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Behind AIG’s Life Insurance Division

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Components of revenues

The revenues of American International Group’s (AIG) Life Insurance division comprises net investment income, premiums, policy fees, and other income. The division garnered premiums of $1.2 billion in the first three quarters of 2017 versus $1.1 billion in the same period of 2016.

With the help of various channels, AIG’s Life Insurance division aims to sell new products and generate high profit margins in order to generate strong returns. However, the division generated other income of $34.0 million in 9M17 versus $43.0 million in 9M16, which implies a substantial 21.0% fall.

American International Group’s beta value stood at ~1.3. Among its peers (XLF), Hartford Financial Services (HIG), Travelers Companies (TRV), and Aflac (AFL) have beta values of 0.68, ~1.2, and ~1.0, respectively.

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Expenses, premiums, and deposits

AIG’s Life Insurance division incurred general operating expenses of $437.0 million in 9M17 compared to $504.0 million in 9M16, which implies a decline of 13.0%. This decline mostly reflects the company’s decision of refocusing on its Group Benefits business.

Moreover, the division generated pre-tax operating income of $272 million in 9M17 versus a pre-tax operating loss of $27 million in 9M16.

Excluding foreign exchange effect, premiums and deposits rose 8.0% in 9M17 compared to 9M16. This rise reflects assumed premiums from the business generated with the help of Laya Healthcare and favorable momentum in its Term and Universal Life unit.

This positive momentum was also seen in AIG’s International Life and Health business, which was also a major contributor to the rise. However, a decline in premiums from the Group Benefits policies negatively impacted the rise.

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