Yahoo Finance AIG’s Consumer Insurance Fell on Retirement and Personal Divisions
Alternative Investments Impact AIG Earnings, Core Getting Stable
Consumer Insurance division
American International Group’s (AIG) consumer finance business recorded a 17% fall in pre-tax operating earnings in 1Q16. The division’s pre-tax operating income fell to $788 million compared with $945 million in 1Q15. The fall was primarily due to lower net investment income due to the negative performance of alternative investments in hedge funds and a lower underwriting income in personal insurance.
AIG is working on expense management in order to boost its bottom line. Insurance companies such as MetLife (MET) and the Hartford Financial Services Group (HIG) are focusing on reducing their operating expenses to improve profitability.
Investors can gain exposure to insurance companies by investing in financial sector ETFs such as the Financial Select Sector SPDR ETF (XLF) and the Vanguard Dividend Appreciation ETF (VIG).
Retirement division
AIG’s Retirement Insurance division saw pre-tax operating earnings of $461 million in 1Q16, a fall of 42%. The fall was primarily due to lower net investment income from alternative investments, partially offset by growth in premiums and deposits. The premiums expanded due to due to higher sales in Fixed Annuities, Retail Mutual Funds, and Group Retirement.
The growth in Fixed Annuities sales and lower Group Retirement surrenders were the primary drivers of the improvement in net flows of $1.7 billion
Life Insurance division
AIG’s Life Insurance division saw pre-tax operating income at $105 million compared with an operating profit of $171 million in 1Q16. This decline was mainly due to lower investment income and higher amortization. The division’s results benefited from a $25 million reduction in the reserve for death claims related to enhanced claims practices.
The division’s results benefited from a $25 million reduction in the reserve for death claims related to enhanced claims practices.
Personal Insurance division
AIG’s Personal Insurance division reported a pre-tax operating income of $222 million in 1Q16 compared with a pre-tax operating loss of $26 million in 1Q15. This was primarily due to a rise in underwriting results, partially offset by a decrease in net investment income. Its combined ratio declined to 93.9. Its loss ratio and accident year loss ratio declined by 6.3 points and 3.2 points to 52.5 and 53.2, respectively, compared with 1Q15.
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