Good day, and welcome to AIG's Second Quarter 2024 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, circumstances or management's estimates or opinions should change. Today's remarks may also 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 aig.com. Additionally, note that following the deconsolidation of Corebridge Financial on June 9, 2024, the historical results of Corebridge for all periods presented, are reflected in AIG's condensed consolidated financial statements as discontinued operations in accordance with U.S. GAAP. Finally, today's remarks related to General Insurance results, including key metrics such as net premiums written, underwriting income and underwriting margin are presented on a comparable basis, which reflects year-over-year comparison on a constant dollar basis as applicable, and adjusted for the sale of Crop Risk Services and the sale of Validus Re. We believe this presentation provides the most useful view of General Insurance results and the go forward business in light of the substantial changes to the portfolio since 2023. Please refer to Pages 29 through 31 of the earnings presentation for reconciliations of such metrics reported on a comparable basis. With that, I'd now like to turn the call over to our Chairman and CEO, Peter Zaffino.

Good morning, and thank you for joining us today to review our second quarter 2024 financial results. We have transformed AIG and have done the foundational work for the next chapter, and I'm excited to take you through it today. Following my remarks, Sabra will provide more detail on the second quarter. Then, our North America and International leaders, Don Bailey and Jon Hancock will join us for the Q&A portion of the call. Our prepared remarks have a lot of detail, particularly related to our deconsolidation of Corebridge. We intend to provide ample time for Q&A. I want to start with highlights of our outstanding second quarter performance. As Quentin mentioned at the beginning of the call, all figures I will reference today will be on a comparable basis, excluding the impact of Validus Re and Crop Risk Services unless otherwise noted in order to provide a clear view of our underlying performance. Adjusted after tax income was $775 million, or $1.16 per diluted share, representing a 38% increase in earnings per share year-over-year, driven by strong organic growth, a continuation of our very strong underwriting performance, ongoing expense discipline, volatility containment and a decrease in shares outstanding. General Insurance net premiums written grew 7%, led by Global Commercial, which grew over 8%. Underwriting income was $430 million. The underlying underwriting income, excluding catastrophes in prior year development improved $110 million or 17% year-over-year. The calendar year combined ratio was 92.5%, a slight increase of 10 basis points from the prior year. The accident year combined ratio, excluding catastrophes was 87.6%, a 170 basis point improvement from the prior year. The CAT loss ratio was 5.7%, or $325 million of total catastrophe related losses. Consolidated net investment income on an adjusted pre-tax income basis was $884 million, a 14%…

Thank you, Peter. This morning, I will provide details on AIG's exceptional second quarter financial results with a particular focus on the accounting treatment of Corebridge deconsolidation, General Insurance quarterly financial results, written premium rate trends, other operations, book value per share and ROE. I will begin with Corebridge related activity this quarter and the accounting treatment on AIG's financials. A few key dates to outline. On May 16, we announced the agreement with Nippon Life. Because that sale could close within 12 months of the announcement and reduce our ownership to well below 50%, held for sale accounting and the classification of Corebridge as discontinued operations was triggered for accounting purposes. Next, we sold 30 million shares of Corebridge on May 30, which brought our ownership to 48%. However, it did not trigger deconsolidation accounting, because AIG still had a right to majority representation on the Corebridge Board. On June 9, we raised our right to majority representation and one of our designees resigned from the Corebridge Board triggering deconsolidation accounting as well as the required filing of pro-forma financials with the SEC four days later. Discontinued operations and deconsolidation accounting principles drove significant changes in AIG's financials this quarter. We added a few slides in the investor deck to explain these changes, which I will refer to in my remarks. Let me start with the impact of held for sale and discontinued operations on Slide 15. Held for sale accounting stipulates that when you reach an agreement to sell a business, its financials must be recast in the current period with assets and liabilities each classified in one-line for both sides of the balance sheet. However, since Corebridge was a core business that we fully intend to exit, it also met the accounting criteria for discontinued operations, which…

Great. Thank you, Sabra. Operator, we're ready for questions.

Thank you. [Operator Instructions] Our first question comes from Michael Zaremski with BMO. Your line is open.

Hey, great. Good morning. First question on the updated kind of combined ratio trajectory guidance for '25. So loud and clear that you'll be able to kind of hit it a bit sooner. I'm curious if you can kind of, if we focus on the loss ratio, what the guidance implies on a like-for-like basis on the loss ratio? Some of the questions we get continuously around most companies seeing some slippage in their loss ratios given lower levels of reserve releases. I'm curious if that's something that's considered within your loss ratio guidance.

Thanks, Mike, for the question. The guidance that we've given in terms of what we expect for the full year 2025 does not contemplate any improvement in loss ratio. It's all in the expense ratio. And so we're trying to guide everybody is that all the expenses that exist in other operations will transition into parent, they'll go into the business or they'll be eliminated and that we're not going to be increasing our combined ratios based on the guidance that we gave at the end of '23. So we're not anticipating any caveats on loss ratios to be able to meet that guidance.

And I guess just I'll stick on this for my follow-up. So given pricing is below loss trend in certain lines like property and understanding that the absolute, maybe this is the answer to the absolute pricing levels are still accretive to the -- to ROE or loss ratio just does it. To the extent, the current pricing environment held, why does it kind of make sense that the loss ratio should be able to kind of stay flattish, and not trying to be negative, just trying to nitpick on the margin?

No. It's a great question. Let's take North America, for example, because you pointed out property. This quarter in terms of the overall index and rate increases, property was the headwind in that index. In casualty, we achieved mid-single digit to high-single digit rate with like 12% and excess casualty plus 2% in exposure. In Lexington, it was 11% increase in casualty, 12% in health care. So again, above loss cost trends. Property was flat this quarter. But you have to look at what's happened with the property market over the past several years. And if you look at the -- even last year in -- like excess and surplus lines, it was a 34% increase and the retail, it was 30%, that's after four years of double-digit rate increase. So I think -- look, with the low activity in CAT maybe in the first quarter, the cumulative rate increases over time, I mean, the property combined ratio fully loaded with CAT, even with giving a little bit back in the second quarter has an outstanding combined ratio. And if I can get that combined ratio for the rest of my career, I'll take it. I mean, like I don't think there's any deterioration in terms of what our overall index will be. And again, I can't really predict, that's why I kind of went into a little bit more detail about like sort of the CAT market is that we don't know. I mean, like, so property is highly driven by what happens in CAT and underlying inflation. And so I'm not going to predict what happens sort of six quarters from now, but I think we feel really comfortable with the portfolio and its profitability.

Thank you.

Thank you. Our next question comes from Meyer Shields with KBW. Your line is open.

Thank you. First question, just I was hoping we can get a general sense of the impact of the sale of the travel insurance on underwriting results in North America Personal

Hey, Meyer. Good morning. In terms of -- I outlined in my prepared remarks, the premium impact, which is the $750 million on net premiums written. But on the overall combined ratio, it's going to be de minimis in terms of what we would lose within General Insurance once we pro forma it out.

Okay. Perfect. Second question, I guess, on the excess casualty, if I understood Sabra's comments correctly, you had favorable development even on that line outside of 2021, which was a weird year. And I was hoping you could sort of break that down for us. I assume that that's older years rather than recent years, but I wanted to confirm that.

Yeah. I'll hand it over to Sabra. But as you know, and she gave a lot of detail in her prepared remarks, and we reviewed 45% of our total book in the second quarter. And in casualty, just based on what's going on in the global market, we really drilled down on every line of business and every year and went through it in tremendous detail. So Sabra, maybe you can just give a few highlights in terms of that analysis.

Yeah. Sure. And just for everyone's benefit, I'll just start by framing a little bit what we did in the quarter for the DVRs. So this quarter, we evaluated $20.2 billion of reserves for U.S. casualty. That's comprised of 23 separate DVRs and more than 200 different lines of business, and then that aggregates to the five lines that you see on the 10-Q. So the net changes in the quarter were only about $20 million after written premiums, and that was $80 million favorable in workers' comp after the ADC, which has about $8 billion of reserves. It was $22 million unfavorable in excess casualty, which also has about $5 billion of reserves. And then in casualty, it's also about $5 billion reserve for $17 million favorable. In terms of the 2021 accident year, as we've noted on previous calls, we've increased our loss cost trends for 2020 and subsequent years. The adjustments we made in 2021 are from just a combination of known early reported claims that due to their facts and circumstances, we expect to penetrate the excess attachment level, including a rebound in the auto frequency and severity. In 2022 and 2023 accident years, we just have not had that same level of early claims experience, and therefore, we still have a high level of IBNR in the reserves. With respect to the accident year within excess casualty, I would note that while we did have the $66 million of adverse development in accident year 2021, we had $33 million of favorable development excess casualty from accident years prior to 2016, and that's where the delta comes it nets down to closer to the $22 million amount.

Yes. Got it. That's exactly what you needed. Thank you.

Thank you, Meyer. Next question, please.

Thank you. Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Hi, thanks. Good morning. Appreciate all the color you guys are providing on the call. My first question, Peter, you said that the full year 2025 calendar year combined ratio would be the same or lower than the full year '23. Since you said comparable basis, I'm assuming you mean ex-Crop and Validus. Can you guys just disclose what that figure is, just so we know what you're setting the '25 baseline out? What was the 2023 adjusted figure?

91.6%.

Okay. Thank you. And then my second question is, you also mentioned in your prepared remarks, you said something about exploring inorganic opportunities. Can you just expand what that means? You guys have obviously taken action of divesting of certain businesses. So what would you look at on the expansion side and what criteria would any potential inorganic deals need to meet?

Thanks, Elyse. I included that in my prepared remarks, just based on the amount of financial flexibility, strategic flexibility that we've created for ourselves. The divestitures have been really about not having like really the businesses that we divest were terrific, and they fit very well with their new owners. But some of them needed scale, like travel and crop. And we wanted to be a little bit less in the volatility business, and therefore, Validus Re was divested. I would think as we look to the future, again, we're going to be very selective, very disciplined. But there are opportunities perhaps where we have existing businesses where we feel as though, we have competitive advantages that having more scale would be helpful. There could be complementary geographies as we look to different parts of internationally, but terrific international business. But there could be places where we want to expand further that give us not only better capabilities within that geography, but also could be very good for our multinational network. There are opportunities to invest further in businesses that we have. Think about AIG TATA in India is a fast-growing large scale business that is an industry leader. And so there's opportunities there as well. So we will use the same criteria, which is to make sure it's disciplined, it's additive, its strategic and it actually furthers and accelerates the progress we can make on an organic basis. And so we will -- again, we'll keep giving updates as there's more relevant information to share.

Thank you.

Thanks, Elyse.

Thank you. Our next question comes from Rob Cox with Goldman Sachs. Your line is open.

Hey, thanks. Just a question on the accident year loss ratio ex-cat guidance for approximately the same level in the back half. Can you help us think a little bit more about what goes into that and where that shakes out on a comparable basis versus the -- I think, over 100 basis points of improvement AIG has reported here in the first half?

Sure. Thank you, Rob. It's really driven by mix of business. And if you take a look at this year compared to last year on a net premium earned basis, like the commercial and personal insurance businesses are literally identical in terms of its overall contribution to total premium. And then the commercial loss ratio largely stayed flat like a 10 basis point improvement, but largely flat. What happened was the Personal Insurance loss ratio dramatically improved, driven by North America which was well over 400 basis points. And so I think that that's really driving the first six months. And if we look at the back half, I mean, should we see the same thing? I think so. But you've seen all the tremendous new business, the momentum we have. The mix of business could be changed a little bit year-over-year when we look at the back half of the year, but that's really what's driving the improved loss ratio in the first six months. So it's really a true mix of business and also the significant improvement that North America personal is making and we expect them to continue to make.

Okay. Got it. Thank you. And maybe just a follow-up. The move to kind of put some more capital to work in high net worth, is that driven by a change in sort of the view in underwriting opportunities there or have they always been good for AIG and what kind of drove that decision to double down now?

The high net worth business had the same issues that the commercial business did, which it had too much TIV and it gets more pronounced in the high net worth business, because it's more dense. And so we needed to shed aggregate for a lot of reasons. One is that we had too much exposure in certain geographies like the world changed with COVID, the pandemic and all the macro factors that affected it. And then also the evolution of more capabilities in the non-admitted market. And so what we decided, and we've been thinking about this for a couple of years, is that build out an admitted platform that is going to be very strong, the right infrastructure and have the ability to grow, but also complement that with the non-admitted market and be able to do that where you have flexibility and form rate and limits and how you can actually respond to client needs. And there's a need. And so what we've been working on is what's the best way to do that, partnering with Ryan Specialty. It's a highly fragmented wholesale market. So nobody has a real strong expertise in high net worth unless you start to build it. And I think Ryan has been doing that. And so getting access to the 40,000 independent agents with a product that's going to be saleable, and we have done such a terrific job in terms of creating opportunity for more aggregate that we want to be able to have both options. And we believe that we'll be able to grow the non-admitted property market just based on the partnership that we just announced recently. So it's always been in the plan, but we didn't want to go out and just say, we're going to do non-admitted and have it a fragmented not strategic approach. And so we believe this is going to give us great opportunities to access the market in a different way.

Thank you.

Thank you.

Thank you. Our next question comes from Mike Ward with Citi. Your line is open.

Thank you. Good morning. I just had one question and is somewhat related. But overall for the business and including commercial lines, curious how you guys are shifting the culture back to sort of a growth mindset, thinking about all the change that you've executed? And I guess, where are we in that part of the story? And should we think about AIG as potentially being able to grow faster than the market, all equal, just by turning some of the spigots back on?

Yeah. It's a terrific question, and I happen to have Don Bailey and Jon Hancock here with me. So I'm going to ask them both to comment on North America and international. It's a great question. Don, why don't you start with, how we have actually been very focused on not only retention, but new business in North America.

Yeah. Thanks, Peter. And we have definitely pivoted to that growth mindset. Its first important to mention that we were doing this off of transforming the business over the last few years. So we come into the growth with a position of strength regarding underwriting discipline, profitability. You've heard about all that. Regarding the growth, we've been very deliberate and creating more value for our distribution partners and clients than ever before, and we're applying much more rigor in pursuing like targeted risks. All of that is what you start to see showing up in the numbers now. And I can give you a little bit more color. The retention that we're delivering high levels of retention across all of our business. I would also add that we're executing on specific market opportunities, notably retail casualty and Lexington. On the retail casualty side, we are on offense. The discipline in the excess market is a positive for us right now, and we're moving on that. Regarding Lex, the growth there comes from three places. We have strong -- continued strong retention there, new products and new customers. So it's not from bigger limits. I would describe it as healthy, horizontal growth. Regarding the sustainability of it, which I think is important, I can look at some of our Lex submission data and share that with you. Year-to-date submissions at Lex are up 42%, and that's on top of 39% growth through last year through six months. We view this as a clear flight to quality in that space. I should also add that we resourced all of that in advance. So we're well positioned to take advantage of what's coming. And Peter, I'll just say this in closing on my end, we're getting all that growth while achieving outstanding loss ratios in the core business.

Don, thank you. That was great. Jon, maybe a little bit of context on International.

Yeah. I mean, I won't repeat what you've already said, Peter or Don, but I would say, this is still a very good market for us to underwrite in. We've got a really large diverse portfolio across international, gives us access to a huge amount of opportunity, different segments, different geographies, different points in time. So we can reshape and shift the book depending on what we see in each market. Similar themes to Don, this has been very planful. This is not opportunistic growth here. We've been building to this for a long time of a very, very high quality book of business. We start with retaining 89% of what we've worked really hard to build a really strong book. New business submissions are up as well. We're retaining that our own flight to quality as well as the market. Hopefully, we've done the markets flight to quality. A couple of highlights for me. We've got a world-class global specialty business. It's grown 8% in the quarter. And that's driven by some very, very good new business in all of the global specialty segments, especially in marine and energy, where we are recognized world leaders in both. We've grown new business in marine 15% over Q1 last year, especially strong in cargo in the UK and across Europe. Peter, you already referenced the energy, 13% increase in new business year-over-year. And that's in all of our global hubs and all of our products actually. So really, really strong targeted growth with one of our best performing profitability businesses. And I'll just finish on, I'll add in Talbot as well Talbot at Lloyd's another very, very good quarter of growth of 12%. And again, that's driven by targeted growth in specialty lines of marine liability that we grew at 13%, cargo and specie at 16% and upstream energy at 19%. And both of those with the market we've got the pipeline that we've got, we expect to see continued good growth.

That's great, Jon. Thanks to you and Don for that detail, really helpful. I want to thank everybody for joining us today. I do want to thank our colleagues around the world for their continued dedication, commitment, teamwork and all of their execution. I also want to extend my deep gratitude to Tom Bolt, who's retiring at the end of the year for his many significant contributions to AIG during a very important time and congratulate him on his story career. Tom was instrumental in establishing a global framework for AIG's underwriting standards, governance and structures and alignment with our refined risk appetite and has just been a terrific executive at AIG. So again, thank you for joining us today. Everybody, have a great day.

Thank you. This does conclude the program. You may now disconnect. Good day.