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AIG Reports Second-Quarter Loss Due to Corebridge Separation

People walk into the offices of American International Group Inc. in New York, US. Photographer: Craig Warga/Bloomberg (Craig Warga/Bloomberg)

(Bloomberg) -- American International Group Inc. booked a loss in the second quarter due to accounting charges tied to the formal separation of life and retirement business Corebridge Financial Inc. 

AIG lost about $4 billion after earning $1.5 billion a year earlier, according to a statement Wednesday. The property and casualty insurer recognized an “accumulated other comprehensive loss” of $7.2 billion as it sold down its 48.4% stake in Corebridge, hitting an ownership threshold that required it to recognize unrealized losses on Corebridge’s corporate bond portfolio. That reflects how bonds written when interest rates were lower are worth less money today. 

Those losses offset a $2.5 billion gain on Corebridge assets it retained. 

“The quarter marked one of the most notable accomplishments in AIG’s history with the deconsolidation of Corebridge, a process which began in 2020 and significantly advanced our multi-year strategy to position AIG for the future,” Chief Executive Officer Peter Zaffino said in a statement Wednesday.  

AIG spun off Corebridge in 2022 and has been paring its interest. Nippon Life Insurance Co. agreed in May to acquire a 20% stake in Corebridge for about $3.8 billion.

The “core fundamentals” of the firm were strong in the second quarter outside of the “complex accounting treatment” of Corebridge as well as last year’s divestitures of its crop risk services unit and Validus Re, Zaffino said. 

For instance, net premiums written, an important industry metric of revenue growth, were up 7% year-over-year to $6.9 billion, adjusted for those two divestitures, according to the statement. Underwriting income was also up 2%, to $430 million, by that same metric, the statement showed. 

Adjusted after-tax income was relatively flat compared with the year-before period, coming in at $775 million, compared with $777 million a year earlier. That number, which excludes the Corebridge adjustment, worked out to about or $1.16 a share, up from $1.06 a year earlier, but below analyst estimates. 

The general insurance unit reported a combined ratio of 92.5%, meaning it spent about 92.5 cents covering losses for every premium dollar brought in, which was higher than analyst expectations of about 91.3%. 

AIG also returned almost $2 billion to shareholders in the quarter via stock repurchases and dividends. 

(Adds year-ago adjusted after-tax income in penultimate paragraph.)

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