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| | AIG Property Casualty Reports Operating Income Of $1.1 Billion In Second Quarter 2013
By Press Release - August 5, 2013
AIG Property Casualty reported operating income of $1.1 billion in the second quarter of 2013, compared to operating income of $936 million in the second quarter of 2012. Underwriting performance improved in the second quarter of 2013, as evidenced by the accident year combined ratio, as adjusted, which excludes catastrophes and prior year development, which declined to 96.5 from 98.3 in the second quarter of 2012. Net investment income in the second quarter of 2013 also benefited from the strong performance of alternative investments and gains on fair value option securities. As part of AIG’s continued focus on capital management, AIG Property Casualty paid $792 million in cash dividends to AIG Parent during the second quarter of 2013.
The second quarter 2013 combined ratio was 102.6, compared to 102.4 in the second quarter of 2012. Second quarter 2013 results included catastrophe losses of $316 million and adverse net prior year development of $154 million (net of premium adjustments), primarily due to a Storm Sandy loss reserve increase of $142 million. These additional Storm Sandy losses related to a small number of existing large and complex commercial claims. The second quarter 2013 accident year loss ratio, as adjusted, improved to 61.9 compared to 64.8 in the second quarter of 2012, driven by a continued shift to higher value business, enhanced risk selection, and rate increases. The second quarter 2013 acquisition ratio was 20.0, a 0.4 point increase compared to the second quarter of 2012. The general operating expense ratio was 14.6, a 0.7 point increase compared to the second quarter of 2012, as a result of increased personnel-related costs during the second quarter of 2013 offset by a decrease in bad debt expense and reduced costs for infrastructure projects. The general operating expense ratio was also higher due to the lower net premiums earned base.
Second quarter 2013 net premiums written of $9.3 billion increased 1.8 percent compared to the second quarter of 2012 due to pricing increases and focused growth efforts. Excluding the impact of a change in the timing of recognizing the excess of loss ceded premiums written and foreign exchange, second quarter 2013 net premiums written increased 4.0 percent compared to the second quarter of 2012.
Commercial Insurance net premiums written, excluding the impact of the two items noted above, increased 3.6 percent compared to the second quarter of 2012. Higher net premiums written were primarily due to growth in new business and pricing. Consumer Insurance net premiums written, excluding the impact of the two items noted above, increased 4.7 percent compared to the second quarter of 2012. Consumer Insurance continued to focus on growing higher value lines of business, while expanding direct marketing as part of its multi-channel distribution strategy.
Commercial Insurance reported second quarter 2013 operating income of $535 million and a combined ratio of 101.7, compared to operating income of $745 million and a combined ratio of 99.3 in the second quarter of 2012. The second quarter 2013 accident year loss ratio, as adjusted, improved to 62.2 from 67.3 in the second quarter of 2012, primarily due to the shift to higher value business, enhanced risk selection, and rate increases. The second quarter 2013 acquisition ratio was 16.3, a 0.9 point decrease compared to the second quarter of 2012 due to a change in business mix and insurance-related assessments. The second quarter 2013 general operating expense ratio was 12.8, a 1.4 point increase compared to the second quarter of 2012, primarily due to lower net premiums earned and increased personnel-related costs offset by a decrease in bad debt expense.
Consumer Insurance reported second quarter 2013 operating income of $91 million and a combined ratio of 100.1, compared to operating income of $192 million and a combined ratio of 97.7 in the second quarter of 2012. The second quarter 2013 accident year loss ratio, as adjusted, was 60.2 compared to 59.1 in the second quarter of 2012. The second quarter 2013 acquisition ratio was 25.9, a 2.4 point increase over the second quarter of 2012, due to continued changes in Consumer Insurance’s business mix and investments in direct marketing. The second quarter 2013 general operating expense ratio was 15.3, a 0.3 point increase compared to the second quarter of 2012, primarily due to lower net premiums earned and increased personnel-related costs, partially offset by reduced costs for infrastructure projects.
Pre-tax operating income in the Other Property Casualty category was $459 million, an increase of $460 million over the prior-year period, principally due to a $268 million improvement in net investment income and lower prior-year unfavorable development from business no longer being written.
from Press Release
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