Good day, and welcome to AIG's Third Quarter 2023 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 provide details on important factors that could cause actual results or events to differ materially. Except as required by applicable securities laws, AIG is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks may also include 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 aig.com. Additionally, note that today's remarks will include results of AIG's Life and Retirement segment and Other Operations on the same basis as prior quarters, which is how we expect to continue to report until the deconsolidation of Corebridge Financial. AIG's segments and U.S. GAAP financial results as well as AIG's key financial metrics with respect thereto differ from those reported by Corebridge Financial. Corebridge Financial will host its earnings call on Friday, November 3. Finally, please note that today's remarks as they relate to net premiums written in General Insurance are presented on a comparable basis, which reflects year-over-year comparison on a constant dollar basis adjusted for the international lag elimination and the sale of Crop Risk Services and the sale of Validus Re. Please refer to the footnote on Page 26 of the third quarter financial supplement for prior period results for Crop Risk Services and Validus Re. 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…

Thank you, Peter. This morning, I will provide more detail on AIG's third quarter, including General Insurance reserves, net investment income, Life and Retirement results and balance sheet and capital management. Adjusted after-tax income attributable to common shareholders this quarter was $1.2 billion, up 80% from 3Q '22, for an annualized adjusted ROCE of 8.5%. AATI per diluted share was $1.61, up 92%, reflecting the accretive impact of share repurchases over the last year. The earnings growth resulted from the 82% increase in General Insurance adjusted pretax income to $1.4 billion, driven by top line growth, improved underwriting results and higher investment income. It's important to note that while Life and Retirement also had strong earnings, AIG's ownership of Corebridge decreased to 65.6% this quarter compared to 90.1% before the IPO. And therefore, our results include a lower percentage of their consolidated earnings than last year. In total, Corebridge contributed about $32 million to the $514 million increase in AIG's adjusted after-tax income. Turning to General Insurance. Peter summarized our underwriting results, but I want to cover prior year development and reserves in more detail. In the quarter, General Insurance prior year development, net of reinsurance, totaled $139 million favorable, including $41 million from the amortization of deferred gain on the adverse development cover. About $129 million, including the ADC gain, resulted from the detailed valuation reviews, or DVRs, with the balance from other items like catastrophes. The DVRs covered $34.1 billion of loss reserves on a pre-ADC basis, about 70% of the total. The DVRs of particular note this quarter were for International Casualty and Financial Lines, North America Financial Lines and North America workers' compensation, which last year was completed in the second quarter. In total, North America had $154 million of favorable development, including $39 million from…

[Operator Instructions] Our first question comes from Meyer Shields with KBW.

One question to start on reserves. I guess, what's the process for ensuring that the adverse development in International Commercial doesn't actually reflect social inflation problem and that it's individual cases? Peter Zaffino;Chairman and CEO: Meyer, thanks for the question. Sabra, do you want to cover? That's just a quick overview of -- Meyer mentioned the International and some of the inflation impact from reserves.

Yes, certainly. And let me first start by explaining what the DVR process is. So DVR is a once-a-year deep-dive into our reserves. But each quarter, we do an actual versus expected analysis. So we do make adjustments to reserves on lines of business during the ordinary part of the year, but the deep-dive is where we really drill down into the lines in great detail. This quarter, as I noted, we had International casualty. The development that you see is related to very specific books or -- and I'm sorry, I'm getting a little feedback on the line here. So I don't know, Meyer, maybe you need to mute. Anyway, the International Commercial Lines is very much related to specific cases and judgments around settlements. And as I said and would also note in Peter's comment, these are generally from older accident years where we are exposed to much larger limits. So therefore, when you have a particular claim that goes against you, they do -- they are lumpy and they tend to be large. So what I would just say again is that we look at our book consistently during the course of the year, do a deep-dive once a year and then make some assessments based on specific facts and circumstances. Peter Zaffino;Chairman and CEO: Thanks, Sabra. Meyer, do you have another question?

Yes, just a quick one. I know there's a lot of moving parts in North America Personal. I was hoping you could give us some sense of maybe true underlying underwriting results and the path to profitability in that segment. Peter Zaffino;Chairman and CEO: Great. Thank you. As we've talked about before, it's a business in transition. We're not pleased with the overall printed results. But we had outlined in the past that it's complicated. 2023 would be a transition year, particularly with PCS, which we see a lot of net premium written coming in each quarter. The earned will follow, and so we should have some significant benefit on the ratios as we fully earn in the premium over the coming quarters. When we look at fourth quarter 2023 and into 2024, we will see the mix of business change. And so therefore, the overall GOE and acquisition expenses should come down. We would see the accident year loss ratio, ex CAT, slightly go up just because of the mix of what PCS is underwriting. We did have some onetime items that I won't go into in the quarter that were headwinds in the Travel and Warranty business. But those businesses are going to have to contribute more as we get into 2024, and we're looking at the entire business model in order to improve their financial results. So we recognize the overall segment needs to improve. We believe we have the sort of business strategic alternatives in place, and we're going to be executing them. And again, it's just a choppy year as we make that transition.

Our next question comes from Gary Ransom with Dowling & Partners.

I wanted to ask about Financial Lines. On the one hand, you noted that rates are going down in that segment. And on the other hand, you were talking about social inflation. And I mean, just generally, it seems to be as worrisome as ever. I know your reserves held up this quarter, but it's like we're in a soft market for those financial lines. And I wondered if you could add some more color on how you're managing through that portion of the cycle in that business. Peter Zaffino;Chairman and CEO: Sure. Yes, thanks, Gary, for the question. And I'll have Dave make some specific comments. When we talk about the headwinds in Financial Lines, and again, Dave will go into it, but it's primarily North America and it's primarily excess. We've done a tremendous job over the past couple of years to reposition the business and not only with the underwriting, but also with cumulative rate. And so we still think there's margins, still think our scale and balance across the world is a competitive advantage. And when we talk about some of the challenges in Financial Lines, it's really specific to North America. Dave, do you want to provide some context in a little bit more detail, please?

Yes. Yes, thank you, Peter. And thank you, Gary. The -- this is obviously a business that I've got a lot of scar tissue in over a lot of 40 years of this. And I sometimes think of my career credibility tied into fixing this book, but I am very confident with where we have positioned the book, okay? The -- we've taken a cautious approach to the large account public company D&O business and particularly excess, Gary, that you've referred to. So we're aware of the consequences of chasing volume, okay? We've seen companies go close to the sun, they burn out, where that's our sophistication. So the -- what we're doing here, private -- public company, D&O, the market, the private, their primary market is, frankly, a stable market, okay? It's holding up well. Cumulative rate increases, even though they went up 120% from the '18 to '21 year, they're trending around 85% today, and they're holding, okay? This is going to be about a story about excess. And I do want to frame this that in that primary market, there are a couple of key points that are also holding and that's retentions are holding up very nicely, okay? There hasn't been an erosion in the self-insured retentions that clients are keeping. And we look at that as sort of an acting hedge against legal cost inflation. And then the other fact that I've always been worried about is the arms race back to limits. And this industry did a great job, and I believe there was respect for this volatility by taking 25 million limits down to 10s and 15s down to 5s. So even today, our portfolio is in the 80% to 90% range of those limits on a primary basis. And therefore, the arms…

Yes, that's a very thorough answer. I'm good. I mean I'm good with that.

Our next question comes from Alex Scott with Goldman Sachs.

First one I had for you is on sort of capital management related to Corebridge separation. I appreciate there's volume constraints, and it's good to have some guidance around how much capacity you can do in terms of buybacks a quarter. I did want to probe you a bit on to what degree, if at all, that, that considers further kind sell-down at Corebridge and sort of further special dividends coming out of Corebridge and so forth. I mean I think the math would tell us that you could potentially do more than $1.5 billion a quarter, particularly for like next year over 4 quarters. And I'm just a little sensitive to it because it affects sort of accretion dilution and just the lag and what to expect. So I want to make sure we have appropriate expectations around the timing of that share count reduction and so forth. So any help is very appreciated. Peter Zaffino;Chairman and CEO: Yes, thanks very much for the question. I mean we tried to provide between Sabra's script and in my prepared remarks a lot of detail on capital management and also the additional liquidity where we're going to have from the special dividend from the Validus Re disposition and overall how we intend to use those proceeds. And it remains the same is we want to make sure that we provide ample capital in our subsidiaries to continue to drive growth. We still think there's great opportunities for us in the businesses that we're in to drive top line growth and continue to drive profit growth and more margin, and that is our primary focus. We've also given guidance in terms of the share count. And clearly, with the 7.5 billion of share authorization and now with the liquidity that we've outlined,…

Yes, that's helpful. Second question I had is on the, I guess, the operating company level on the RemainCo General Insurance side of things. Where do you see those metrics over time? I mean one of the things that I've looked at is just decomposing the ROE, and the underwriting leverage itself seems lower at AIG, which made all the sense in the world as you guys had more volatility. But as you sort of expressed in your opening comments and as you guys have sort of proven out, the volatility is significantly reduced. So where can that go to over time? What are the right metrics for us to look at? Is it RBC premium to surplus? Any help on thinking through how much more business you could write on the equity you have? Peter Zaffino;Chairman and CEO: Yes. Well, we could write significantly more business based on the capital we have in the subsidiaries today. We have a lot of moving pieces. I mean, certainly, selling Validus Re gives us a lot more flexibility in terms of how we position the portfolio for next year. And so I'll give you a couple of examples of that is that we underwrite property business where we pick up CAT across the world, whether it's Japan, our International business through Lexington, through Talbot, through our retail in North America. But we always had to be very cautious in terms of the overall volatility in terms of how we're correlated with Validus Re, including our reinsurance purchasing where we had certain retentions that might be lower than what our risk tolerance would assume within North America and International. We bought ILWs that benefited the group. And so like as we think about how we reposition the portfolio, I believe we have a…

Our next question comes from Michael Zaremski with BMO.

My question is kind of on some points that were touched on already on the portfolio transformation strategy, which has obviously been successful over the past 5 years. So Peter, you used the T word, trillion, you said $1.4 trillion limit reduction. So just curious, I think David gave us a flavor of this answer, but does that -- is there a way to frame what percentage limit reduction your average -- this average policy is? It sounded like David said it's over 50% in some of those Financial Lines? And just related, like how is that -- was AIG an outlier previously and you moved towards the market? Or just how has this changed your competitive position in the marketplace? Peter Zaffino;Chairman and CEO: Yes. I think you recognize how we were able to reduce volatility. When you have -- I have to even pause when I have to write out trillion because it's a big number. And $1.4 trillion of limit, I don't think that's been done in our business before, and then reposition the portfolio to drive significant profitability improvement. It absolutely was an outlier. Its gross limit deployment and net limit deployment was significant relative to any of its competitors. And in order to have the type of predictable results we've been able to produce over the past couple of years, when you see the relative improvement as well as absolute improvement, we are really proud of that. You had to take out the volatility, which was the outsized limits, not only from a gross perspective, and we recognize that. While we talk about it is that, yes, we're a buyer of reinsurance, it's strategic, it matters, but it's not what's driving the results. The driver of the results is the gross underwriting and the overall reduction. Everywhere you look, property, casualty, financial lines, everything is 50% plus of reduction of gross limits. And then you add on reinsurance to temper volatility, that's how we've been able to position the portfolio to have not only significantly improved results, less volatility, it's also very sustainable. And we believe that there's opportunities for further improvement.

Okay. Great. And my last, if I may, is on -- there's a lot of leadership changes over the past, right, years and quarters. I think Sabra used the term simplify structure. I guess any color you can offer on are we -- is the structure simplified, we're on baseball inning 4 or 9? Or any comments would be helpful. Peter Zaffino;Chairman and CEO: Sure. Look, we've had a lot of change over the last 5 years. When I look at our overall attrition, it's at all-time low. We've had a couple of senior executives that we brought in to position the organization for the future and believe that the underwriting structure that we put forward is going to be with us for a couple of years. It's going to drive the performance that we've become accustomed to. And we'll continue to bring in skill sets in the organization that supplement what we already have in order to position us for the future. So I'm like really very pleased. As I said, we have very low attrition, continue to upgrade talent across the organization. And people want to come work here, which is a really positive attribute of the organization and how we position it for the future. So thank you. I do have one closing remark. First of all, I'm very proud, and I'd like to thank all of our colleagues for their efforts and all that they've done to progress our strategic plans and deliver consistently strong financial results. Very proud of them. I would like to say a few words about our former Chief Financial Officer, Shane Fitzsimons, who passed away on Friday, October 27. Shane had a brilliant career. He was highly thought of in the global business community and quickly earned the trust and respect of the insurance industry, which is not easy to do. He was a cherished colleague here at AIG. Shane brought energy, integrity and a very positive attitude that was both contagious and inspiring. He's a big reason why AIG is where it is today. Shane was a great friend to many of us, and we're so grateful for all that he did for AIG, our stakeholders and our colleagues. Thank you, and have a great day.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.