per common share was $72.37 as of March 31, 2021, a decrease of 5.3% from December 31, 2020 primarily due to a decrease in net unrealized mark-to-market gains on fixed maturity securities as a result of the increase in interest rates during the first quarter of 2021. Adjusted book value per common share was $58.69, an increase of 2.9% from December 31, 2020 reflecting growth in retained earnings from net income in excess of dividends and share repurchases.

As of March 31, 2021, AIG Parent liquidity was approximately $7.9 billion, down from $10.5 billion at December 31, 2020 principally reflecting debt repayment, share repurchases and shareholder dividends. In February 2021, AIG repaid $1.5 billion aggregate principal amount of its 3.300% Notes Due 2021. Additionally, AIG repurchased approximately 8 million shares of AIG Common Stock during the first quarter for an aggregate purchase price of $362 million. As of May 6, 2021, approximately $1.1 billion remained under the share repurchase authorization. AIG’s total debt and preferred stock leverage at March 31, 2021 was 28.4%. Excluding the impact of accumulated other comprehensive income adjusted for the cumulative unrealized gains and losses related to Fortitude’s funds withheld assets, total debt and preferred stock leverage at March 31, 2021 was 29.7%.

Today, the AIG Board of Directors declared a quarterly cash dividend of $0.32 per share on AIG Common Stock (NYSE: AIG), par value $2.50 per share. The dividend is payable on June 29, 2021 to stockholders of record at the close of business on June 15, 2021.

The AIG Board of Directors also declared a quarterly cash dividend of $365.625 per share on AIG Series A 5.85% Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share, which is represented by depositary shares (NYSE: AIG PRA), each representing a 1/1,000th interest in a share of preferred stock. Holders of depositary shares will receive $0.365625 per depositary share. The dividend is payable on June 15, 2021 to holders of record at the close of business on May 31, 2021.

FINANCIAL SUMMARY

	Three Months Ended March 31,
($ in millions, except per common share amounts)	2021			2020
Net income attributable to AIG common shareholders	$	3,869		$	1,742
Net income per diluted share attributable to
AIG common shareholders	$	4.41		$	1.98

Adjusted pre-tax income (loss)	$	1,256		$	180
General Insurance		845			501
Life and Retirement		941			601
Other Operations		(530	)		(922	)

Net investment income	$	3,657		$	2,508
Net investment income, APTI basis		3,191			2,699

Adjusted after-tax income attributable to AIG common shareholders	$	923		$	105
Adjusted after-tax income per diluted share attributable to AIG common shareholders	$	1.05		$	0.12

Weighted average common shares outstanding - diluted (in millions)		876.3			878.9

Return on common equity		24.2	%	11.2		%
Adjusted return on common equity		7.4	%	0.8		%

Book value per common share	$	72.37		$	69.30
Adjusted book value per common share	$	58.69		$	60.55

Common shares outstanding (in millions)		859.4			861.3

All comparisons are against the first quarter of 2020, unless otherwise indicated. Refer to the AIG First Quarter 2021 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.

GENERAL INSURANCE

Three Months Ended March 31,

($ in millions)

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