Good day, and welcome to AIG's third quarter 2017 financial results conference call. Today's conference is being recorded. At this time, I'd now like to turn the conference over to Ms. Liz Werner, Head of Investor Relations. Please go ahead, ma'am.

Thank you, Derek. And before we get started this morning, I'd like to remind you that today's presentation may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Any forward-looking statements are not guarantees of future performance or events. Actual performance and events may differ, possibly materially, from such forward-looking statements. Factors that could cause this include the factors described in our first, second, and third quarter Form 10-Q and our 2016 Form 10-K under management's discussion and analysis of financial conditions and results of operations and under risk factors. AIG is not under any obligation and disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Today's presentation may contain non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in the slides for today's presentation and in our financial supplement, both of which are available on our website. This morning, you'll have the opportunity to hear from various members of our senior management team, including Brian Duperreault, Sid Sankaran, Peter Zaffino and Kevin Hogan. The format will follow that of past calls with one question and one follow-up. With that, I'd like to turn the call over to our CEO, Brian Duperreault.

Good morning, and thank you for joining us to discuss our third quarter results. There's a lot to talk about this quarter, and I'll share my perspective on how I view results, the market and how our business is performing. To begin, this quarter, the industry experienced catastrophic losses that surpassed historic levels and had a deep impact on all of us. AIG's response to the catastrophes highlights our strengths, our market presence, and the undeniable value that insurance provides during these times of great loss. Hurricane Harvey, in particular, hit home for AIG, as we have over 3,200 employees based in Houston. I was very impressed with the execution of our business continuity plans for our Houston-based businesses. Due to our multiple-location structure, all these businesses were fully operational within a few days after Harvey hit. While I can say that our employees are extremely dedicated and worked hard for our clients through this event, I am most proud of their compassion in serving their communities. We call them our Houston Heroes, and they share their stories as well as those of others across AIG, including those in Puerto Rico. It is our people who are our greatest asset, and we believe their actions speak to the strength of AIG. To date, we've had over 11,000 claims from Harvey, Irma, and Maria, and our claims team in particular distinguish themselves in this difficult time. The severity of the recent catastrophic events forced AIG and all market participants to reassess appropriate pricing for the risks assumed. We've successfully begun to raise rates in the wake of the catastrophes, and we'll continue to do so. We have recently seen other market participants follow across the property market. In addition to CATs, this quarter's results include additional actions on reserves for the…

Thank you, Brian, and good morning, everyone. This morning, I'll comment on our third quarter financial results and provide an update on our capital and liquidity. Turning to slide 4, we reported an after-tax operating loss per share of $1.22, reflecting catastrophe losses and reserve strengthening on recent accident years in commercial. Our consumer businesses delivered another solid quarter of results with a normalized ROE of 10.6% in the quarter and 11.6% year-to-date. Operating results also benefited from our ongoing expense discipline, with general operating expenses on an operating basis down 11% or over $260 million from the third quarter a year ago. Turning to slide 5, the catastrophe losses of $3 billion were in line with our previously disclosed range and were comprised of $2.7 billion in Commercial losses and almost $300 million in Personal Insurance losses. Looking ahead to the fourth quarter, our early estimate of California wildfire losses is approximately $500 million pre-tax, net of reinsurance and largely in our Personal Insurance business. Turning to slide 6, I'll provide some commentary on reserves. First, we have completed our assessment on over 80% of our reserves in total during our third quarter reviews. This leaves a little less than 20% of our reserves remaining to be reviewed in the fourth quarter. As part of our studies, we accelerated approximately $6 billion of reserves into the third quarter from the fourth quarter based on lines that displayed adverse claims trends. As a result of our reviews, we strengthened prior year commercial P&C loss reserves by $900 million pre-tax, excluding the $62 million benefit from the amortization of the deferred gain on the adverse development cover. Based on the detailed valuation reviews, there was no overall development on the lines covered by ADC with Berkshire. At this point, the remaining…

Thank you, Sid, and good morning, everyone. Today, I will discuss some of my early observations at AIG, our third quarter business results for the Commercial business, and our focus on building an operating structure that will drive long-term sustainable improvements in underwriting, as well as our financial performance. First, let me express how pleased I am to have joined AIG, and it's great to be working with Brian again. I'm also very pleased to be working with a talented leadership team, and all of our colleagues from around the world. I expect the majority of my first three months here as a Global Chief Operating Officer, interacting with clients, distribution partners and colleagues. During my visit to many cities around the world, I've begun to review our operations in more detail, and learn more about our ability to provide value and service to our clients and brokers. As part of the transition to AIG's new operating structure and my expanded role, I have spent the last 30 days becoming more familiar with the underwriting process and claims process for the Commercial and Personal Insurance businesses. Our early observations have affirmed many of the perspectives I had from interacting with AIG as a business partner in previous roles. First, our clients and broker partners regard AIG as an insurer with deep risk expertise and very strong underwriting capabilities, along with innovative solutions to deliver on our expansive global footprint. They want AIG to be a strong and active underwriter of risk, and we have received overwhelming support of our plans to position AIG for the future. My second observation is related to the team at AIG. The spirit and collaborative nature of our colleagues as well as their desire to rally around leadership is truly impressive. Nowhere has that been…

Thank you, Peter, and good morning, everyone. As you can see on slide 14, Consumer produced solid results for the quarter despite higher catastrophe losses. We earned over $1 billion in pre-tax operating income, and our normalized ROE was 10.6%. Higher catastrophe losses were partially offset by lower accident-year losses for Personal Insurance and the favorable actuarial assumptions update and higher fee income for Life and Retirement. Strength of the equity markets has continued to help partially mitigate the challenges and impact of the low-rate environment on our results. During the quarter, we continued to take further actions to enhance returns, strengthen our platforms and pursue targeted growth opportunities. Turning to Individual Retirement on slide 15, regulatory uncertainties and disruption have continued to significantly affect distributors, negatively impacting industry sales, particularly of annuity products. This disruption, along with more aggressive competition in the Fixed Annuity space, led to materially lower Individual Retirement sales and net flows from a year ago. In the face of industry sales challenges, we continued our disciplined approach with respect to product pricing, product features and asset quality. We've enhanced the product design and features for our Variable and Index Annuities in a disciplined manner, which has attracted new sales. And continue to benefit from our broad product portfolio and diversified distribution network. Individual Retirement's Assets Under Administration were at historical highs at quarter-end driven by equity market performance and positive Index Annuity net flows, which resulted in increased fee income. We continued our practice of active spread management but as expected, we saw compression from the runoff of higher-yielding assets and the low-yield environment. Also, Commercial mortgage loan and unexpected accretion income impacted base net investment spreads benefiting Variable and Index Annuities in the current quarter and Fixed Annuities in the prior period. Turning to…

Okay, well, listen, let me do it. So, operator, let's start Q&A.

Absolutely. Thank you. And our first question comes from Josh Shanker with Deutsche Bank. Please go ahead.

Yeah. Good morning, everyone. Thank you for taking my question. Working through all the changes with reserve – inter-quarter reserve charges and whatnot, I look at the liability in Financial Lines segment and I see about 300, 400 basis points of initial PICC improvement from the first half of 2017 to third quarter 2017. Give that you had these early emergent loss problems in the 2016 year, is it prudent to be picking the third quarter of 2017 so much higher – or so much better than the first half of the year?

Well, Josh, I think we're being realistic about our loss PICCs. There was improvement. I think there is some – recognize, the starting points, but if you go accident-year-to-accident-year there was improvements in Casualty, whether it's reducing areas of high loss levels or changing reinsurance, et cetera, we're basically getting rid of programs, et cetera. So we have made improvements, so I think they're realistic. Yeah.

The third quarter book looks somewhat different from the first half book is what you're saying?

Well, I don't know if it's the third quarter. I mean, I look at it on a year-to-date basis. That's the loss ratio you got to look at and that's the one I concern myself with. And Sid tried to give you a kind of a general idea of what the accident year for the – for all of 2017 is going to be and I think that's really, to me, our starting point. And that's the one I would use.

Your next question comes from Ryan Tunis with Credit Suisse. Ryan J. Tunis - Credit Suisse Securities (USA) LLC: Hey. Thanks. So just going back to, I guess, Brian's earlier comments. You originally said that reserves appear reasonable, and I think you also said this morning that, that you still – that, that conclusion still holds. If that's the case, is this – is the lower reserve, I guess, activity we're seeing this quarter, that level of volatility, what investors should be used to or expect on a go-forward basis? Thanks.

Okay. Yeah. Thanks, Ryan. Let me clarify. I think the reserve process is reasonable. And when I look at 2016, it's the first chance we get to look at it really, first real view of it. So, I consider this more underwriting than actuarial. This is looking at our underwriting and understanding what our starting point was and whether the changes taking effect were as strong as they were, and we're setting that up. So we are in a business of volatility. There's no question about it. So quarter-to-quarter, you're going to see movements, but as I said in my remarks, and Peter repeated, we want to dampen some of this volatility through reinsurance to take some of that out, and then get the right base going forward. And that's – I think the real takeaway for you is, that I would like you to understand is, the process is reasonable. The underwriting will get better, and we will get these accident year loss ratios down and we'll get to profitability. Ryan J. Tunis - Credit Suisse Securities (USA) LLC: And, I guess, thinking about the process of – whether it's establishing reserves this quarter or even just losses on the hurricane, is there anything different about, I guess, the approach that you might have taken in establishing what the right size of those was versus what you think AIG may have done in the past?

Well, look, it's very wise for me to comment on what AIG did in the past, and so, I don't want to do that. What I want to do is, say, look, I come here and I look at what we're doing now, and I think it's reasonable. I do. And to me, if you've got a problem, you recognize it, you recognize it early, you admit it, you have to fix it. That's our business. You can't go error free. What you can do is be relentless in the pursuit of the truth and the resulting actions that are required. And that's what we're doing. So, I think it's – I think we're on the right track. I really do.

Your next question comes from Jay Gelb with Barclays. Please go ahead.

Thank you. One question and then a follow-up. The first, I just want to clarify that, as the remaining reserves are reviewed for Property Casualty in the fourth quarter, and we realized there's around 20% left. Am I right in saying or characterizing, what you're saying as, don't expect anything meaningful from a development standpoint in 4Q?

I had a feeling you'd ask something like that, Jay. So, let me give you a couple of data points, okay. There was – yeah, there's about 20% left (36:12) $10 billion, I think something like that and 80% – here's the data point, 80% of that's basically covered by the ADC. So that's data point. And the other is, as Sid pointed out, we pulled forward anything that we saw that was showing deterioration signs, the rest isn't. so, I think those are two indications of what the fourth quarter might produce.

That's helpful. Thank you. And then for Peter, I believe you mentioned in your prepared remarks expectations for double-digit rate increases in Commercial. Are you talking about just Commercial Property insurance? And, I don't if at this point you want to give any expectations for accident year loss ratio improvement in 2018?

Thanks, Jay. Why don't I just comment on what's happening on with rate. And as Brian mentioned and I followed-up is that the tax have been a catalyst for pushing rate, but the accident years for Property have underperformed I think in the industry, with a lot of rate pressure from the better part of the last four years. I think the lack of CAT has allowed the attritional loss ratio to kind of creep up. So in the third quarter, we began to push rate and that was on CAT exposed as well non-CAT exposed business and the rates are holding. I mean, just a reminder, our fourth quarter is the seasonally smallest quarter for Property, so it'll take a little bit of time. I actually think that the reinsurance market hasn't fully worked its way out either with the retro capacity we see capital being raised, so that's really to serve a lot of the current portfolio, how that translates into reinsurance and then into primary, we will see. But we have been over-communicating with distribution partners and clients and outlining a lot of specific reasons why we need rate and the early signs are that we're achieving it.

Your next question comes from Elyse Greenspan with Wells Fargo.

Hi. Good morning. My first question, I guess, is a little bit of follow-up tied together, price and reinsurance. So Peter, on your comment, you pointed to purchasing more reinsurance next year with expectations that rates will be higher. Do you think you guys – is the strategy to get enough price on your own business to offset the impact of paying higher reinsurance price and just how do you envision that all coming together in the margins in your Commercial line's book?

I think you want to – she wanted you to answer that, Peter?

All right, Elyse, well, we had a fairly traditional CAT program on a per occurrence basis. We're looking at a variety of different options in the market now. We're looking at different ways of structuring the CAT, we're looking at different ways to structure our per risk, looking for perhaps some catastrophe covering our per risk. So, we're looking at a variety of different structures. So, we'll be in a better position to talk about it in the fourth quarter. I'm not sure that on our book, we're going to see a significant amount of rate in the reinsurance structure, that's yet to be determined. And that's not going to really influence what we're doing on the front-end. We're pushing rate because we need to improve our accident years in Property.

Can I just add to that? Elyse, let me just add to that. Look, we're buying reinsurance because we have too much volatility, frankly. And I want the partnership of a reinsurer to help me look at our portfolio. There's a lot of value in reinsurance, and we don't expect rate compression. We don't think that the resulting numbers are going to be out of line with where they should be, but we're going to see real value out of the reinsurance. And I don't expect that to be a problem. It's going to be a help to us.

Okay. And then my second question, if we kind of think about the Property market today and just the expectations for higher prices, I mean just from sitting through and thinking about the softness that we've seen over the past years, how sustainable do you think a hard market could be? And, Brian, as you kind of think back, is there another kind of prior period you would compare the type of hardening market we're potentially looking forward to on the Commercial Lines side?

Elyse, that's interesting. I've been around a while, seen a few hard markets, but there haven't been that many. I mean, so we'll not talking about 20. They're all different. They're all different. They all start out different. They all end different. It's usually – obviously, it starts with the fact that the pricing, whatever level, isn't any good. And we certainly had that aspect. I think a lot of times, it's a withdrawal of capacity as opposed to a loss, because the catastrophe itself took it away. They tend to be localized. So in my experience, you could have a Property hard market, and you don't have a Casualty hard market. The 9/11 time was a bit different. So I think the market is recognizing that the Property levels are unsustainable, number one. Number two, the Property market has believed (41:48) it's been living off of the CAT profits. They don't exist. And number three, I think there is a real question about whether the models for CAT are hitting the mark. Is there a global warming, et cetera, the things that we're seeing, wildfires in California. So, I think there's maybe a question about the whole level of exposure that we have. All those are a great making for a market. How long it lasts? I guess it lasts as long as it lasts. How long is a piece of string? I don't know, but I do think it has all the ingredients for a significant improvement to Property because the Property has problems at the frequency level, it's got problems at the severe loss level, and it's got problems in the CAT, and all should be fixed. The interesting thing is the market – we have to do it anyway. We started taking actions and raising rates and taking care of our exposures. And the market is doing exactly the same thing. So we definitely see a sign of a market change here.

Your next question comes from Kai Pan from Morgan Stanley. Please go ahead. Kai Pan - Morgan Stanley & Co. LLC: Thank you and good morning. My first question on the underlying loss ratio trends, and if you look at the (42:52) trend, it improved about 2 points like to 69% in the first nine months of 2017. So, given the underwriting action you are taking right now, and just wonder, the pace of the improvements, the 2 points, do you see that will be slower in 2018?

No, I don't think it'd be slower. I don't think it'd be slower. Kai Pan - Morgan Stanley & Co. LLC: Okay.

Because we're addressing non-Property lines with the actions they require, and risk selection is the number one action taken, and we've already talked about the Property, so, no, I don't think it'll be slower. Kai Pan - Morgan Stanley & Co. LLC: Okay. Great. My follow-up question on capital management, you purchased about like $275 million of shares in the third quarter. Is that level the investor can expect going forward? And how do you see the $4 billion to $5 billion sub-dividends (44:00) going forward each year?

I'm not going to give you an expectation of what we might do in share buybacks. We bought back shares. And we may buy back shares again. I won't tell you when or how or what, but it is a capital management tool; we've used it. We do have capital; we want to deploy that capital in our business, that's primary. I believe we have places that we can deploy to make improvements in our portfolio and long-term structure, and that's the number one priority. Okay. Next question.

Thank you. Next, we'll hear from Tom Gallagher with Evercore.

Good morning. Two questions, Brian. The first one, just on the SIFI de-designation; given when you read the Fed's commentary about how much you shrunk the balance sheet as the rationale for the de-designation. Does this inform your view of what types of deals you might consider from an M&A perspective, meaning would you consider deals that added a lot of balance sheet given what the Fed said in that process?

Well, that's interesting, Tom. When I do a deal that adds to the – well, I think most deals do add to the balance sheet, so that's not my first thought, though, obviously. My first thought is, is it strategic? Is it something that makes us better? Do we get better people or better technology or better market penetration, or are we in places we don't? And I'm not – anything we do would make us larger. But I want us to be better and better balanced and have more diversification on earnings stream. And that trumps anything else.

Got you. And then my follow-up is, when I think about the message at AIG in 2015 and 2016, it was getting far more conservative and shrinking the casualty book. And now you have all this adverse development on the 2016 accident year for the long-tail lines. I guess, what I ask myself, is it possible that there was a lot of adverse selection there as AIG was executing the pivot? Is that part of what's going on here? Or is that – do you think that's not the right observation?

Tom, look – there's probably some of that. I would say that selection trumps price; let's start with that, okay. And if one takes action and it's price-oriented, you could suffer some risk selection issues if you're not thinking selection first. And so I've tried to emphasize in my remarks that risk selection is our first priority, and we will price the products that we like appropriately. And so if there is some adverse selection taking place, we're going to root that out.

Your next question comes from Erik Bass with Autonomous Research. Please go ahead.

Hi. Thank you. With the issues we've seen in 2016, 2017 books, it's clear and as you alluded today, AIG has continued to have some underwriting challenges. Based on what you observed, what do you think is driving this? And can you provide more detail on what you're doing on the underwriting side in terms of talent, processes, data, et cetera, to improve the results?

Yeah. So, look, I think there were some actions, and I don't want to denigrate all the work that was done here. I mean, there is some improvement. But I think the – back to what we said, Peter, and I said about the Commercial business, we attacked the structure because I think the structure was not recognizing that Specialty matters. So, there was a little too much general, it's not Specialty. We imposed, and rightfully so, better underwriting tools, tools to help underwriters get better. But we have to have the underwriters make the ultimate decisions. So I think we – I think the pendulum might have swung a little bit towards the science and less towards underwriting of selection. We want to restore that balance. I think, I know, we're in a volatile. We take a lot of volatility. Our gross lines I believe were too high. I believe our net lines were too high. So when you have issues, they're extreme. If you make a mistake, it's exacerbated. So we want to cut those extremes down. And I think, we want a better balance. I mean, you've got to pick your spots where you can make money and where you can you should reduce. Some of that took place. There's a greater, maybe, an enhanced sense of urgency to do that and, yeah, there's a – we have good people here. But there are places where we need good people that we're getting from the outside. It will always starts with people. You put a good structure together, I think we got a great structure. You put good people in that structure, you empower them, and you hold them accountable, and this is very doable. I've seen it before, I haven't seen – there's nothing I haven't seen before. This is all basic execution and it's execution that will win the day here. And we are executing.

Thank you, appreciate the comments. And just – from the specialization of the business units, what does that mean from a practical basis? And how do you see that improving the results?

Well, we talked about AIG Risk Management. That's a business in our marketplace that comes in, in a certain way, has to be handled by specialists. We have diffused that and spread it across the business. Now we've created the unit, again, we used to have one, we created it again. Lexington; Lexington is a Surplus Lines company. It requires a separate unit with people who are specialists in Surplus Lines work. We had taken that business and kind of spread it into our branches. And so, there are – people were doing both. That's not a good way to structure, so we've gone back, and we're creating the Lexington. Peter, maybe you want to add something?

Yeah, Brian, I think just to add to what you were saying is that by creating these distinct units that have very strong capabilities within their segment, if you look AIGRM, the ability to share best practices across the loss sensitive and Risk Management business is going to yield better results. We are doing a bottoms-up review, so Bill Rabl is going to look at – there's a finite amount of risk, there's 800 (50:48), we're going to do a ground up view of risk selection, attachment points and using all the tools, data and capabilities that we have to price the business. So we're really going to get into the details and focus on underwriting and improving the book.

Thank you. Your next question comes from Larry Greenberg with Janney. Please go ahead.

Yeah. Thanks. Just following up on underlying loss ratio. I just want to be sure I'm understanding this, that usually when we hear about underwriting actions and how the accounting works in this business, it usually takes a year to two for it to flow through the bottom lines. But am I understanding that, that with reinsurance, with cutting back limits, with some of the actions that you or your predecessors might have taken to-date that we can expect or should expect an improvement in 2018 levels?

Well, one would hope our 2018 has improved over 2017, that's the actions we're taking. And yeah, reinsurance can speed it up a little bit, I suppose. Things still have to earn out. 2017 is going to earn out into 2018, that's just life. And there's nobody that wants to get this done any faster than me. I know you're impatient I'm even more impatient than you are. There is a sense of urgency here. We'll get it done as fast as humanly possible.

Great. And then the volatility in the larger severe losses in the Property line, is there any way to kind of give us a tolerance level for severe losses? Or how we should be thinking about that prospectively as you cut back limits?

Peter is going to answer that.

Yes. I think Larry, back to what we had talked about on the risk appetite for a property per risk, we probably – when we were re-underwriting the book, I think we took some very good actions to try to improve the overall portfolio. I believe focusing on areas of key segmentation and continuing that evolution. But I think it'll be a better chance for us to update in the next quarter when we have an understanding of our per risk. I think our tolerance is going to decrease, and so some of those spikes that perhaps you've seen in the past will be leveled out. I think that's what Brian was referring to, and lessening the volatility that we're seeing on some of the losses, even in Casualty where we just have too big of a net. So, I don't think you can draw to one specific reason as to why it's occurring, other than we want to protect the balance sheet and protect our results through reinsurance purchasing above severe.

Thank you. Your next question comes from Brian Meredith with UBS.

Hey. Good morning. Two quick questions here for you. First, if I look at the general operating expenses, down 20% year-over-year in the Commercial line segment. So, Brian, Peter, I'm wondering, when are we going to start seeing the investments in the business that you'd talked about start to kick in on the expense side? And could that have some offset with respect to the margins in the business as the loss ratio may be goes down, you'll start to see the expense ratio at least in the interim kind of move up here?

Yeah. Investment is – we're investing in people. So there's good GOE and bad GOE, that's a good GOE.

Right.

And we're investing in people. So that – and I said this in the last call, maybe you're going to see – you could see some offsets to reductions over here with increases over here, but we're adding to the strength of the company. Ultimately, that's a good thing. So I'm not – we have to be expense conscious in this business. We, as a company, still have an expense level that's in excess of our peers and therefore, in excess of what the market will bear. We've got to address that. There's no question about it. And there's different ways to address it, but getting better people in is – has to be a priority, period. Sid, you want to say something?

Yeah, Brian, I'd just remind you one of the areas that we've been most aggressive on and that has contributed to our expense discipline has been areas such as professional services fees, overhead IT infrastructure, real estate and we're going to continue to attack those areas I think with a tremendous amount of discipline, both at AIG level and in Commercial.

Right. And we're going through this – we mentioned the structure. The structure calls for – like all unit integrity, more specialized units, more of them. Technically speaking, that probably adds a little bit to expense levels. But my experience is when you put someone in charge, give them a unit, they squeeze the living daylights out of the expenses. So, I think ultimately, that's another great way to get our expenses under control. Give people responsibilities for a P&L, and you'll see expense discipline.

Great. And then, just next question quickly, just on the share buyback that we saw on the quarter, kind of taking a little bit different way here toward this, Brian. $250 million, not a whole lot, not that meaningful. Why buy back anything? Why not just keep the cash in your balance sheet for these investment opportunities?

I got to say, what a great question, Brian. I mean, I didn't expect to say, why you're buying any stock back? So this is interesting. It's a management, it's a capital management tool, and we deployed it and I'll continue to deploy it. Look, I don't have anything against stock buyback as a management tool. If I can find something better to do with the capital, you know I better be doing that, that's what we get paid to do. So no, we make the decisions as the moment arises, and we'll continue to do that.

Look, I think I'm being told that we should wrap up. So operator, I'm going to just do some closing remarks now. Look, first of all, thank you, investing publics to – that listened to the story. I think, just be confident in our efforts. We will right this ship, it's started already. I am a very optimistic man about this, I really am. And then, I really want to finish by thanking the employees. Look, we've gone through a very difficult quarter, catastrophes that have affected us as a business and affected us personally, and I can't be prouder. So thanks, everybody.

And once again, that does conclude today's conference call. We thank you for your participation. You may now disconnect.