Commercial insurance prices no longer being decreased by AIG

commercial ins prices smallChartis is the property and casualty division of American International Group, Inc. (AIG).  They stopped cutting commercial-insurance rates.  Brokers say they are unable to raise prices in some markets because the insurer doesn’t have as much power as they use to.

When FactSet surveyed the company, AIG made $2.57 cents a share in 2008.  Since then it has decreased to just 98 cents a share.  The insurer will report AIG’s second-quarter results to the analysts and investors.

The government has bailed out AIG, which made customers and investors worry that AIG would not recover.  The Wall Street Journal reported that in some cases AIG reduced the prices by more than 30% to keep customers or to obtain new business.  According to AIG’s 2008 fourth quarter results the commercial insurance premiums declined 22% compared to 2009.

Chartis is an important part of AIG and may be on its way to becoming its own independent business.  If unsuccessful as a business, Chartis will be hard-pressed to produce returns for shareholders.  If that occurs, AIG will ultimately need to pay back the tens of billions of dollars that they owe the U.S. government.

Chartis is charging small rate increases to the commercial-insurance policies that have had some losses.  They are taking this opportunity to increase their premiums as well.  One broker stated that Chartis is testing to see if small rate increases will stick with the clients with fewer claims.   AIG stated that they might lower commercial-insurance prices, but no more than other insurance companies.

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