The European operations of AIG announced a £171.1 million loss in pre-tax profit in the year ending November 30, 2016, down from the previous year’s gain of £408.5 million.
Reporting its financial results on Thursday, AIG Europe also said that its combined ratio surged to 111.8% from 98.2% last year, while underwriting losses soared to £439.5 million from £61.9 million.
According to AIG Europe, the loss before tax was a result of increased liability reserves in response to the Ogden rate cut, higher levels of severe claims and lower levels of investment returns.
The insurer said adverse claims experience – largely in the financial sector – and severe property losses saw higher net claims of £2.9 billion, leading to the higher combined ratio and underwriting loss.
“During 2016, we experienced adverse prior year development and also higher levels of severe claims within both property and special risks and liability and financial lines, through terrorist attacks, storm impacts and D&O claims,” AIG Europe said.
The company’s expenses also increased to £1.4 billion from £1.3 billion through higher acquisition costs in central Europe and a marginal increase in the underlying cost base.
On the positive side, AIG Europe’s net premiums written rose slightly by 3% from £3.55 billion to £3.66 billion, fueled by favourable currency movements and underlying business growth.
“The challenging operating environment during 2016 validated our strategy of focusing on underwriting discipline and on those business lines and geographic areas that are most profitable,” said Anthony Baldwin, AIG Europe chief executive.
“I remain confident that we will see further benefits from these changes in 2017,” he added.
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