Good day, and welcome to AIG's Fourth Quarter 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Quentin McMillan. Please go ahead.

Thank you very much, Katie. Today's remarks may contain forward-looking statements, including comments relating to company performance, strategic priorities, including AIG's pursuit of a separation of its Life and Retirement business, business mix and market conditions. These statements are not guarantees of future performance or events and are based on management's current expectations. Actual performance and events may differ materially. Factors that could cause results to differ include the factors described in our third quarter 2021 report on Form 10-Q and our 2020 annual report on Form 10-K and other recent filings made with the SEC. AIG is under -- is not under any obligation and expressly disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. Additionally, some remarks may refer to non-GAAP financial measures. A reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on our website at www.aig.com. With that, I would now like to turn the call over to our Chairman and CEO of AIG, Peter Zaffino. Peter Zaffino;President, CEO, Global COO & Director: Good morning, and thank you for joining us. Following my prepared remarks, Mark will provide more detail on our financial results and other relevant updates to close out 2021. Shane Fitzsimons, who became AIG's CFO on January 1, will be available for Q&A, along with David McElroy and Kevin Hogan. Today, I will cover 4 topics: First, an overview of General Insurance's fourth quarter and full year performance, where we continue to drive meaningful underwriting profitability improvement. I will also briefly touch on the 1/1 reinsurance renewal season. Second, I will review results from our Life and Retirement business, which continues to be a meaningful contributor…

[Operator Instructions] We'll take our first question from Elyse Greenspan with Wells Fargo.

My first question, given that you guys have just under $11 billion of capital at the parent, your debt to capital is also below 25%, and you have the Life and Retirement IPO coming, shouldn't you be able to buy back more than $3.9 billion this year? Or is the $3.9 billion, Peter, that you mentioned remaining under the authorization, is that a floor? And could you come back later after the IPO and update that figure? Peter Zaffino;President, CEO, Global COO & Director: Thanks, Elyse, for the question. Yes, that's really what we tried to outline in terms of the capital management, is the $10.7 billion, what's in front of us in terms of we see great growth opportunities in the business. And I think that the results and how much they're improving are evidence of that, maintaining the right leverage, committing to the dividend and then talking through the current share authorization and not speculating on the amount or timing of the IPO beyond the guidance that we've already provided. So as we do the IPO, we will continue to refresh that sort of capital management and sort of accelerate what we can do with capital above what we have for liquidity today.

Okay. And then my second question is on that sub-90% underlying margin target in General Insurance. You guys came in at 91% for 2021 for the full year. Given your comments that earned rate should exceed loss trend this year and you still have some AIG 200 expense saves coming in, should we think about seeing improvement in both the loss and the expense ratio in '22? And then also, would you expect to be at that sub-90% during every quarter of 2022? Peter Zaffino;President, CEO, Global COO & Director: Thanks, Elyse. I'll have Mark add to my comments. But we gave you full year guidance. I think Mark gave tremendous detail in his prepared remarks in terms of the earned premium, the improvements that we've made. And again, when you look at the quality in terms of how we're growing with strong top line, strong retention, strong new business, strong rate, developing margin above loss cost, in addition, AIG 200, as you mentioned, earning in is going to give us an expense benefit. The one thing I do want to note that in the expense benefit, we've been investing against that in terms of bringing more underwriters in for growth, particularly in A&H, where we see great opportunities. We're building an operational muscle within AIG in terms of adding high-qualified people that have backgrounds in data, digital, digital workflow. So while we're recognizing the benefits from AIG 200, we're also investing to be able to continue to perpetuate this very strong performance. Mark, do you want to comment a little bit in terms of the -- I don't think we give quarterly guidance, but how you think about next year in a little bit more detail? Mark Lyons,Executive VP & CFO: Yes, happy to, Peter. Thank you. So with respect to your quarterly question, I mean, the Insurance business, we take out a lot of different risks. We have the big portfolio, so you get some smoothing. But quarter-by-quarter, you never really know that. And as Dave McElroy and Peter have said in the past, every quarter has a different underlying mix to it. So we would certainly expect improvement, but I wouldn't be surprised if 1 quarter went off or something. But the year, we certainly expect continued improvement.

We'll take our next question from Meyer Shields with KBW.

Let me start with a question for Mark, if I can. It's going to be a little sort of detailed. But in the supplement, you disclosed $676 million of alternative investments that are above expectations. And then there's, I want to say, $476 million of consolidation offset. And I'm wondering if you could talk about the relationship between those 2? And what sort of rule of thumb we should apply to the outperformance that goes out on the consolidation side? Mark Lyons,Executive VP & CFO: Well -- sorry. Peter Zaffino;President, CEO, Global COO & Director: Go ahead, Mark. Mark Lyons,Executive VP & CFO: So thank you for the question, Meyer. What you'll always see is the -- and basically, what you see in other operations, which always gets a little confusing, granted, is that the investment income in the subs would be double counted otherwise. So what you see as you go through that is that the elimination of that overlap, firstly. Secondly, on the alternatives, I kind of highlighted for you what some of the returns have been on that over the last couple of years, which we certainly wouldn't count on really on a go-forward basis, you don't plan on that level. We're happy to have it, but we wouldn't really contemplate that on a strict go-forward basis.

Okay. And the second question, maybe a little bit less obscure. You mentioned the decrease in PMLs historically. How do things look, whether it's PML or AAL? How do you use 2022 based on both inward network reinsurance? Peter Zaffino;President, CEO, Global COO & Director: Well, let me start, and then Dave, maybe you can just add a little bit of commentary on how we're thinking about the property book. But as I said in my prepared remarks, we were very conservative in terms of how we've been shedding gross limit. This is on the sort of AIG, non-AIG Re side. And we've been very conservative on growth and also we've reduced our nets, I mean. So when I was trying to outline in the reinsurance that we're taking less volatility going forward, just because of all the different factors of what we've been doing on the underwriting side and also to continue to advance and evolve our comprehensive reinsurance program. Before turning it over to Dave, I will comment on AIG Re. We significantly reduced our aggregates in peak zones at 1/1, didn't think the risk-adjusted returns were there. As Mark alluded to, we lowered in the majority of our return periods in the frequency, severity and tail; significantly reduced our net PMLs and have a lot of ability depending on what happens in the market in the future to be able to be responsive. But we were not going to be an index in the market. And I think we were very conservative at the AIG Re level in terms of that deployment. Dave, do you want to add a couple of comments on property? David, you're on mute.

Yes, it's very important to understand the reunderwriting that was done in the Property book. And not only the limits that were taken out, of the $1 trillion, about $600 billion of that was Property around the world. So -- and it really did rearchitect completely different businesses with Lexington becoming more of an E&S carrier. 80 -- 90% of our limits now are less than $10 million, okay? And we let Retail Property play, and they started to do shared and layered. They weren't competing anymore with $2 billion limit. So the whole PML and AAL has come down dramatically, okay? And that's obviously influenced how we buy our [ reinsurances ]. We are reflecting the fact that there is a higher, let's say, expected loss in inflation in the 2022 plan. So we've actually added a little bit above our AAL as a marker for our CAT load in 2022 to reflect that. I think that's just prudent business. It also reflects the fact that the -- we think we have these books from a limit management standpoint, from an exposure standpoint controlled, but we need to be conservative. We need to think of it that way. So -- and that actually extends to the Global franchise, too. There was a massive amount of limits that we've taken out of that portfolio, and that feeds into the respective CAT programs that we have overseas.

We'll take our next question from Erik Bass with Autonomous Research.

I just wanted to walk through the mechanics of the capital transfers prior to the IPO, just to make sure that I have this correct. Is the expectation that Life and Retirement will issue debt and then use the proceeds to pay the $8.3 billion dividend to the AIG Holding Company, and that will then, in turn, use that cash to retire debt? And I guess, is the takeaway that this will put you in a leverage position such that all of the net IPO proceeds will be available to shareholders or for growth investments? Peter Zaffino;President, CEO, Global COO & Director: Yes, it's a really good question, Erik. Thanks for that. Shane, maybe you can just answer Erik's question, but also just give a high level in terms of how we're thinking about the sequencing with the IPO.

Yes. So Erik, you're correct. So Life and Retirement declared a dividend of $8.3 billion, which is a note receivable at parent at the moment. So Life and Retirement will go into the market and actually raise some of that debt actually pre IPO, and we're working through that at the moment. And those proceeds will then come across as a repayment on the note. And then the proceeds from that note will be used to pay down debt at parent. So the goal is to keep debt levels between the 2 companies more or less at the same level moving forward. And I think as Peter outlined, the goal in separation is to have [indiscernible] for the new company in the high 20s and in the -- for the -- what you would know going forward is kind of parent plus General Insurance in the low 20s, is kind of the way that this will evolve. Peter Zaffino;President, CEO, Global COO & Director: Yes. Thanks, Shane. And Erik, you're right, like we're going to have more flexibility as the proceeds of the IPO become available, but we're trying to be very prudent in terms of the capital management leading up to that.

Got it. And then I believe that you transferred the ownership of the asset management business to Life and Retirement at the end of the year? Peter Zaffino;President, CEO, Global COO & Director: Yes.

Can you just help us think about the impact of this change on go-forward results for both L&R and other ops? Peter Zaffino;President, CEO, Global COO & Director: Well, this is a process that we've outlined as part of the separation. So there's a variety of steps in terms of sequencing that. One is that we transfer the investment management group to Life and Retirement as part of the separation. We've been operationally taken assets under management as we put in the prepared remarks and have been very open and transparent about Blackstone. So that was a transfer. We have a sort of target operating model that we're working through with Life and Retirement and with the remaining AIG in terms of the pace in which we will make those changes. But we're going to optimize that structure to make sure that it's in the range of what the sort of AUM basis point fee was in terms of our internal management with using an outsourcing model. So we'll continue to give you more and more guidance, but you should know that like in sequential steps, we want to get the transfer for -- into Life Retirement, then Blackstone and then how we optimize the target operating model to make sure there's not headwinds for Life Retirement in the future.

We'll go next to Alex Scott with Goldman Sachs.

First thing I wanted to ask about is just the ROE at the remaining company. It seems like you provided some helpful guidance on Life and Retirement, what the cash flows could look like. It seems like maybe some of that's getting honed in a bit. And I know you probably can't give specifics so much, but could you give us a feel for what kind of ROE we'll be looking at sort of post separation as we have some stranded costs and things like that to deal with versus maybe where you would expect to run a company with these businesses at the remaining company more long term? Peter Zaffino;President, CEO, Global COO & Director: Sure, Alex. Thanks for the question. Again, we have so much going on that there is, I keep using the word sequencing because we want to make sure that we're doing the underwriting turnaround and all the things that we outlined through the scripts in the right sequence and making sure that we are getting things put behind us. We do have a path to a 10% ROE. I can't really give you a specific time frame because you can appreciate, we have so many moving pieces at the moment. Many of them we addressed in the scripts, but there's some that we can't address until we know further in terms of what are the IPO proceeds and looking further at the structure of the equity. I'm going to ask Shane to comment a little bit more. I mean -- but we know that we have to get expenses and rationalized in the company. But again, those priorities are going to be, we got to focus on making sure that we're driving the underwriting. We have great opportunities as a global leader in the industry, and we want to make sure that we're solving risk issues and capitalizing on all the opportunities present themselves. We want to finish AIG 200, which is going to give some of that expense benefit in terms of driving the ROE and get that done within the calendar year and then pivot to investment on digital. The operational separation of Life Retirement is incredibly important. We've been working with Kevin and the leadership team of getting that set up. So we want to continue to drive that forward, and then we have to execute on the IPO. So once that is largely complete, we know that the parent and what it is today called General Insurance, we have to combine the 2, and we will rationalize that operating model, not only driving profitability improvement but expense improvement, and that will drive the path in terms of achieving that ROE. Shane, I know I probably gobbled up a lot of the details, but is there anything else you'd like to add?

Yes. I mean, Peter, I think the only other thing I would really add is that we also made significant progress here in 2021 with a combination of buyback and getting share. Our leverage down below 25% is a significant highlight. Peter talked about what we have to do in terms of finalizing the remaining equity as part of an efficient capital structure for Remain Co, including post-separation leverage in the low 20s and what capital is needed in the insurance subsidiaries to support accretive organic growth and return to share owners. And I think Peter mentioned as well, we have improved expense ratios, but one of the key drags on our ROE is parent expenses. And we have been rightsizing this through AIG 200 in separation, but we need to do more. And I think Peter has assembled a team that has spent good parts of their career in transformation, driving expense and operational efficiency programs. And we'll turn this headwind at parent into a tailwind, at least, that's -- and that will help us get to where we need to get to. And we will provide updates over time. Peter Zaffino;President, CEO, Global COO & Director: Thanks, Shane.

That's all really helpful. And maybe a follow-up, in General Insurance, can you just comment maybe a high level around how you're balancing, driving further margin improvement from here versus prioritizing growth? And maybe if you could just comment between North America and international, if you could? Peter Zaffino;President, CEO, Global COO & Director: Yes. Let me just give a brief overview, and then ask Dave to comment on a little bit more specificity. One is we have a great balance across the globe in terms of International and North America. We've been driving top line growth, but the underwriting culture that we've developed is all about profitability. And so making sure that we continue to drive that profitability on a combined ratio, it's sustainable, but the areas in where we think we really drive significant value, there's multiple. Mark mentioned some of the product lines. It's not a couple, it's many, and it's across many geographies. And our underwriting leadership capacity and ability to structure programs is going to be something that we think is sustainable, but we won't be sacrificing margin and bottom line for top line. Dave, anything you want to add in terms of some of the specific areas where you're really looking to grow? Dave, you're on mute.

Thank you. You can hear me? Peter Zaffino;President, CEO, Global COO & Director: Yes.

Yes. I think we don't want to front-run 2022, but a lot of the work that we've done over the last 3 years really -- and it manifests itself in 2021. You could see we are growing. You can see the numbers that we put forth on the accident year as well as combined year. And those books form our future. So I've spoken to a momentum business, but we now look at those books of business that we've rearchitected, okay, and it gave us a lot of room to do that, and you saw the pivot to growth. But those are now a well-formed books that we think we can grow off of. If you think about renewal retention, when you think about rate on that book and when you think about new business on that book, we are optimistic around that forming a foundation for growth into 2022 and 2023. And renewal retention is a momentum business, okay? We've been adding a couple of hundred bps to each renewal retention each year. We think that there's opportunity there because we like the book. It's a better price book into 2022. Rates. You've heard some of the rhetoric. We believe that rates will continue to trend above expected loss costs with an inflation buffer in there. We saw in the fourth quarter where there was concern and fear around Property, and Property turned back. And I call out not only to ourselves but to everybody on this call, how we thought there would be deceleration in 2021, but there was a respect in the industry and a reflection in the industry on inflation costs, and the market is reacting rationally to that. And we think that will continue into 2022. And then new business, the machinery and what Peter…

That will conclude today's call. We appreciate your participation.