American International Group, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fourth Quarter and Full Year Performance: Adjusted after-tax income per diluted share was $1.96 in the fourth quarter (a 51% increase year over year) and $7.09 for the full year 2025 (a 43% increase year over year). Underwriting income was $670 million in the fourth quarter (a 48% increase year over year) and $2.3 billion for the full year 2025 (a 22% increase year over year).
• Reinsurance Renewals: January 1 renewals had enhanced terms and favorable pricing. The property catastrophe program improved with a risk-adjusted rate decrease of over 15% on property catastrophe. Casualty treaty renewal had exceptional pricing and terms.
• Strategic Transactions: Progress on Everest portfolio conversion, investment in Convex Group with a 35% equity interest and 9.9% ownership in Onyx Corporation, and formation of Syndicate 2479 in partnership with Amwins and Blackstone.
• Gen AI and Data/Digital Strategies: Progress in embedding GenAI in underwriting and claims processes. Priorities for 2026 include deploying underwriting and claims assist, enhancing ontology, developing an orchestration layer, and using GenAI for SPV strategy.
• Capital Management: Returned $6.8 billion to shareholders, including $5.8 billion in share repurchases and $1 billion in dividends. Debt outstanding at year-end was $9 billion, with a debt to total capital ratio of 18%. Sold down Corbridge Financial, realizing approximately $2.5 billion in gross proceeds in 2025.

Segment Performance

• General Insurance:
  • Fourth Quarter: Net premiums written were $6 billion, up 1% year over year. Global commercial grew 3%. Accident year combined ratio was 88.9%, and the calendar year combined ratio was 88.8%. General insurance expense ratio was 32.1%, a 70 basis point improvement year over year. Total catastrophe losses for the quarter were $125 million, with a $116 million favorable prior year development.
  • Full Year 2025: General insurance net premiums written grew 2%. The full year accident year combined ratio adjusted was 88.3%, and the calendar year combined ratio was 90.1%. General Insurance net investment income reached $3.4 billion, a 12% increase over 2024.
• Other Operations: Fourth quarter adjusted pretax loss was $129 million versus the prior year quarter's $150 million. Full-year 2025 adjusted after-tax income was $4 billion, an increase of 24% year over year.

Guidance

• For full year 2026, expects low to mid-teens net premiums written growth in general insurance.
• Intends to repurchase at least $1 billion of common shares in 2026, with proceeds from the sell-down of Corbridge Financial likely deployed to additional share repurchases.

Risks

• Market dynamics affecting property pricing, particularly in North America where retail property pricing was down 10% and excess and surplus lines pricing was down 13% in 2025.
• Uncertainties in casualty loss picks related to social inflation and rising litigation costs.
• Regulatory and market conditions impacting reinsurance renewals and strategic transactions, such as potential challenges in portfolio conversions and SPV formations.

Question and Answer

Q: On the expense ratio, what to expect in the next few years?

A: Peter Zaffino mentioned that the expense ratio was affected by parent expenses being allocated into the business, but progress is being made towards the target of a sub-30% expense ratio by 2027, with meaningful improvement expected in 2026.

Q: About general insurance net premium growth, what portion is from organic growth vs deals?

A: Peter Zaffino stated that growth comes from various sources including reinsurance benefits, Convex partnership, SPV initiatives, and changes in high net worth quota share, but specific breakdowns of organic vs deal contributions were not detailed.

Q: Explain the orchestration layer for AI agents?

A: Peter Zaffino discussed orchestrating AI agents across the organization to drive better decision-making and reduce costs, with progress expected throughout 2026 in integrating these agents into workflows.

Q: On the expense ratio target, what's the timeline?

A: Peter Zaffino reaffirmed the goal of achieving a sub-30% expense ratio by 2027, with meaningful improvement anticipated in 2026.

Q: Capital repurchase plans?

A: Keith Walsh confirmed a minimum of $1 billion share repurchase in 2026, with proceeds from the Corbridge sell-down likely used for additional repurchases.

Q: Thoughts on market evolution and its impact?

A: Peter Zaffino and Jon Hancock discussed multiple market cycles, portfolio positioning to handle market dynamics, and the importance of being ready for market turns, emphasizing the company's diversified portfolio and Gen AI leadership in navigating cycles.