AMERICAN INTERNATIONAL GROUP, INC. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Investor Day Overview: Showcased progress in underwriting culture, GenAI deployment, reinsurance strategy, and global portfolio breadth ($24B net premiums written).
• Financial Results: Strong premium growth, adjusted after-tax income $702 million, $2.5B capital returned to shareholders (share repurchases + dividends), debt to total capital ratio 17.1%.
• India Strategy: Tata AIG joint venture with 20% CAGR growth, leveraging Tata Group's expertise, with growth potential in India's expanding insurance market.
• Tariffs Discussion: Monitors uncertainty around tariffs, impacting loss costs, inflation, and supply chains; built risk margin in lines impacted.
• Financial Targets: Operating EPS on track, core operating ROE target 10%-plus in 2025, dividend increased 12.5%, and aim to meet Other Operations expense targets.

Segment Performance

• General Insurance: Adjusted pre-tax income was $979 million. Net premiums written were $4.5 billion, a +8% year-over-year increase. Combined ratio was 95.8%, with the accident year combined ratio (as adjusted) at 87.8%. Global Commercial net premiums written grew 10%, North America Commercial up 14% (Lexington grew 23%), and International Commercial net premiums written up 8% FX-adjusted.
• Global Personal: Combined ratio was 107.9%, but the accident year combined ratio (as adjusted) improved 140 basis points year-over-year. Excluding the divested travel business, the accident year combined ratio improved 110 basis points.
• Other Operations: Adjusted pre-tax loss was $70 million in Q1, a significant improvement from prior year's $205 million. Achieved run-rate GOE target at $85 million, on track for $350 million annual expenses in 2025.

Guidance

• Returned $2.5B capital to shareholders in Q1, including $2.2B share repurchases and $234M dividends.
• Share repurchase authorization increased to $7.5B, with $7.1B available; expect $5-6B repurchases in 2025.
• Target core operating ROE 10%-plus in 2025, and Other Operations run-rate GOE target achieved at $85M in Q1, on track for $350M annual expenses in 2025.

Risks

• Tariffs Uncertainty: Creates market uncertainty, impacting transactional activity and loss costs; complexity in tariff policies and supply chain impact.
• Market Volatility: Potential impact on loss costs, inflation, and future premiums; need to monitor evolving macro trends.

Q: On GenAI transformation, how has AIG approached it and its status?

A: Process started years ago with digitization and data quality, pilots now live, using partners like Palantir for data ingestion and GenAI deployment to accelerate underwriting.

Q: How is North America Commercial pricing performing?

A: Casualty strong (above loss trend), property had headwinds but technical pricing strong; submission count good, retention high.

Q: What's the impact of tariffs on underwriting?

A: Cautious, built risk margin in lines impacted, monitoring loss cost inputs and line-specific variables for potential impact.

Q: Thoughts on M&A and capital deployment?

A: Disciplined, looking for additive acquisitions, with ample capital and low leverage, ready to return capital if no suitable opportunities.

Q: Sustainability of North America Commercial growth?

A: Strong but property effect may subside; rest of portfolio (casualty, etc.) has strong retention and growth opportunities, with reinsurance structure providing comfort.

Q: Casualty loss trend outlook?

A: Monitoring, no adjustment to loss costs yet, keeping current projections unless significant changes occur