American International Group, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Results: Adjusted after-tax income per diluted share was $2.20 (+77% y-o-y); adjusted after-tax income for the quarter was $1.2 billion (+52% y-o-y) driven by General Insurance. Underwriting income was $793 million (+81% y-o-y); net investment income on an adjusted pretax basis was $1 billion (+15% y-o-y). Accident year combined ratio was 88.3%, calendar year combined ratio was 86.8% (580 basis points improvement from prior year).
• Strategic Investments: Acquired 35% equity in Convex Group (strong underwriting culture and performance), 9.9% in Onex Corporation (global asset manager), and renewal rights for Everest Group's core portfolios (adding scale to AIG's retail book).
• GenAI Initiatives: Embedding GenAI in underwriting and claims; deployed AIG Assist in North America Financial Lines and Lexington middle market property/casualty; processing 100% of submissions in private/not-for-profit; accelerating GenAI rollout across more business units.
• Capital Management: Strong balance sheet; returned $19 billion to shareholders over 3 years; intends to continue share repurchases in 2026 at normalized levels; core operating ROE was 13.6% in Q3 and 10.9% YTD, on track for Investor Day metrics.

Segment Performance

• North America Commercial Insurance: Net premiums written flat y-o-y; adjusting for prior year closeout, net premiums written would have increased 3%. Growth driven by Programs (+27%), Western World (+11%), Excess Casualty (+8%); partially offset by Retail Property (-10%) and Lexington Property (-8%). Accident year and calendar year combined ratios remain exceptional.
• International Commercial Insurance: Net premiums written increased 1% y-o-y, driven by Marine (+11%) and Property (+6%); partially offset by Financial Lines (-6%). New business strong, with Specialty (+17%), Marine (+35%), Energy (+30%), Property (+24%), and Financial Lines (+12%) showing growth.
• Global Personal: Net premiums written decreased 4% due to high net worth quota share reinsurance; expects trend to reverse in 2026 while focusing on improving profitability.

Guidance

• Intends to continue share repurchases in 2026 at normalized levels.
• Seeks compelling opportunities to deploy capital for long-term strategic value.
• Core operating ROE target of 10%-13% through 2027.
• Expense ratio target below 30% by 2027.
• Dividend per share expected to grow similarly in 2026, subject to Board approval.

Risks

• Macro and insurance market dynamics could impact performance.
• Regulatory approvals needed for some transactions (e.g., EU for Everest renewal rights).
• Volatility in property catastrophe reinsurance could affect Convex's earnings.

Question and Answer

Q: Talk about the expected underwriting profitability from both the quota share with Convex and the renewal rights with Everest.

A: On Convex, it's a whole account quota share with a strong track record of profitability, growing to 12.5% over time. On Everest, International portfolio combined ratios similar to AIG; U.S. Property portfolio has strong attritional loss ratios; Financial Lines conversion expected to match AIG's combined ratios; Casualty portfolio expected to improve with AIG's underwriting expertise.

Q: Thoughts on capital situation and minimum holdco liquidity.

A: Well-capitalized with $5 billion of holdco liquidity at quarter end; intends balanced capital management, with $1 billion share repurchase target for 2026.

Q: Earnings power of Convex amidst property cat reinsurance pricing.

A: Convex has a diversified portfolio, balanced in insurance and reinsurance, with strong underwriting in specialty classes; not overly exposed to vulnerable property cat segments, well within risk appetite.

Q: Competitive dynamics and GenAI impact on top line.

A: GenAI accelerates underwriting and claims, driving growth and efficiency; competitive environment requires focus on portfolio mix; GenAI deployment enhances speed to execution and decision-making for underwriters