Yahoo Finance AIG’s Personal Insurance improved 4Q14 underwriting performance
AIG’s 4Q14 and fiscal 2014 earnings: Key takeaways (Part 14 of 15)
Overview
AIG’s Personal Insurance business under the Consumer Insurance segment provides accident, health, and property and casualty products. The segment reported a pre-tax operating income of $121 million in 4Q14 compared to a loss of $9 million in 4Q13. Its improved bottom line result from increased underwriting income, offset by lower investment income.
Top line performance
In the above chart, we can see a slight drop in AIG’s revenues in terms of net premiums written of the segment, which is due to a stronger US dollar. Excluding the impact of weaknesses in other currencies compared to the dollar, AIG’s top line increased by 2%, driven by higher premium rates and the execution of growth strategies in certain lines of business.
Underwriting results
AIG’s underwriting income improved to $39 million in 4Q14 compared to a $132 million loss in 4Q13. Consequently, we see a below 100% combined ratio, implying an underwriting profit in 4Q14, compared to an over 100% combined ratio in the previous year’s same quarter.
For more analysis of the P&C insurance business’ underwriting profitability, please read our investor’s guide to the insurance business.
The lower loss ratio in 4Q14 compared to the prior year was due to improved underwriting performance across product lines, as well as lower catastrophe losses. The administrative expense ratio also declined as a result of AIG’s focus on reducing expenses. Management expects further increases in efficiency in the future.
In this segment, AIG competes with insurers like Allstate (ALL), Chubb (CB), Travelers (TRV), and other P&C insurers operating in the personal lines industry held by the Financial Select Sector SPDR ETF (XLF).
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