The conference call for AIG's First Quarter 2024 Financial Results is being recorded and is being led by Quentin McMillan. The call may include forward-looking statements and non-GAAP financial measures, and AIG is not obligated to update these statements. The results will include AIG's Life & Retirement segment and other operations on the same basis as prior quarters. The net premiums written in general insurance will be presented on a reported and comparable basis, adjusted for certain sales.

The second paragraph of the article discusses the first quarter financial results for the company. The adjusted after tax income and net investment income both saw significant increases compared to the previous year. The general insurance underwriting income also improved, with a 19% increase and a sub-90 combined ratio for the 10th consecutive quarter. The Life & Retirement business also reported strong results, with their highest quarterly premiums and deposits in a decade and a 12% growth in APTI. The sale of the UK Life Insurance Business to Aviva plc was also mentioned.

In the first quarter, AIG had net proceeds of $550 million and returned over $2.4 billion to shareholders through stock repurchases and dividends. They also increased their common stock dividend by 11% and increased their share repurchase authorization. AIG ended the quarter with strong liquidity and the CEO will discuss financial highlights, the results in Life & Retirement, capital management plans, and their path to a 10% ROCE. They also provided an update on their sell down of Corebridge Holdings.

AIG's Life & Retirement division will no longer be included in the company's financial statements once Corebridge is deconsolidated. AIG is committed to reducing its ownership in Corebridge and utilizing the proceeds for returning capital to shareholders. In the General Insurance division, net premiums written were impacted by the dispositions of Validus Re and Crop Risk Services. However, Global Commercial had a strong quarter with 1% growth in net premiums written. AIG reconfirmed its guidance for high-single-digit growth in net premiums written for the full year. In North America Commercial, net premiums written grew 4%, with Lexington experiencing significant growth in excess Casualty and Captive Solutions.

In the first quarter, the company saw a significant increase in submission volume and strong new business performance in all lines. Retention for Lexington was also high at 78%. Net premiums written for North America retail property were negative due to reinsurance purchases, while North America Financial Lines declined 4%. International Commercial had flat net premiums written, with growth in International Property and Talbot offset by declines in Global Specialty and international Financial Lines. The combined ratio for Global Commercial improved significantly, with an 84.4% accident year combined ratio excluding catastrophe and an 86.6% accident year combined ratio including catastrophe. International Commercial had the strongest performance with a 82.8% accident year combined ratio excluding catastrophe and a 83.5% accident year combined ratio including catastrophe.

The North America Commercial and Global Personal Insurance divisions of General Insurance had outstanding results in the first quarter, with significant improvements in their accident year combined ratios. The North America Personal division also showed improvement, and the International Personal division maintained a strong performance. The company's reinsurance decisions played a role in the flat net premiums written for the quarter. Overall, General Insurance had an excellent quarter and their reinsurance partnerships have been strategically planned.

AIG's strategy has been to improve underwriting profitability and diversify their business portfolio to deliver consistent results. They have focused on preserving and optimizing capital through active management of risk and volatility. The divestiture of Validus Re and reduction in property limits have allowed for potential future growth while managing exposures. Reinsurance purchasing is concentrated in January and changes in purchasing tend to be more noticeable in the first quarter. Changes were also made in 2024 to more accurately reflect catastrophe costs in pricing.

The company reallocated their PMLs and catastrophe costs to focus on growth opportunities in their portfolio. They have the lowest attachment point among their peer group and have the ability to take on more risk in their catastrophe program. In the first quarter, their net premiums written in Commercial would have been 15% higher if they had chosen to raise their attachment point to $500 million. Their earnings potential is significant and they have the flexibility to continuously evaluate and refine their reinsurance purchasing. In the Life & Retirement business, Corebridge completed a restructuring and has realized $400 million in savings with an expected cost to achieve of $300 million. They have also repurchased $240 million of common shares in the first quarter and ended the quarter with a strong balance sheet and parent liquidity of $1.7 billion.

The Corebridge Board of Directors has approved a $2 billion share buyback authorization as part of their commitment to delivering a 60% to 65% payout ratio to shareholders. The company has also made progress towards their future operating model and saw a 17% improvement in adjusted pretax loss from other operations in the quarter. They expect future parent expenses to be in a specific range and plan to use a benchmark of 1% to 1.5% of net premiums earned for total parent expenses. The company has also focused on capital management, strengthening their balance sheet and completing over $40 billion in capital market transactions since 2022. They have been disciplined in executing their capital management strategy outlined in 2022.

AIG aims to maintain strong insurance company capital levels to support growth and dividends, reduce total debt, and improve leverage ratios. The company has a well-structured debt portfolio and plans to return excess capital to shareholders through share repurchases and dividends. AIG's Tier 1 insurance subsidiaries have the ability to support growth without additional capital contributions, and the company has significantly increased its dividend capacity in recent years. AIG also plans to review reinsurance and consider strategic growth opportunities. The company has reduced its overall debt by over $12 billion and aims to have a debt-to-capital ratio of 15% to 20% upon deconsolidation.

AIG is prioritizing share repurchases over additional work on maturities. They plan to repurchase up to $6 billion in 2024 and up to $4 billion in 2025, covered by a $10 billion share authorization. They expect to have between 550 million and 600 million shares outstanding by the end of 2025. The company recently increased their cash dividend and is confident in their ability to deliver strong financial performance. They achieved a 9.3% adjusted ROCE in the first quarter and a 13.3% adjusted ROCE in General Insurance.

AIG Next is a new initiative focused on achieving expense savings, reducing complexity, and simplifying operations within the company. It will be governed by an experienced team and is expected to generate $500 million in annual savings by 2025. A voluntary early retirement program has already been announced, with an anticipated 50% participation rate resulting in $225 million in one-time costs and a net run rate benefit of $150 million.

Peter, the CEO of AIG, is pleased with the company's performance in the first quarter of 2024. He credits their ability to execute and their efforts to position AIG for the future. Sabra, the CFO, then provides details on AIG's first quarter results, including General Insurance, Investment Income, Life & Retirement, and a balance sheet update. AATI was $1.2 billion, flat from last year due to a reduction in ownership of Corebridge. General Insurance APTI increased $110 million, driven by higher underwriting and net investment income. On a comparable basis, it was up $285 million. Underwriting income also rose $94 million from the prior year quarter, or $239 million on a comparable basis.

International Commercial Lines was the main contributor to higher underwriting profitability, with a $175 million increase in underwriting income. North America Commercial Lines saw a decrease in underwriting income, but it was up $35 million on a comparable basis. Catastrophe losses were $107 million, down from $265 million in the previous year. Prior year development was favorable at $34 million. The General Insurance calendar year combined ratio improved by 210 basis points, and the accident year combined ratio improved by 30 basis points. The accident year loss ratio adjusted for catastrophes was 56.6%, reflecting continued earn-in of rate above loss cost trend and better underwriting and risk selection. The expense ratio for the quarter was 31.8%, down 20 basis points from the prior year quarter.

The expense ratio improved by 90 basis points due to the acquisition ratio and general operating expense ratio. New business production in Global Commercial was strong, with North America and International both seeing significant growth. Overall rate in North America increased by 5%, above the loss cost trend, with significant increases in casualty lines. In International, overall rate increased by 3%, slightly above the loss cost trend, with property, energy, and marine lines seeing the largest increases. However, financial lines saw a decrease in pricing.

AIG is taking a long-term approach to financial lines and remains disciplined in risk selection, terms and conditions, pricing, and reserving. Despite a negative rate trend, the cumulative rate level in North America is 50% higher than five years ago. Renewal retention has improved and remained strong. AIG performs detailed valuation reviews once a year and evaluates pricing, claims, loss trends, and reserves each quarter. In 2024, they will review the North America Casualty book in the second quarter and the International Commercial Lines, Global Financial Lines, Commercial Property, and other lines in the third quarter, with the remaining reviews completed in the fourth quarter. Between reviews, they conduct an actual versus expected review to monitor trends and address any issues.

AIG has been addressing adverse casualty loss development and trends in the 2016 to 2019 accident years by reunderwriting and repricing their casualty book, changing reserving assumptions, and increasing reserves on North American Casualty. Their AVE reviews show that loss experience is within their expectations for these accident years. AIG's reserving philosophy is to react quickly to adverse trends and allow time for favorable trends to mature. There were no adjustments made to casualty reserves this quarter. AIG's balance sheet and reinsurance have improved, leading to better underwriting results and reduced volatility. Additionally, AIG has benefited from reinvestment rates on fixed maturities and loans, resulting in higher yields and net investment income.

In the first quarter, consolidated net investment income on an APTI basis increased by 13%, with General Insurance and Life & Retirement seeing growth of 2% and 16% respectively. The sale of Validus Re negatively impacted General Insurance's net investment income growth, but adjusting for this, there was a 7% increase in fixed maturities and loans due to higher reinvestment rates. New money rates on fixed maturities and loans were also higher, with an annualized yield of 5.9%. Alternative investment income was down in both General Insurance and Life & Retirement. Sales and earnings in the Life & Retirement segment were strong, with premiums and deposits of $10.7 billion and APTI increasing by 12%.

The paragraph discusses AIG's Life & Retirement alternative investment income, which was negative this quarter due to losses in private equity and low income from hedge funds and real estate. The company's total contribution to AIG's AATI decreased by 20% due to a reduction in ownership. The balance sheet shows a decrease in book value per share, but an increase in adjusted book value per share, driven by earnings, dividends, and share repurchases. AIG has made significant financial and operational accomplishments in the first quarter of 2024, and is confident in achieving their goal of 10% plus adjusted ROCE. The call is now open for questions.

In paragraph 20, Peter Zaffino discusses the company's approach to capital management and potential opportunities for growth. He mentions that the company will remain committed to their outlined capital management structure and will prioritize share repurchases. However, they are open to considering inorganic opportunities if they are compelling and strategically beneficial. Zaffino also addresses the competitive environment and notes that while there may not be a significant gap between pricing and loss trends, the company will still pursue growth opportunities in certain areas.

The speaker discusses the limitations of looking at the Marsh Index and emphasizes the company's focus on improving combined ratios and seeking risk-adjusted returns. They mention that the first quarter was impacted by energy in the specialty class, but overall, the company has a strong retention rate and is finding opportunities for growth. The speaker also notes the exceptional performance of Lexington, but acknowledges that market dynamics have changed.

Peter Zaffino, CEO of AIG, discusses the potential for growth in the excess and surplus lines market, despite a slowdown in the property sector. He emphasizes that the E&S market is here to stay and the company is investing in it. In response to a question about the deconsolidation of Corebridge, Zaffino states that they are working on it and hope to complete it before the end of the second quarter. He also mentions a new share count target for the end of 2025, which is 550 million to 600 million shares.

In response to a question about the base case for Corebridge, AIG CEO Peter Zaffino explained that the company's guidance for 600 million to 650 million shares by the end of the second quarter assumes a sell-down of Corebridge and other forms of liquidity. The company plans to continue with $1.5 billion in share repurchases in the third and fourth quarter, which would bring the share count to the lower end of the range. Zaffino clarified that the guidance does not include a sell-down to zero, but rather contemplates several transactions in the next four quarters. He also stated that the $10 billion share repurchase authorization is just an update and does not necessarily mean that the company will exceed that amount by the end of 2025.

The speaker discusses the company's capital management strategy and how it has been derived. They also mention their use of reinsurance and how they have strategically positioned it to control volatility and minimize risk. The speaker emphasizes that their approach to purchasing reinsurance is different from other companies and is directly overseen by the speaker.

The speaker discusses their close collaboration with colleagues to determine the company's risk appetite for the year. They have made strategic reinsurance decisions, such as transitioning to excess of loss in certain segments, which has resulted in better outcomes and protected their capital. They have also made improvements in property cat and high net worth business coverage. The speaker notes that their approach to reinsurance will not impact their gross portfolio, but rather focuses on managing volatility and taking more net opportunities. The next question is about underwriting leverage.

Peter Zaffino discusses the potential for AIG to increase underwriting leverage within its insurance company subsidiaries, particularly in the property market. He mentions the various points of entry for AIG in the property market, including Lexington E&S property, retail property, high net worth business, and international opportunities. Zaffino believes there are great opportunities for growth, and Sabra Purtill adds that AIG has the leverage to take advantage of these opportunities if they have favorable risk-adjusted returns.

The speaker reiterates that all General Insurance subsidiaries have capital above their target ranges, with the US pool having a risk-based capital ratio of around 460%. They note that premiums to surplus leverage is not the best way to measure capital in a General Insurance company, especially for a leading player like AIG in Casualty and Specialty Lines. The speaker then addresses the significant increase in excess casualty premiums and explains that AIG has been taking advantage of market conditions and has been reunderwriting their portfolio for years, resulting in a new underwriting philosophy, strategy, and terms.

AIG is considering all options for the potential sell-down of Corebridge, including multiple smaller chunks or a larger sell-down. They are also looking at the possibility of using an accelerated share repurchase (ASR) after the sell-down. The decision will depend on market conditions and balancing the interests of Corebridge and AIG shareholders.

The speaker states that they are ready to move forward but will do so in a methodical way to ensure the best interests of all stakeholders. They will consider multiple options, including an ASR, to repurchase shares. However, the amount of shares that can be repurchased is constrained by average daily trading volume. The speaker thanks colleagues for their dedication and teamwork and concludes the call.

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