November 1, 2019 / 11:23 AM / 8 months ago

CORRECTED-UPDATE 3-AIG's profit misses estimates on life unit review, catastrophe losses

(Corrects the year to 2017, not 2018, in seventh paragraph.)

By Bharath ManjeshR and Suzanne Barlyn

Nov 1 (Reuters) - American International Group Inc missed analysts' estimates for third-quarter profit on Friday due to weakness in the insurer's life and retirement unit and a difficult period for catastrophe losses.

Pre-tax income from AIG's life and retirement business fell 9% to $646 million as it booked a $143 million charge related to a review of its actuarial assumptions.

The unit and many other life insurers typically conduct reviews every third quarter of assumptions they made when writing policies many years ago. The process can end with extra cash having to be set aside to cover future claims.

Excluding the impact from AIG's actuarial review, adjusted pre-tax income at the unit fell 3% due to an increase in the number of insured who died and lower alternative investment returns, the company said.

Shares of AIG, one of the largest U.S. insurers, were down 1.8% on Friday.

The insurer posted a profit of 56 cents per share, on an adjusted basis, well below analysts' expectations for a profit of $1 per share, according to IBES data from Refinitiv.

AIG is in the midst of a turnaround effort, launched by Chief Executive Officer Brian Duperreault, who took charge in 2017.

The strategy largely involves the insurer's general insurance unit, where Duperreault has been set to improve underwriting practices and scale back exposure to bad risks. He also deployed a reinsurance program to mitigate catastrophe losses.

Some of those changes involve AIG's speciality commercial unit, Lexington Insurance, which reduced total casualty insurance limits by 58% during the quarter while increasing premium rates by more than 30%, AIG Chief Financial Officer Mark Lyons said in a call with analysts on Friday.

AIG's net income attributable to common shareholders was $648 million, or 72 cents per share, in the third quarter ended Sept. 30, compared with a loss $1.26 billion, or $1.41 per share, a year earlier.

AIG's net pre-tax catastrophe loss narrowed to $511 million in the quarter from $1.6 billion a year earlier.

The company also reported a narrower underwriting loss in its general insurance business - $249 million compared with $1.73 billion last year.

The insurer's general insurance accident year combined ratio, excluding changes from losses incurred in past years, was 95.9, compared with 99.4 a year earlier.

A reinsurance program that AIG put in place to minimize earnings volatility during catastrophe season "played out as designed," Duperreault said during the call on Friday. (Reporting by Bharath Manjesh in Bengaluru; Editing by Anil D'Silva and Paul Simao)

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