Good day, and welcome to AIG's Second Quarter 2022 Financial Results Conference Call. This conference is being recorded. Now at this time, I would like to turn the conference over to Quentin McMillan. Please go ahead.

Thanks very much, and good morning. Today's remarks may include forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations. AIG's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results or events to differ materially. Except as required by the applicable securities laws, AIG is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Additionally, today's remarks may refer to non-GAAP financial measures. The 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'd now like to turn the call over to our Chairman and CEO, Peter Zaffino. Peter Zaffino;Chairman and CEO: Good morning, and thank you for joining us to review our second quarter results. AIG had an excellent quarter with strong momentum continuing across all of our strategic, financial and operational objectives. I could not be more pleased with the exceptional results in General Insurance. And Life and Retirement again delivered good results despite very challenging equity market conditions, significant volatility and other headwinds. As you saw in our press release, adjusted after-tax net income per diluted common share was $1.19. General Insurance achieved a calendar year combined ratio of 87.4%, the first sub-90 quarter and best result this business has achieved in over 15 years. The accident year combined ratio, excluding CATs, was 88.5%, a 260 basis point improvement year-over-year and the 16th consecutive quarter of improvement. And the accident year combined ratio, excluding CATs, in Global Commercial was 85.3%, an…

Thank you, Peter, and good morning to all. As Peter noted, I will provide more detail on our second quarter financial results and unpack a number of our key performance metrics, specifically EPS, liquidity, leverage, net investment income and ROCE. I will begin by providing more detail on the financial results of General Insurance and Life and Retirement in the second quarter. I will then provide more detail on net investment income. I will then review our balance sheet, leverage, AOCI, liquidity and share count, which benefited from excellent execution on a number of capital transactions. And finally, I want to provide you more detail on the execution path to 10% ROCE for AIG and more detail on what we intend to do to get there, including income drivers, expense reduction and AIG 200 where, as Peter noted, we have contracted or executed on our stated goal of $1 billion of exit run rate savings 6 months ahead of our original time line. Turning to EPS. Adjusted after-tax EPS was $1.19 per diluted common share. Improvements in General Insurance profit of $1.26 billion contributed $0.06 year-over-year. Within General Insurance, strong underwriting income of $799 million contributed $0.31 of improvement, offset by a $0.25 decline in net investment income primarily driven by the decline in alternatives. And reduction in shares outstanding also contributed $0.10. Life and Retirement declined $0.52 in APTI to $563 million, which was below last year's second quarter primarily due to $0.36 or $387 million unfavorable from lower net investment income, $0.19 or $202 million from accelerated DAC amortization and an increased SOP 03-1 reserves. The net investment income decline in Life and Retirement was due to alternatives being down $0.21 and an $0.11 decline in yield enhancement income. As I noted, General Insurance's adjusted pretax income contribution…

[Operator Instructions] Our first question will come from Meyer Shields at KBW.

Peter, you provided a ton of information on rates and trend and exposure. But I was hoping we could dig a little deeper, specifically into the exposure benefits for liability lines where premiums are based on receipts, but maybe the relationship between receipts and losses is not as obvious as, let's say, in property, and we've got the concerns of longer tail lines. Peter Zaffino;Chairman and CEO: Sure, Meyer. Thank you for the question. Like you said, we've provided a lot of information in our prepared remarks. But I think, Mark, why don't you go through what the effects are in exposure and also talk a little bit about sort of the loss ratio implications in the observations that we made? Mark Lyons;Executive Vice President, Global Chief Actuary and Head of Portfolio Management: Happy to. So a couple of things come to mind. First off, as Peter mentioned, North America Commercial aggregate loss trend is now up to 6% this quarter as opposed to our upper revision we did last quarter, the 5.5%, because we look at that every quarter. Short-tailed lines are driving much of this increase, and that is seen in our own data as well as external information. And over the last few years, because I'm talking about the weighted average loss cost trend there, the North American portfolio has reduced its property writings and has shrunk as a percentage of total, which helps ameliorate the growth in severity. So -- but we're seeing commercial property line loss cost trends of roughly 10% and in specialty-oriented property lines closer to 15%, driven by inflationary trends in construction materials, replacement costs, labor, transportation, things of that nature. Our view of casualty, bodily injury and the medical side of work comp, though, is unchanged from last quarter. And recall…

Yes. Just a very brief one really on the last comment. Is there an opportunity or an advantage to maybe shifting even more of the premium Phase 2 inflation-sensitive exposure? Mark Lyons;Executive Vice President, Global Chief Actuary and Head of Portfolio Management: Yes. I mean, it's -- that is a potential strategy that you'd -- a little difficult to implement, right, because you have -- part of a profitable portfolio are those things, rated -- inflation exposure basis like premises. However, when you get into other lines, like the M&C side of GL, Meyer, I think what you're saying makes a lot of sense. Peter Zaffino;Chairman and CEO: Yes. I think maybe I'd just add to that, and we'll take the next question, which is all the significant repositioning we've done in the excess and surplus lines, particularly with the Lexington. You hear a lot about in the prepared remarks because they've done such a great job between growth, rate, retention and pivoting that portfolio to be a significant contributor in terms of profitability improvement. I mean, we've gotten on property alone 16 consecutive quarters of double-digit rate increases. And as Mark alluded to, that just starts to drive margins. So we are repositioning the portfolio based on where we see the best risk-adjusted returns.

Our next question will come from Erik Bass with Autonomous.

So with the Corebridge IPO, it sounds like your strategy is to remain patient and wait for markets to recover since you're not a forced seller. Is this the right take? Or if the IPO window opens in the fall, would you look to take advantage and get some stock floated even if at a modest discount to what you view as the ultimate fair value? Peter Zaffino;Chairman and CEO: Yes. Thanks, Erik. We provided a lot of sort of guidance in our prepared remarks, but let me try to add to it. Our plan has always been to do an IPO of Corebridge, and that has not changed. So now we are targeting September. I mean, we gave you some of the variables, but obviously there's more to consider like you outlined. We just felt that the market conditions in the second quarter were not conducive. We always intend to own greater than 50% following the IPO. And therefore, we'll continue to consolidate results for the foreseeable future. The base case is still to do secondary offerings, but those will likely take place in 2023. And so look, we're going to watch the market. We always have to be careful in terms of the conditions that exist in the regulatory approvals. But our base case has just shifted from May, June to September. And we'll watch it carefully, and we'd like to get it floating.

Got it. And then one follow-up on Corebridge. I was just hoping you could talk a little bit more about the performance of your VA hedging program this quarter and the movements in the RBC ratio that we saw. Peter Zaffino;Chairman and CEO: Yes, Shane, you and Kevin want to provide some insight on that?

Yes, so...

Go ahead, Kevin.

So Erik, yes, our VA -- the hedging program, our economic target-based hedging program has continued to perform as we have expected throughout all of the market volatility. It is an economic target-based hedging program, and so the RBC decline was in part due to the variable annuity and index annuity portfolios. And as you know, those market impacts are reversible as markets recover. So we have hedged all hedgeable economic risks. We have an open credit spread position, which we believe is offset by our general account credit portfolio, and the hedge has performed as we have designed it.

Our next question will come from Brian Meredith with UBS.

Yes, two quick questions here for you. First one, thanks for all the detail on the expense outlook going forward. I'm just curious, is there another plan expense reduction program for the General Insurance business post the Corebridge split? And Pete, I'm curious, is there a G&A expense ratio did you think you need to be at or a target you're looking at to be among the most competitive from an expense leverage perspective in the commercial insurance business? Peter Zaffino;Chairman and CEO: Yes. Thanks, Brian. Yes. So as we said, we're really proud and pleased that we just finished AIG 200, and that will start to continue to earn in. The work that we did in the summer for Corebridge, we increased our expectations there over the 3-year period to be now at the upper end of the range of $400 million. So our primary focus is the underwriting excellence in terms of the improvement, the focus on continuing AIG 200 and making sure that operational excellence becomes a core part of the organization, which it already has, but we want to continue that, and then making sure that the separation of Corebridge is done flawlessly. At the same time, we are looking at our overall cost structure. There's a ton of work underway. And as we start executing on those other pieces, there will be -- Shane put in his prepared remarks, where we're going to get out a meaningful amount up to $500 million more of expenses. That's the remaining company within AIG. So that will start to get executed. As we start to deconsolidate, we'll have a path forward as we flow Corebridge and be able to give you more guidance. I don't have a percentage. I focus on the nominal in terms of -- when…

Great. That's really helpful. And then one last question on the whole exposure loss trend. Everybody is talking about increasing exposure. What happens if we go into a recession? Can that actually hurt your ability to see -- accrete margin? Peter Zaffino;Chairman and CEO: I don't think so based on the makeup of the portfolio. But Mark, why don't we end where we started with you just to give a little bit of perspective and then you can turn it back to me. Mark Lyons;Executive Vice President, Global Chief Actuary and Head of Portfolio Management: Yes. Thank you, Peter. And Brian, good to hear from you. So to your question, remember, what Dave McElroy and his team are doing, Lexington is becoming an increasing proportion of the business. And on a non-admitted basis, you have a lot of interesting terms and conditions like minimum earned premiums. So even if that does fall off a bit, that doesn't necessarily translate on a downward movement. Peter Zaffino;Chairman and CEO: Thanks, Mark. Thanks a lot, Brian. Have a great day. And thanks, everybody, for joining us. Really appreciate the time, and have a great day.

And once again, ladies and gentlemen, this does conclude your conference call for today. Thank you for your participation, and you may now disconnect.