Commercial premiums up, consumer premiums down at AIG

American International Group Inc. released Thursday its financial results for the three months ending Sept. 30, recording a 1% year-to-year drop in Q3 property and casualty net premiums written, from $8.712 billion in 2012 to $8.66 billion this year.

In the most recent quarter, the combined ratio for New York City-based AIG was 101.6%, down from 105.0% in Q3 2012. Q3 catastrophe losses dropped year-to-year, from $261 million in 2012 to $222 million this year. All figures are in U.S. currency.

“Net adverse development was $72 million (net of premium adjustments), primarily in the U.S. Commercial Insurance business, compared to $145 million (net of premium adjustments) for the third quarter of 2012,” AIG stated in its filing with the U.S. Securities and Exchange Commission.

“The third quarter 2013 accident year loss ratio, as adjusted, improved to 63.7, compared to 66.5, reflecting the continued effect of the execution of AIG’s strategic initiatives and positive pricing trends, partially offset by an increase of $71 million in severe losses.”

AIG reported total revenues of $14.826 billion in Q3 2013, down from $16.722 billion in Q3 2012. In the latest quarter AIG reported total premiums were $9.352 billion (down from $9.512 billion in Q3 2012) and investment income was $3.573 billion (down from $4.65 billion in Q3 2012).

In commercial insurance, net premiums written increased 2%, from $5.099 billion in Q3 2012 to  $5.999 billion this year. The combined ratio in commercial dropped from 106% in Q3 2012 to 100.2% in Q3 2013.

“The third quarter 2013 accident year loss ratio, as adjusted, improved 4.6 points to 66.2, reflecting the continued execution of AIG’s multi-faceted strategy to enhance risk selection, pricing discipline, exposure management, and claims processing, partially offset by higher severe losses in Property and Specialty totaling $211 million, compared to $120 million in the third quarter of 2012,” AIG stated.

For the nine months ending Sept. 30, catastrophe losses in commercial insurance were $522 million, down from $603 million in Q3 2012.

“Net adverse development, including related premium adjustments was $245 million in the nine-month period ended September 30, 2013, which includes $165 million of adverse development related to Storm Sandy, compared to $153 million in the prior year,” AIG stated in its management discussion and analysis.

“The adverse development related to Storm Sandy resulted from higher severities on a small number of existing large and complex commercial claims. These increased severities were driven by a number of factors, including the extensive damage caused to properties in the downtown New York metropolitan area.”

In consumer insurance, net premiums written dropped 5% year-over-year, from $3.63 billion in Q3 2012 to $3.441 billion in Q3 2013. The combined ratio in consumer insurance increased 1.1 points, from 98.8% in Q3 2012 to 99.9% in the latest quarter. The accident year loss ratio also increased year over year, from 57.7% to 58.5%, “primarily due to higher retail warranty losses, partially offset by improvements in automobile and personal property as a result of rate and underwriting actions.”

Net income attributable to AIG was $2.2 billion in the latest quarter, up from $1.9 billion in Q3 2012.