AIG Sees Mortality Reporting Delays

A security guard stands inside the American International Group Inc. (AIG) headquarters office in New York, U.S., on Tuesday, Jan. 29, 2016. American International Group Inc., the insurer being pressured by activist investor Carl Icahn to divest assets, had the outlook on its credit rating changed to negative from stable by Standard & Poor's after announcing plans to sell a stake in mortgage insurer United Guaranty Corp. Photographer: Victor J. Blue/Bloomberg

Executives at American International Group Inc. say COVID-19 might be affecting the flow of information the company needs to pay life insurance claims.

Kevin Hogan, chief executive officer of AIG's life insurance and retirement unit, talked about that concern Tuesday, in a conference call the company held to go over first-quarter earnings with securities analysts.

Early in the first quarter of the year, reported mortality for the insureds was lower than what AIG had built into its pricing, Hogan said.

"Later in the period, what we did notice is that there were some delays in reporting, generally related to the issuance of certain documentations," Hogan said.

AIG added an item for life insurance claims that are likely to come in, but have not yet come in, because of the worries about the lag in reporting, Hogan said.

Resources

A link to the webcast of AIG's earnings call is available here.
An article about AIG's earnings release is available here.

AIG does expect to get reports of additional mortality for the second and third quarters of the year, Hogan said.

"But we don't expect to see significant impacts to the balance sheet based on what we know, and there could be some offsetting factors," Hogan said. "Although we may experience some acceleration, we are not expecting large incremental impacts to mortality rates and expect any incremental impacts to be manageable in the context of our overall balance sheet."

P&C

The main focus of the AIG analyst call was the company's general insurance divison.

Peter Zaffino, the chief executive officer of AIG's general insurance unit, and other AIG executives called COVID-19 "the largest single catastrophic loss the insurance industry has ever seen."

"While the insurance industry manages risk of all kinds, it's fair to say that the profound impact and global nature of COVID-19 is something we have never encountered," Zaffino said. "There's no playbook."

L&R

Hogan said that the turmoil in the investment markets is hurting AIG, but that most of the market effects of market turmoil are reversible.

Hogan also said that, although benefits sales are down, employers may be more inclined to keep benefits plans in place at existng health care organization. That trend could make AIG's own benefit plan sponsor clients sticikier, Hogan said.

Hogan predicted that the impact of COVID-19 on claims would be modest, and that the effects of market turmoil would be survivable.

"Although we may experience some acceleration, we are not expecting large incremental impacts to mortality rates and expect any incremental impacts to be manageable in the context of our overall balance sheet," Hogan said. "Market stress in the first quarter due to COVID-19, while severe in nature, did not reach our modeled stress testing scenarios."

Pension Risk Transfer Deals

A financial services company involved in a pension risk transfer deal sells an employer or other pension plan sponsor a group annuity.

The annuity helps the plan sponsor pass pension risk to the insurer.

"For institutional markets, we have continued to grow our asset base and earnings, and this business continues to be well-positioned," Hogan writes. "We remain focused on new opportunities and have the capacity to participate as activity arises in the pension risk transfer and other institutional businesses."

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