AIG Q1 profit drops 27% after catastrophes and reserve hikes

Global insurer AIG made a profit of $1.6bn (£954m) in the first quarter of 2014, down 27% on the $2.2bn in made in the same quarter last year.

The main cause was an 18.9% fall in pre-tax profit at the group’s non-life division to $1.3bn (Q1 2013: ($1.6bn).  The life division’s pre-tax profit grew by 1.6% to $1.42bn (Q1 2013: $1.39bn).

The non-life division’s combined operating ratio jumped by 3.9 points to a loss-making 101.2% (Q1 2013: 97.3%).

The division’s worse result was mostly because of catastrophe claims, which jumped to $262m in Q1 2014 from just $41m in Q1 2013.

The company was also hit by $162m of reserve strengthening in the quarter. By contrast, AIG benefited from $52m of reserve releases in Q1 2013.

Despite the reduced profitability, AIG chief executive Robert Benmosche described his company’s Q1 2014 performance as “solid”.

He said: “The earnings power of our business, coupled with our customer strategy, reinforce the strength of our foundation throughout our core insurance operations.

“I am encouraged by the positive momentum we’ve generated around the world, which has enabled us to become closer to, and better serve, our customers.”

He added: “These results reflect strong operating income across our insurance operations, as well as execution of our capital management strategy.

“We remain diligently focused on increasing operational efficiency, managing our expenses, and investing in technology; we continue to look at ways to simplify and make our organisation more efficient to ensure that we are creating a company that will thrive well into the future.”