American International Group Inc has racked up an estimated $750 million to $800 million in catastrophe losses so far during the 2018 fourth quarter, its chief executive officer said on Wednesday. Still, the company's general insurance unit is on track to enter 2019 "at a slight underwriting profit," AIG CEO Brian Duperreault said at the Goldman Sachs US Financial Services Conference in New York.
The catastrophe losses do not include December, Duperreault said. AIG expects the unit's 2019 net earned premium to be consistent with 2018 levels, Duperreault. Duperreault, who took charge of AIG in 2017, has vowed to turn the company around. His most critical task is overhauling AIG's underwriting culture after the company spent years chasing revenue growth without appropriately weighing risks.
Reinsurance for California wildfires will add between $150 million and $175 million to AIG's net pretax losses for the fourth quarter, Duperreault said. AIG expects its Validus Holdings Ltd unit, the reinsurer it acquired in July, to incur about a $60 million pretax loss for wildfires, Duperreault said.
Earnings for AIG's Life and Retirement will decrease for the second half of 2019, partly related to investment in new business and "growth initiatives," Duperreault said. The insurer's fourth quarter effective tax rate will be around 26 percent because of global catastrophes and a shift in business mix, Duperreault said.
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