AIG to Record $4.1B Q4 Charge, Bolster Chartis' Loss Reserves

American International Group Inc. announced today that it plans to raise the loss reserves for its Chartis property/casualty business.

According to a release, following completion of AIG's annual comprehensive loss reserve review, the insurer plans to book a $4.1 billion charge—net of $446 million in discount and loss sensitive business premium adjustments—for Q4 2010 to bolster the reserves. 

Chartis has been a major focus of CEO Robert Benmosche since he took over control of the company from Edward Liddy in 2009, and a key component of his rebuilding plan.

Taking further steps to strengthen Chartis' loss reserves, AIG said that it entered into a letter agreement with the U.S. Department of the Treasury that would permit it to retain $2 billion of the net cash proceeds from the recently closed sale of AIG Star Life Insurance Co. Ltd and AIG Edison Life Insurance Co. that it will use, along with other funds, to support Chartis. As a result, the insurer expects that Chartis' companies' statutory surplus will remain largely unaffected.

AIG said that strengthening to Chartis loss reserves reflects adverse development on prior accident years in classes of business with long reporting tails. Four classes: asbestos, excess casualty, excess workers' compensation and primary workers' compensation, comprise about 80% of the total charge. The majority of the strengthening relates to development in accident years 2005 and prior.

As a result of the 2010 year-end loss reserve review, AIG said that it strengthened loss reserves about $4.6 billion before discount.

The insurer also announced that it plans to report its Q4 results after the market closes on February 24.

 

For reprint and licensing requests for this article, click here.
Core systems Policy adminstration Customer experience
MORE FROM DIGITAL INSURANCE