01—Abstract
Summary
Summary of the 8-K filed February 13, 2024. Cited figures are marked; the original filing is the authoritative source.
AIG reported fourth quarter and full-year 2023 results on February 13, 2024, with a clear story of strong underwriting and significant strategic and capital actions.
Full-year 2023 adjusted after-tax income (AATI) per diluted share rose 33% to $6.79a, while GAAP net income per diluted share fell to $4.98 from $12.94, largely because of net realized losses tied to the Fortitude Re funds withheld embedded derivative and derivative activity. General Insurance delivered $2.3 billion of underwriting income (up 15%), a 90.6% combined ratio (improved 130 bps), and an 87.7% accident year combined ratio, as adjusted. Life and Retirement adjusted pre-tax income grew 15% to $3.8 billion, supported by base spread expansion.
Capital management was a major focus. AIG returned about $4.0 billionb to shareholders in 2023 ($3.0 billion of buybacks and $1.0 billion of dividends), reduced financial debt by $1.4 billion, and ended the year with $7.6 billion of parent liquidity. The company divested Validus Re (closed November 1, 2023) and Crop Risk Services, and completed three Corebridge secondary offerings that cut its stake to about 52.2%.
Management expects to deconsolidate Corebridge in 2024. Book value per common share rose to $65.14c, while adjusted book value per share was $76.65, and the total debt and preferred to capital ratio fell to 28.5% (24.3% excluding AOCI). The filing also declared a quarterly common dividend of $0.36 per share (payable March 28, 2024) and a preferred dividend on the Series A 5.85% Non-Cumulative Perpetual Preferred Stock.
AIG also announced it will redeem all 20,000 outstanding Series A preferred shares on March 15, 2024. Investors will likely focus on how the Corebridge deconsolidation changes reporting visibility, the sustainability of underwriting margins, and the volatility in GAAP earnings driven by Fortitude Re-related derivative marks.
02—Key points
Key Highlights
- Adjusted after-tax income per diluted share rose 33% to $6.79 for FY2023, while GAAP diluted EPS fell to $4.98 from $12.94, mainly due to Fortitude Re embedded derivative losses.
- General Insurance underwriting income increased 15% to $2.3 billion, with a full-year combined ratio of 90.6% (improved 130 bps) and an accident year combined ratio, as adjusted, of 87.7%.
- Life and Retirement adjusted pre-tax income grew 15% to $3.8 billion, with Individual and Group Retirement base spreads expanding 46 bps year-over-year.
- Returned about $4.0 billion to shareholders in 2023 ($3.0 billion of buybacks and $1.0 billion of dividends) and reduced financial debt by $1.4 billion.
- AIG parent liquidity ended 2023 at $7.6 billion, and the total debt and preferred to capital ratio improved to 28.5% from 33.7% in Q3 2023.
- Reduced its Corebridge stake to about 52.2% through three secondary offerings and expects to deconsolidate Corebridge in 2024.
- Declared a $0.36 quarterly common dividend and will redeem all Series A 5.85% preferred shares on March 15, 2024.
03—Questions
Frequently Asked Questions
Why did GAAP earnings fall sharply in 2023 even though operating results improved?
GAAP net income attributable to common shareholders fell to $3.6 billion ($4.98 per diluted share) from $10.2 billion ($12.94) in 2022. The decline was primarily driven by net realized losses on the Fortitude Re funds withheld embedded derivative in Life and Retirement, compared with gains in the prior year, along with derivative activity. Adjusted after-tax income, which excludes these items, rose to $4.9 billion ($6.79 per share).
What is driving the improvement in General Insurance profitability?
Underwriting income rose 15% to $2.3 billion, driven by Global Commercial Lines, which grew 25%. The combined ratio improved 130 bps to 90.6%, supported by rate increases ahead of loss cost trends, business mix shifts, and lower catastrophe charges. Management also highlighted strong January 1 reinsurance renewals.
How is the Corebridge deconsolidation expected to affect AIG?
AIG's ownership of Corebridge fell from 77.7% at the start of 2023 to about 52.2% at year end, reducing Corebridge's contribution to AATI. Management expects to deconsolidate Corebridge in 2024, which it believes will give investors greater visibility into AIG's business, capital structure, and operations. Corebridge's earnings will then no longer be consolidated line by line.
What capital return and balance sheet actions did AIG take?
AIG returned about $4.0 billion to shareholders in 2023 through $3.0 billion of buybacks and $1.0 billion of dividends, after raising the common dividend 12.5% in Q2 2023. It also reduced financial debt by $1.4 billion, repurchased $1.6 billion of senior notes in Q4, and ended the year with $7.6 billion of parent liquidity. The total debt and preferred to capital ratio fell to 28.5%.
What dividends and preferred stock actions were announced?
AIG declared a quarterly common dividend of $0.36 per share, payable March 28, 2024, to holders of record on March 14, 2024. It also declared a $0.365625 per depositary share dividend on its Series A 5.85% preferred (payable March 15, 2024). In addition, AIG will redeem all 20,000 outstanding Series A preferred shares, and the 20,000,000 corresponding depositary shares, on March 15, 2024 at $25,000 per share ($25.00 per depositary share).
04—Continue