Did AIG's earnings really jump by about 60x year over year?

Not on an underlying basis. The GAAP EPS jump from $0.03 to $1.74 was mainly due to net realized gains on the Fortitude Re funds withheld embedded derivative versus losses a year earlier. Adjusted after-tax income per diluted share, which strips out such items, rose 8.6% to $1.77, and total AATI was roughly flat at $1.2 billion.

Why did reported premiums drop so sharply, and is the business shrinking?

Reported General Insurance NPW fell 35% to $4.5 billion mainly because of the 2023 sales of Validus Re and Crop Risk Services and changes in reinsurance structures. On a comparable basis, which adjusts for those divestitures and currency, NPW grew about 0.4% overall and about 4% in North America Commercial Lines, so the underlying business is roughly stable rather than shrinking.

Is the dividend increase sustainable, and how much capacity is there for buybacks?

The $0.40 quarterly dividend is an 11% increase and the second consecutive year of 10%+ raises. Q1 dividends and preferred payments totaled $250 million, a small share of AIG's earnings. The buyback authorization was raised to $10.0 billion effective May 1, and parent liquidity was $5.1 billion at March 31, 2024, which supports continued repurchases alongside the Corebridge deconsolidation plan.

What does the Corebridge deconsolidation mean for AIG's earnings?

AIG's ownership of Corebridge has been declining, and Corebridge's contribution to AATI fell about 20% year over year. Management says reducing its stake in Corebridge remains a top 2024 priority and that the deconsolidation will proceed. Investors should expect a smaller share of Corebridge earnings and related equity-market exposure to change over time.

What should investors watch in the coming quarters?

Key items include whether the General Insurance combined ratio stays below 90% as catastrophe losses vary; whether the reinsurance changes that depressed reported premiums give way to growth; progress on AIG Next cost savings toward an adjusted ROCE above 10% (Q1 was 9.3%); the pace of Corebridge deconsolidation; and the sensitivity of GAAP results to Fortitude Re derivative and interest-rate movements, which can cause large swings in reported EPS.

AIG 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 1, 2024. Cited figures are marked; the original filing is the authoritative source.

AIG reported first-quarter 2024 results on May 1, 2024, with net income attributable to common shareholders of $1.2 billion^a, or $1.74 per diluted share, versus $0.03 a year earlier.

The swing was driven mainly by net realized gains on the Fortitude Re funds withheld embedded derivative, compared with losses in the prior-year quarter. The more durable measure, adjusted after-tax income (AATI), was $1.2 billion^b, or $1.77 per diluted share, roughly flat in dollar terms but up 8.6% per share, helped by a 19% rise in General Insurance underwriting income to $596 million. General Insurance combined ratio improved 2.1 points to 89.8%, and the accident year combined ratio, as adjusted, improved to 88.4%.

Reported net premiums written fell 35% to $4.5 billion^c because of 2023 divestitures and reinsurance changes, though the company says they grew on a comparable basis. Capital management was the other major theme. AIG returned $2.4 billion to shareholders in the quarter through $1.7 billion of buybacks (about 23 million shares), $250 million of dividends, and the redemption of $500 million of preferred stock, and it repaid $459 million of maturing debt.

The Board raised the repurchase authorization to $10.0 billion^d effective May 1 and declared a quarterly dividend of $0.40 per share, an 11% increase and the second consecutive year of 10%+ increases. Book value per share was $64.66, down 1% from year-end on higher interest rates but up 10% year over year. Adjusted book value per share was $77.79.

Parent liquidity stood at $5.1 billion, and the debt-to-capital ratio excluding AOCI fell to 23.6%. The main forward-looking items are the planned deconsolidation of Corebridge Financial, the AIG Next efficiency program, and a target of adjusted ROCE above 10%.

Adjusted ROCE was 9.3% in the quarter. Corebridge's contribution to AATI fell about 20% as AIG's ownership declined, and the filing flags ongoing risks such as catastrophe losses, reinsurance counterparty exposure, and macro and geopolitical conditions.

02—Key points

Key Highlights

GAAP EPS of $1.74 vs. $0.03 a year ago, driven largely by Fortitude Re embedded derivative gains; adjusted after-tax income per diluted share rose to $1.77 from $1.63 (+8.6%).
General Insurance underwriting income rose 19% to $596M; the combined ratio improved 2.1 points to 89.8%, and the AYCR, as adjusted, improved to 88.4%.
Reported General Insurance NPW fell 35% to $4.5B due to 2023 divestitures (Validus Re, Crop Risk Services) and reinsurance changes; AIG reports 4.4% growth on a comparable basis after adjusting for those sales.
Returned $2.4B to shareholders in Q1 ($1.7B buybacks, ~23M shares; $250M dividends) and redeemed $500M of preferred stock; the buyback authorization was increased to $10.0B effective May 1.
Quarterly dividend raised 11% to $0.40/share (payable June 28, 2024, record date June 14), marking a second straight year of 10%+ increases.
Book value per share of $64.66 (down 1% QoQ, up 10% YoY); adjusted book value per share of $77.79; debt and preferred to total capital ex-AOCI improved to 23.6% from 24.3%.
Life & Retirement APTI rose 12% to $991M on higher spread income, with premiums and deposits of $10.7B; Corebridge's April sale of AIG Life to Aviva and Corebridge's deconsolidation remain key 2024 milestones.

03—Questions

Frequently Asked Questions

Did AIG's earnings really jump by about 60x year over year?
Not on an underlying basis. The GAAP EPS jump from $0.03 to $1.74 was mainly due to net realized gains on the Fortitude Re funds withheld embedded derivative versus losses a year earlier. Adjusted after-tax income per diluted share, which strips out such items, rose 8.6% to $1.77, and total AATI was roughly flat at $1.2 billion.
Why did reported premiums drop so sharply, and is the business shrinking?
Reported General Insurance NPW fell 35% to $4.5 billion mainly because of the 2023 sales of Validus Re and Crop Risk Services and changes in reinsurance structures. On a comparable basis, which adjusts for those divestitures and currency, NPW grew about 0.4% overall and about 4% in North America Commercial Lines, so the underlying business is roughly stable rather than shrinking.
Is the dividend increase sustainable, and how much capacity is there for buybacks?
The $0.40 quarterly dividend is an 11% increase and the second consecutive year of 10%+ raises. Q1 dividends and preferred payments totaled $250 million, a small share of AIG's earnings. The buyback authorization was raised to $10.0 billion effective May 1, and parent liquidity was $5.1 billion at March 31, 2024, which supports continued repurchases alongside the Corebridge deconsolidation plan.
What does the Corebridge deconsolidation mean for AIG's earnings?
AIG's ownership of Corebridge has been declining, and Corebridge's contribution to AATI fell about 20% year over year. Management says reducing its stake in Corebridge remains a top 2024 priority and that the deconsolidation will proceed. Investors should expect a smaller share of Corebridge earnings and related equity-market exposure to change over time.
What should investors watch in the coming quarters?
Key items include whether the General Insurance combined ratio stays below 90% as catastrophe losses vary; whether the reinsurance changes that depressed reported premiums give way to growth; progress on AIG Next cost savings toward an adjusted ROCE above 10% (Q1 was 9.3%); the pace of Corebridge deconsolidation; and the sensitivity of GAAP results to Fortitude Re derivative and interest-rate movements, which can cause large swings in reported EPS.

04—Continue

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