The operator introduces Quentin McMillan and reminds listeners that the call is being recorded. McMillan mentions forward-looking statements and non-GAAP financial measures, and notes that AIG's results will be reported on a consistent basis until the deconsolidation of Corebridge Financial. He also mentions that the results for AIG's Life and Retirement segment and other operations will be reported separately from Corebridge Financial. Finally, he states that net premiums written in general insurance will be presented on a comparable basis.

In the third quarter, AIG reported strong financial results, with adjusted after-tax income increasing by 92% year-over-year. The company also saw a 29% increase in consolidated net investment income and a 30% increase in net investment income for General Insurance. Net premiums written in General Insurance grew by 9% and underwriting income improved by over 250% from the previous year. The CEO also discussed AIG's progress in strategic, operational, and financial objectives, as well as recent divestitures and their approach to the casualty insurance market. They also confirmed their guidance for a 10% plus ROCE post deconsolidation of Corebridge.

In the third quarter, AIG had a strong performance with an improved combined ratio and favorable reserve development. Their Life and Retirement business also saw growth in sales and income. AIG returned over $1 billion to shareholders and is committed to reducing their ownership and eventually separating from Corebridge. They also retired Validus Re debt and ended the quarter with $3.6 billion of parent liquidity.

During the quarter, the company made progress on its strategic repositioning by simplifying its portfolio and reducing volatility. They successfully closed the sale of Validus Re to Renaissance Re for $3.3 billion in cash and entered into an agreement with Enstar Group to provide protection against any adverse development on Validus Re's loss reserves. They also announced the sale of Laya Healthcare to AXA for $650 million and the sale of their UK life insurance business to Aviva plc for £460 million. The proceeds from these sales will be used for a special dividend to shareholders.

The company expects a transaction to close in the second quarter of 2024, which will largely be used for share repurchases. Gross premiums written decreased by 1% in the third quarter, but net premiums written increased by 9%, driven by growth in Global Commercial and Global Personnel. North America commercial net premiums written also increased by 5%. However, the decision to not renew two large Lexington programs had a significant impact, reducing Lexington program's net premiums written by 57% in the quarter. This decision was made due to concerns about CAT exposure and inadequate pricing. The impact of this decision was approximately $115 million in the third quarter.

In North America, there was a decline in financial lines, while property, Global Specialty, and Talbot saw growth in International Commercial. Renewal retention remained strong, and new business was up in both North America and International. Lexington Casualty and Western World saw significant growth in new business.

In the third quarter, Retail Property and Retail Casualty saw significant growth in new business, while Financial Lines contracted due to underwriting discipline. International Commercial also saw strong growth, led by Talbot and Global Specialty. In North America Commercial, rate increases were driven by Lexington wholesale, while Personal Insurance saw a 16% increase in net premiums written, mainly from business underwritten on behalf of PCS. The lag in earned premium growth continued to dissipate, resulting in reduced expenses.

In the high and ultra high net worth business, there was a significant improvement in the accident year loss ratio due to improved pricing and transitioning to the non-admitted market. The International personal segment also saw growth in net premiums written, driven by personal auto and travel, and a decrease in the accident year loss ratio. The General Insurance combined ratio improved by 680 basis points, with the global commercial segment performing exceptionally well with a 130 basis point improvement in the accident year combined ratio. Excluding Validus Re, the global commercial accident year combined ratio would have remained flat and the calendar year combined ratio would have improved by over 100 basis points.

The global commercial combined ratio ex CAT for the first 9 months was 83.6%, but excluding crop and Validus Re, it would have increased to 84.3%. The global personal accident year combined ratio improved by 380 basis points due to the North America PCS business. However, there has been an increase in liability and excess casualty claims in the US, driven by mass tort events and rising economic and social inflation. AIG has been implementing a portfolio remediation strategy since 2018, reducing gross limits by $1.4 trillion and establishing strong underwriting guidelines. They are now focusing on managing severity in their casualty portfolio, as their previous strategy involved writing large limits with a higher risk appetite. This required a change in their underwriting approach.

The global Casualty portfolio represents 12% of total gross premiums and 13% of net premiums, with North America and International segments making up 55% and 45% respectively. In North America, there has been a significant decrease in gross limit and average limit size for excess casualty, while average lead attachment points have doubled since 2018. Primary auto and general liability rates have also increased by 200% and 250% respectively, and a strategic reinsurance program has been put in place to further mitigate net exposure and volatility. AIG is adequately protected from vertical exposure and has an adverse development cover for US long-tail commercial lines prior to 2016. Currently, there is $9 billion of unused recoverable limit left from the $25 billion coverage.

The paragraph discusses conflicting views on the use of reinsurance in combination with gross portfolio underwriting. The author argues that a balanced approach, including a strong underwriting culture and strategic use of reinsurance, is necessary for success in the market. They also mention their focus on managing social and economic inflation and their balanced framework for capital management, which includes organic growth, share repurchases, debt reduction, and potential inorganic growth opportunities.

In the third quarter, the company had $3.6 billion in available liquidity and expects to receive an additional $3.7 billion from the sale of Validus Re and Lea Healthcare. They plan to use the proceeds for share repurchases and reducing debt. The company is focused on delivering a 10% ROCE post deconsolidation of Corebridge and has made progress in improving underwriting results, making leadership changes, strengthening capital position, and divesting non-core assets. They have also accelerated their capital management strategy and have a strong liquidity position.

The paragraph discusses the progress AIG has made towards achieving their targets, with a focus on the deconsolidation of Corebridge. It also mentions the sale of Validus Re to RenaissanceRe and the positive impact it has had on AIG's portfolio. The paragraph concludes by mentioning the upcoming discussion on AIG's third quarter results, including general insurance reserves, net investment income, and balance sheet and capital management.

In the third quarter of 2022, AIG's adjusted after-tax income attributable to common shareholders increased by 80%, resulting in an annualized adjusted ROCE of 8.5%. This growth was driven by a strong performance in general insurance, with a 82% increase in adjusted pre-tax income. However, AIG's ownership of Corebridge decreased to 65.6%, resulting in a lower percentage of their consolidated earnings being included in AIG's results. General insurance also saw favorable prior year development of $139 million, with $41 million coming from the amortization of deferred gain on the adverse development cover. The detailed valuation reviews (DVRs) for international casualty and financial lines, North America financial lines, and North America workers' compensation contributed to this favorable development. Overall, North America had $154 million of favorable development, while international had $15 million unfavorable.

The company has seen favorable trends in casualty, bodily injury, securities class actions, and medical workers' comp, which is attributed to changes in underwriting standards and risk selection. The favorable development is mainly from older accident years or short tail lines. There has been adverse development in UK and European casualty, mainly from commercial auto and large loss experience. The DVRs for workers' comp have been favorable. The company also evaluates economic and social inflation trends and mass tort exposure.

The company had favorable development in property lines and personal insurance, but experienced $23 million of adverse development on prior year catastrophes. Net investment income also contributed to earnings growth, driven by higher reinvestment rates on fixed maturities and loans. The average new money yield for fixed maturities and loans was 5.88%, significantly higher than the yield on sales and maturities. The portfolio yield in general insurance and life and retirement increased, and the company expects continued improvement in portfolio yields. Alternative investment income was better than last year but below long-term expectations, mainly due to reduced exposure to hedge funds. The company's investment portfolios have strong credit performance and are well diversified and highly rated. Commercial real estate is being closely monitored.

The debt service coverage ratios in the office sector are strong, but loan-to-value ratios and real estate equity valuations have been impacted. The company has addressed most of its near-term maturities and saw strong results in the third quarter. Adjusted pre-tax income increased by 24%, driven by investment spread expansion and strong sales in fixed index annuities. The annual actuarial assumptions update resulted in a modest increase in APTI. Individual Retirement APTI increased by 52%, while Group Retirement APTI remained flat due to net outflows. Life Insurance APT was also flat, and Institutional Markets APTI decreased due to less favorable mortality experience.

In the third quarter of 2023, AIG saw a 19% increase in sales due to record production, but this was partially offset by lower PRT sales. The adjusted pre-tax loss also improved by $149 million, driven by lower corporate and other GOE and higher short-term investment income. The company remains on track to reduce corporate GOE by at least $100 million in 2023. The balance sheet shows that the estimated risk-based capital ratios are above target ranges, and the company has significant financial flexibility for share repurchases, debt reduction, and increasing common stock dividends. The Validus and Lea sales are expected to bring in an additional $3.7 billion in liquidity in the fourth quarter, and AIG plans to use this for share repurchases and debt reduction. They expect to be able to repurchase around $1.5 billion of common stock per quarter, starting after earnings, and continuing into 2024 depending on excess liquidity levels.

In the fourth quarter, the company plans to accelerate debt repayment and achieve a 10% plus ROCE post deconsolidation. Year-to-date, annualized adjusted ROCE for AIG was 8.8% and 12.0% in General Insurance and 11.4% in Life and Retirement. The company has a pro forma AIG shareholders' equity of about $40 billion, excluding Corbridge. With the sale of Validus Re and the redeployment of proceeds, the current pro forma estimate of AIG equity is about $37 billion. The company is confident in achieving its 10% plus adjusted ROCE goal. The company is ready to answer questions on their reserves and ensuring that the adverse development in international commercial is not due to social inflation.

Sabra Purtill explains the DVR process, which is a once-a-year deep dive into the company's reserves. They also do an actual versus expected analysis each quarter, but the deep dive is where they really drill down into the lines of business. This quarter, the international casualty development was related to specific cases and judgments around settlements, mainly from older accident years with larger limits. The company consistently looks at their book and makes assessments based on specific facts and circumstances. Peter Zaffino adds that North America Personal is a business in transition and they are not pleased with the overall underwriting results, but it is a complicated process.

The speaker discusses the transition year of 2023 and the impact on net premium written and earned ratios. They mention changes in the mix of business and the need for improvement in the overall segment. The speaker also addresses the financial lines segment, noting a decrease in rates and the impact of social inflation. They mention that the reserves held up this quarter but acknowledge the challenges in managing through this portion of the cycle.

The company has made significant progress in repositioning its business over the past few years, particularly in underwriting and cumulative rate. The company's global scale and balance are seen as competitive advantages. The challenges in the financial lines are mainly specific to North America. The company has taken a cautious approach to the large account public company D&O business and is confident in its positioning. The primary market for D&O insurance is stable, with cumulative rate increases trending around 85%. The company is focused on excess insurance and is not chasing volume. Retentions and limits are holding up well in the primary market.

The company's portfolio is mostly within the limits set by the primary insurer, which is a good thing. The competition in the market for larger policies is increasing, so the company is reducing their limits and policy count. The claim environment is a concern, as it may affect the profitability of excess layers. The company's international book is a valuable asset and has performed well. It is larger than the US book and has a wider geographic spread.

The speaker discusses the impact of AIG's global franchise on private company business, SME business, and middle market cyber business in North America. They mention that the rates are holding up better than expected and that there has been five years of work to build and frame the book. They also mention that there are volume constraints on capital management related to the Corebridge separation and that they may potentially do more than $1.5 billion a quarter next year. The timing of share count reduction and special dividends from Corebridge may affect accretion dilution and expectations should be managed accordingly.

Peter Zaffino discusses the company's plans for capital management and liquidity, including the special dividend from the Validus Re disposition. The primary focus is to provide ample capital for growth opportunities and drive profit growth. The company also plans to buy back shares and clean up debt, while being mindful of leverage. The Corebridge sell-down is a priority, but the company will be thoughtful in the current environment. Proceeds from the sell-down will be used to accelerate the outlined capital management plan.

The speaker expects to update the company's capital structure and guidance during future calls. They also discuss the potential for growth in the RemainCo general insurance business, as volatility has decreased and the sale of Validus Re provides more flexibility. The company is looking into repositioning their portfolio and believes they have a significant amount of aggregate to work with.

The speaker discusses the company's significant capital and their focus on growth. They acknowledge the need to reduce expenses and streamline operations in order to improve return on equity. They also mention the success of their portfolio transformation strategy, which has resulted in a $1.4 trillion limit reduction. The speaker is unable to provide a specific percentage for the average policy limit reduction.

Peter Zaffino discusses AIG's improved profitability and reduced volatility, which was achieved by reducing gross limits and implementing reinsurance strategies. He also mentions that leadership changes have helped to simplify the company's structure.

The speaker discusses the changes that have occurred in the organization in the past five years, including low attrition rates and the hiring of new executives. They express satisfaction with the current state of the organization and its ability to attract talented individuals. The speaker also takes a moment to honor the former Chief Financial Officer, Shane Fitzsimons, who recently passed away and was highly respected and valued by colleagues. The speaker concludes by thanking all colleagues for their efforts and wishing everyone a good day.

This summary was generated with AI and may contain some inaccuracies.