American International Group, Inc.

Good day and welcome to AIG's second quarter 2020 financial results call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sabra Pertil, Head of Investor Relations. Please go ahead.

Good morning and thank you all for joining us. Today's call will cover AIG's second quarter 2020 financial results announced yesterday afternoon. The news release, financial results presentation, and financial supplement were posted on our website at www.aig.com, and the 10Q for the quarter will be filed later today after the call. Today's remarks may contain forward-looking statements, including comments relating to company performance, strategic priorities, business mix, and market conditions, including the effects of COVID-19 on AIG. These statements are not guarantees of future performance or events and are based on management's current expectations. Actual performance and events may differ materially. Factors that could cause results to differ include the factors described in our first quarter 2020 report on Form 10-Q and our 2019 annual report on Form 10-K and our other recent filings made with the SEC, inclusive of the effects of COVID-19 on AIG which cannot be fully determined at this time. AIG is not under any obligation and expressly disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. Additionally, some remarks may 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. I'll now turn the call over to Brian.

Good morning, and thank you for joining us today. I hope everyone is staying healthy and safe. Like last quarter, our team is participating on the call from different locations. I'm joined by Peter, Kevin, and Mark, and Doug DeShiel, our Chief Investment Officer, will also be available for Q&A. AIG continues to show remarkable strength and resiliency as COVID-19 remains a formidable and ongoing catastrophe. Our global workforce has adjusted to working remotely, and I am incredibly proud of how the team has become more unified and focused on supporting each other, our clients, and other stakeholders during this unprecedented time. Throughout the second quarter, we continued to build on the strong foundation created since late 2017 to instill a culture of underwriting excellence, adjusted risk tolerances, and implement a best-in-class reinsurance program. These actions strengthened and protected our balance sheet and are allowing us to effectively manage through COVID-19 and its collateral effects on the global economy in addition to natural catastrophes. We also made progress on strategic initiatives across AIG, including the early June closing of the sale of a majority stake in Fortitude, which significantly de-risked our balance sheet and represented the vast majority of our legacy portfolio. Our focus on de-risking is also reflected in how the overall investment portfolio has held up during this extended period of market uncertainty. As we outlined on our last call, our portfolio is diversified by asset class and industry sector and contributes to our strong balance sheet. Mark will give more details on the accounting implications of the sale of Fortitude, which, while in line with what we outlined on prior calls, are complex. and had a significant impact on our GAAP results in the second quarter. There are other positive developments in the second quarter, such as the launch of Syndicate 2019, which also added some noise to our results, but overall, I'm very pleased with our underlying performance in this quarter. We also enhanced our financial flexibility with parent company liquidity of over $10 billion at June 30th, reflecting the proceeds from the Fortitude sale, as well as the successful debt offering we completed in May. With respect to CATS, in the second quarter, our total estimated net CAT losses were $674 million, including $458 million related to COVID-19. This brings our estimated COVID net losses for the first half of the year to $730 million. We continue to view COVID as an earnings event, not a capital event for AIG. In arriving at our COVID estimate for the second quarter, we follow the same thoughtful and rigorous process that Peter outlined on our last call. As the ramifications of the pandemic continue to unfold, different lines of business are being impacted, which to date has been in line with what we expected. Thanks to General Insurance excluding CATS, we continue to see improved underwriting profitability with the accident quarter combined ratio coming in at 94.9%, a 120 basis point improvement over the prior year quarter. With respect to rate, the current environment is as strong as I've seen in more than 20 years, and the increases over the last several quarters accelerating due to COVID-19. These rate increases are global, broad-based across multiple lines of business, and the changes we are starting to drive in terms and conditions particularly in commercial property, are remarkable. The underlying discipline and rigor Peter and the GI team have instilled across the business is impressive, and they continue to be a market leader in solving risk issues for our clients and distribution partners. With respect to life and retirement, our financial results improved in the second quarter, reversing much of the negative impact of market volatility we saw in the first quarter, and our hedging program continued to perform as expected. Although it is still early days, we are seeing signs that the second quarter will represent a low watermark in sales, and mortality rates remain within mid-range of our pandemic models. Kevin will provide more details on life from retirement in his remarks. We also made significant progress on AIG 200 in the second quarter. We moved into the execution phase of our operational programs, and we have already seen demonstrable results from our efforts so far. You will hear more about this from Peter. To summarize where we are through the second quarter of 2020, relative to where we began our journey three years ago, we successfully reshaped AIG by substantially changing our operating model to focus on three core business units, general insurance, life and retirement, and investments. We also vastly improved our underwriting capabilities and business portfolios. significantly reduce volatility, de-risk our balance sheet, and increase financial and capital flexibility. These achievements are the result of extraordinary work by our colleagues across AIG to remediate the commercial and personal portfolios in general insurance, strengthen our business and life in retirement, and reduce risk in our investment portfolio. And with the sale of Fortitude, we essentially eliminated the vast majority of our legacy portfolio and related exposures to long-tail runoff liabilities and interest rate risk. With all this complex work behind us, we are now able to focus on our core businesses and leverage our financial position to strategically deploy capital towards growth, particularly in the general insurance commercial lines, where we are seeing some of the strongest market conditions in our careers. I remain confident that AIG is well positioned for the future and on the right path to become a top-performing company and a leading insurance franchise. Before I turn the call over to Peter, I do want to take a moment to address the recent movements for racial equality across the United States and other parts of the world. At AIG, our colleagues were deeply upset by the traumatic events that exposed the depth of inequality that continues to exist the United States, and around the world. We saw an outpouring of empathy, which led to courageous and often difficult conversations throughout our organization. We are now moving beyond empathy and conversation to formulating near, short, and longer-term actions we must take. We know there are no quick fixes, and while we have taken important steps over the last few years to foster a culture of diversity and inclusion, we must do more. Like the other complex issues we have taken on at AIG, my leadership team is committed, and I am confident that with the support of our global colleagues, we will make lasting change at our company. As we continue our transformational journey at AIG, we remain steadfast in our pursuit of excellence in all that we do, which we know can only be achieved with exceptional, diverse talent at all levels of the organization. Peter, over to you.