AIG profit jumps as premium growth meets a tougher catastrophe quarter

Reported profit at American International Group (NYSE:AIG) rose 63% year-on-year to US$844 million in the third quarter, but the more telling operating measure moved in the opposite direction. Adjusted after-tax income fell to US$1.086 billion, or US$2.06 per diluted share, from US$1.226 billion, or US$2.20 per share, a year earlier.

Investment gains lift reported earnings

The increase in GAAP net income was primarily linked to changes in the fair value of AIG’s investments, higher General Insurance net investment income, higher earned premiums and lower net realised losses. Total net investment income climbed to US$1.1 billion from US$772 million, although the adjusted pre-tax basis rose more modestly to US$1.075 billion from US$1.024 billion.

That distinction matters because the adjusted result strips out several volatile investment and other items. AIG’s Core Operating return on equity was 11.1% for the quarter, down from 13.6% a year earlier, while adjusted book value per share increased 5% to US$81.25. Reported book value per share edged down 1% to US$74.96.

Premium growth outpaces underwriting income

General Insurance net premiums written rose 7% to US$6.651 billion, or 8% on a constant-dollar basis. Growth was broad-based: International Commercial premiums increased 13% to US$2.387 billion, Global Personal rose 6% to US$1.783 billion, and North America Commercial grew 2% to US$2.481 billion.

Underwriting income, however, fell 29% to US$564 million. The combined ratio widened to 91.3% from 86.8%, driven principally by US$283 million of catastrophe-related charges, compared with US$100 million in the prior-year quarter, and lower favourable prior-year reserve development. A ratio below 100% still indicates underwriting profit, but the deterioration shows how quickly catastrophe activity can dilute premium growth.

Capital returns continue despite mixed quarter

AIG returned US$787 million to shareholders during the quarter, comprising US$527 million of repurchases covering approximately 7 million shares and US$260 million of dividends. The board also declared a quarterly cash dividend of US$0.50 per share, payable on 30 December 2026 to shareholders on the register at 16 December.

The share count fell to 518.7 million from 544.5 million a year earlier, helping support per-share measures even as adjusted quarterly earnings declined. AIG also issued roughly US$1.3 billion of euro-denominated notes during September; total debt to total capital stood at 20.8%, or 19.6% on AIG’s adjusted measure. The next test is whether premium growth can keep translating into durable underwriting earnings when catastrophe losses and reserve releases are less forgiving.