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AIG Says It's Still Thinking About the Proposed Life Split: Earnings

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What You Need to Know

  • Money continued to flow into AIG's indexed annuities.
  • COVID-19 continued to reduce Genworth's long-term care insurance benefits spending.
  • Aetna's parent vaccinated 3 million people against COVID-19.

Managers of American International Group Inc. said Tuesday that they’re still thinking about how to split the life and retirement operations from the company’s property and casualty insurance operations.

AIG announced Oct. 26, 2020, that it intends to start with a disposition of up to a 19.9% interest in the life and retirement business.

“Any separation transaction will be subject to the satisfaction of various conditions and approvals, including approval by the board of directors, receipt of insurance and other required regulatory approvals, and satisfaction of any applicable requirements of the Securities and Exchange Commission,” AIG said in its earnings announcement for the fourth quarter of 2020.

“No assurance can be given regarding the form that a separation transaction may take or the specific terms or timing thereof, or that a separation will in fact occur.”

AIG’s Earnings

AIG (NYSE: AIG) is reporting a $16 million net loss for the fourth quarter of 2020 on $9.7 billion in revenue, compared with $869 million in net income on $12 billion in revenue for the fourth quarter of 2019.

The New York-based company’s life and retirement unit is reporting $1 billion in adjusted pre-tax income on $4.3 billion in adjusted revenue, up from $858 million in adjusted pre-tax income on $4.1 billion in revenue for the year-earlier quarter.

The individual retirement unit is reporting $552 million in adjusted pre-tax income on $1.5 billion in revenue, up from $500 million in adjusted pre-tax income on $1.4 billion in revenue.

Here’s what happened to net flows of assets for several individual retirement products, in the United States, between the fourth quarter of 2019 and the latest quarter:

  • Indexed Annuities: An $832 million inflow (down from a $1.1 billion inflow)
  • Variable Annuities: A $326 million outflow (compared with a $433 million outflow)
  • Fixed Annuities: A $695 million outflow (compared with a $673 million outflow)

At the life insurance unit, premiums increased to $491 million, from $450 million, and benefits and losses increased to $895 million, from $751 million.

Genworth Financial (NYSE: GNW)

Genworth is reporting $266 million in net income for the fourth quarter of 2020 on $2.3 billion in revenue, up from $24 million in net income on $2 billion in revenue for the fourth quarter of 2019.

The Richmond, Virginia-based company’s life insurance unit is reporting $129 million in adjusted operating income on $1.8 billion in revenue, compared with a $115 million adjusted operating loss on $1.6 billion in revenue for the year-earlier quarter.

The company’s long-term care insurance (LTCI) unit produced $129 million in adjusted operating income for the quarter on $1.3 billion in revenue, up from $19 million in adjusted operating income on $1.1 billion in revenue for the year-earlier quarter. Net investment gains at the unit increased to $118 million, from $19 million.

Long-term care insurance “benefits and other changes in policy reserves” fell to $863 million, from $925 million a year earlier, and stood at the lowest level in at least two years.

At the long-term care insurance unit, “claim terminations in the current quarter were higher compared to the prior quarter and prior year,” the company said in its earnings announcement.

“Although it is not the company’s current practice to track cause of death for LTC policyholders and claimants, the elevated terminations impacting the current and prior quarter were likely the result of the COVID-19 pandemic.”

The number of policyholders filing new LTCI claims was also lower than usual.

“The recent decrease in incidence is assumed to be driven by the COVID-19 pandemic and temporary in nature,” Genworth said. “The company also assumed that the COVID-19 pandemic has accelerated its mortality experience on the most vulnerable claimants, leaving its overall claim population less likely to terminate compared to the pre-pandemic average population.”

Genworth has increased reserves to prepare for the possibility that “incurred but not reported” LTCI claims may be high, and the possibility that the number of LTCI claims terminated due to death may fall, the company said.

CVS Health (Aetna) (NYSE:CVS)

CVS is reporting $975 million in net income for the fourth quarter of 2020 on $70 billion in revenue, compared with $1.7 billion in net income on $67 billion in revenue for the fourth quarter of 2019.

The Woonsocket, Rhode Island-based drug store company’s health care benefits unit, which now includes Aetna and some other operations, ended the quarter providing or administering coverage for 23 million people, or about as many people as it was covering a year earlier

Here’s what happened to enrollment in five types of coverage between the fourth quarter of 2019 and the latest quarter.

  • Commercial Insured: 3.3 million (down from 3.6 million)
  • Commercial Self-Insured: 13.6 million (down from 14.2 million)
  • Medicare Advantage: 2.7 million (up from 2.3 million)
  • Medicare Supplement: 1.1 million (up from 881,000)
  • Medicaid:  2.7 million (up from 2 million)

Because social distancing efforts aimed at controlling COVID-19 reduced the number of head cold and influenza cases sharply, sales of cough and cold products fell, but COVID-19 diagnostic testing revenue offset some of the loss of cough and cold product revenue.

Aetna has extended waivers for:

  • Out-of-pocket costs for inpatient hospital admissions for treatment or health complications associated with COVID-19 for commercial members through Jan. 31, and for Medicare Advantage members through March 31.
  • Cost-sharing for in-network telemedicine visits by commercial members for outpatient behavioral and mental health counseling services through Jan. 31.
  • Cost-sharing for student health plan members’ use of covered in-network telemedicine visits for medical and behavioral health services through Jan. 31.

CVS Health has administered about 15 million COVID-19 tests nationwide at its pharmacies, and about 3 million COVID-19 vaccines in long-term care facilities.