Highlighting the development as a “noteworthy item” in an earnings announcement Thursday night, American International Group reported prior-year loss reserve strengthening of $836 million before taxes, which contributed to a $1.7 billion bottom-line net loss (after taxes) for the third quarter.

The reserve boost was secondary to the headline item—$3.0 billion in catastrophe losses from Hurricanes Harvey, Irma and Maria—the main contributor to nearly $2 billion written in red ink on AIG’s third-quarter income statement. In last year’s third quarter, AIG reported net income of $462 million.

Operating earnings (excluding capital losses on investments and other income adjustments) also revealed a reversal, with AIG reporting a $1.1 billion after-tax operating loss for third-quarter 2017, exactly the opposite of last year’s third-quarter result—$1.1 billion in after-tax operating income for third-quarter 2016.

Through nine months, after-tax net income fell to almost one-quarter of last year’s figure, coming in at $576 million for 2017, compared to $2.2 billion for the first nine months of 2016. The cats and reserve charge cut year-to-date operating income in half, with AIG reporting a $1.7 billion figure for 2017 compared to nearly $3.2 billion for 2016.

The reserve charge relates primarily to long-tail lines in the Commercial Insurance segment, AIG said, noting that $705 million of the $836 million charge is for accident year 2016 “in reaction to early unfavorable loss emergence.”

The emergence is not covered under a reinsurance agreement with Berkshire Hathaway‘s National Indemnity Company announced earlier this year, which relates to accident years 2015 and prior.

The commercial insurance development drew negative commentary from S&P Global Ratings although the rating agency neither changed its ratings nor the rating outlook for AIG. Zeroing in on the reserve charge, S&P noted that it had already moved AIG’s ratings (A+ financial strength) to a negative outlook in June, taking into account the company’s protracted turnaround and “missteps” in trying to improve the results of the P/C commercial insurance division.

“Our primary rating focus continues to be monitoring AIG’s improvement of underwriting fundamentals, with catastrophe losses being a lesser indicator of executional effectiveness,” S&P said, adding that “underwriting actions for recent accident years need time to season for [S&P] to assess fundamental improvement in results.” S&P noted that AIG increased its accident year 2016 loss picks for commercial insurance by 11 points in fourth-quarter 2016. The third-quarter 2017 action adds another 5 points, S&P said.

“Our assessment of enterprise risk management as ‘adequate’ already incorporates negative subscores for reserving and underwriting risk controls,” S&P said, also noting that AIG’s underlying underwriting performance deteriorated in third-quarter 2017 “even though the company cut its commercial insurance premium by $2 billion over the past 12 months.” Excluding reserve development and catastrophe losses for the third quarter from the reported (calendar year) 2017 loss ratio of 168.4, the resulting accident year 2017 loss ratio for commercial insurance is 75.1—”well above its 62 target,” S&P said, referring to a year-end 2017 target set by prior AIG management.

“Starting in second-quarter 2017, under new leadership, AIG stopped providing financial guidance to the market, which will make it more difficult to gauge progress and may imply a longer time frame to meaningfully turn around the commercial insurance business,” S&P said.

In the earnings statement published by AIG, the leader of the new management team, President and Chief Executive Officer Brian Duperreault, provided some descriptive guidance about the intentions of the new management team. He said the company is now “laser focused on commercial underwriting.” The insurer is taking actions to enhance tools for underwriting—and talent—”so much so that I that declared 2018 the ‘Year of the Underwriter,'” he said in the statement, noting that the actions would position AIG for “long term profitable growth” without providing a specific time frame for results to respond to the underwriting actions.

Both AIG and S&P highlighted results of the company’s consumer insurance segment—which includes personal insurance, life, and retirement businesses—as a positive noteworthy item. Even with catastrophe losses, the consumer business had $1.0 billion of pre-tax operating income.

AIG also highlighted a 15 percent drop in general operating expense and the Financial Stability Oversight Council’s decision to rescind AIG’s designation as a nonbank systemically important financial institution in September as noteworthy reportable items for the quarter.

Still, S&P said its negative outlook “reflects pressure on AIG’s delivery on sustainable improvements in its operating fundamentals while retaining its competitive resilience.”

Commercial insurance premiums fell 13 percent to $3.8 billion in the quarter, and the reported combined ratio came in at 195.4, including 71 points of catastrophe losses and 22 points of prior-year reserve development.

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