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The Impact of Hurricanes on AIG’s Personal Insurance Division

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Nov. 15 2017, Updated 9:00 a.m. ET

Higher losses

American International Group’s (AIG) personal insurance division saw catastrophe losses of $297 million in 3Q17, compared with $27 million in 3Q16.

The substantial rise in losses was mainly due to windstorm and hailstorm losses, which stood at $206 million in 3Q17 and $26 million in 3Q16. Over the last 12 months, AIG has had a free cash flow yield of 1.8%. To compare, peers (XLF) Allstate (ALL), National General Holdings (NGHC), and Arch Capital Group (ACGL) have had yields of 6.1%, 5.3%, and 3.5%, respectively.

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Net investment income

AIG’s personal insurance division’s net investment income rose substantially, by 18%, to $86 million in 3Q17 from $73 million in 3Q16. The rise was mainly because of alternative investments. The division’s net premiums fell to $2.8 billion in 3Q17 from $2.9 billion in 3Q16, and it reported pre-tax operating income of -$71 million in 3Q17, compared with $148 million in 3Q16.

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