American International Group Inc. pledged to keep paring its business as it saw its 2017 second-quarter net income drop 40.9 % to $1.13 billion on a double-digit decline in commercial premiums.
“Commercial continues to execute on its mix shift and managed through a very challenging property/casualty market,” Brian Duperreault, president and CEO, said during the company’s Thursday morning earnings call.
“Our goal in commercial is to improve the bottom line, and the best way to do that, near term, is to shift our mix of business while continuing the emphasis on risk selection,” said Mr. Duperreault.
The commercial group has made good progress in reducing U.S. casualty exposure, he added.
Commercial net premiums written fell 14.9% to $3.83 billion for the second quarter and 16% to $7.455 billion for the first six months of 2017. The company’s combined ratio deteriorated to 102.7% from 98.3% in the year-ago period and also worsened for the six months to 102.4% from 97.9%.
“We are not done. We still have portfolios that don’t meet profit targets, including property,” Mr. Duperreault said. “Given market conditions, fixing them will most likely require further reductions in premiums.”
Consolidated premiums fell 13.0% to $7.61 billion for the quarter and fell 12.3% to $15.396 billion for the half. Six-month net income rose 33.8% to $2.31 billion, largely on cuts in expenses.
The company said earnings were also affected by second-quarter net realized capital losses of $69.0 million compared with net realized capital gains of $1.04 billion a year ago.
Mr. Duperreault also addressed AIG’s human capital situation.
“There is no question AIG lost talent, but it was also blessed with a strong bench. The job now is to rebuild that bench,” Mr. Duperreault said, adding that AIG will be a “net acquirer of talent.”
Earlier this summer, AIG announced that Peter Zaffino and Seraina Macia would be joining the insurer’s ranks.
Mr. Duperreault also said the company would consider acquisitions in addition to its organic growth efforts.
“We will consider acquisitions that are strategically complementary,” Mr. Duperreault said, pointing to the U.S small and middle market as one area of opportunity.
The CEO remained seemed hopeful for the insurer’s prospects.
“There are few companies in the global insurance industry with the scale, global footprint and brand of AIG,” Mr. Duperreault said.