American International Group, Inc.

Good day and welcome to AIG's first quarter 2025 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 marks 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 if 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. Following the deconsolidation of Corbridge Financial on June 9th, 2024, the historical results of Corbridge for all periods presented are reflected in AIG's consolidated financial statements as discontinued operations in accordance with U.S. GAAP. Finally, today's remarks related to net premiums written and net premiums earned are presented on a comparable basis, which reflects year-over-year comparison on a constant dollar basis and adjusted for the sale of the global personal travel and assistance business as applicable. We believe this presentation provides the most useful view of our results and the go-forward business in light of the substantial changes to the portfolio since 2023. Please refer to pages 26 of the earnings presentation for reconciliations of such metrics 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 first quarter 2025 financial results. AIG's overall performance in the quarter was exceptional, and we continue to make significant progress on our strategic, operational, and financial objectives. We had a very busy start to the year, and while it's hard to believe, just 30 days ago, we hosted our Investor Day. We're incredibly grateful for the positive engagement and support from our colleagues and many stakeholders and appreciated the opportunity to share our journey with them. For my prepared remarks, I will start with an overview of our investor day, including what we intend to achieve, some observations from the meeting, and what we've learned since. Second, I will highlight our first quarter financial results. Third, I want to provide a spotlight on our business strategy and long-term view of India, a business that we briefly touched on at our investor day. Fourth, given the widespread interest, I will offer a few observations on the impact of tariffs. And last, I'll provide an update on our progress toward our financial targets that we outlined at our Investor Day. Keith will then provide more detail on our financial results, and Don Bailey and John Hancock will join us for the Q&A portion of the call. Beginning with Investor Day, our objective was to demonstrate the incredible progress that companies made over the last seven years and why we believe we're so well positioned for the future. We shared how we established an underwriting culture of excellence, substantially reduced underwriting exposure, controlled volatility, structured the company for the future, refreshed our purpose and values, developed a world-class end-to-end operating structure, digitized end-to-end processes, developed a robust data hierarchy, and retired over 1,200 applications while migrating to the cloud. We discussed how we created a lean parent company, and strengthen our balance sheet while executing a disciplined capital management strategy, which will enable AIG to have maximum strategic and financial flexibility for the future. We provide a detail on our strategy to deploy GenAI end to end and to demonstrate how the advancement in adoption is making a difference across our business to drive future growth. And that was on full display. I'm very grateful to our world-class partners Alex Karp of Palantir, and Dario Amadei of Anthropic for joining Sarah Eisen and me on stage to showcase and validate our strategy. And while they are very entertaining guests and have better things to do with their time than show up at AIG's Investor Day, they felt compelled to speak to our stakeholders about how they fully endorse AIG's strategy. It was a very important moment for our company. We demonstrated the breadth and depth of our global portfolio with 24 billion of net premiums written, which enables us to leverage both our diverse geographic footprint and strong product offerings to solve our clients' risk needs. We highlighted what a thoughtful and carefully planned reinsurance strategy can do for a company over time, showcasing key structures of our portfolio and providing an introduction to our special purpose vehicle backed by Blackstone, which is an important part of our strategic evolution. Our stakeholders came away from the event with a much clearer understanding of our strategic direction, the deep expertise within our company, our differentiated approach to Gen AI, and our ambitious yet achievable financial targets and global growth opportunities. Inside the company, there's a sense of confidence and pride. Our investor day gave our colleagues the opportunity to see their hard work recognized in an impactful way, which has generated energy and engagement across the organization. And we're excited to take this momentum forward. If I had to choose just one key takeaway from our investor day, it is that AIG is in every way a different company. Turning to our financial results against the challenging geopolitical and macroeconomic environment, we made excellent progress towards our long-term strategic and financial goals while delivering exceptional underwriting results, effectively managed volatility while reducing expenses. In the first quarter, adjusted after-tax income was $702 million, or $1.17 per diluted share. Building on our momentum, we had another quarter of strong premium growth, net premiums written, were $4.5 billion, an increase of 8% year over year on a comparable basis, led by 10% growth in global commercial. North America commercial insurance net premiums written grew 14% year over year. Lexington grew 23%, led by Lexington casualty, which grew 27%. It's worth noting that Lexington's submission growth continued in the first quarter, increasing 30% year over year. and that is following an increase of over 50% in the first quarter of 2024 when compared to 2023. Simply an outstanding result. This increase in submission activity was primarily driven by middle market casualty in property, which together represents two-thirds of the total submissions received. Glass-Belter contributed 16% growth, and retail property grew over 40%, almost entirely driven by the significant enhancements to our reinsurance structures. International commercial insurance net premiums written grew 8% year-over-year on an FX-adjusted basis, driven by property at 35%, largely as a result of enhanced reinsurance structures, and marine grew at an impressive 17%. Turning to expenses, our general insurance expense ratio decreased to 30.5% in the first quarter compared to 31.8% in the prior year quarter. The divestiture of our travel business was the largest contributor to this improvement, accounting for 110 basis points. The remaining 20 basis points of improvement came from AIG Next initiatives. This is very impressive when you consider that General Insurance absorbed $78 million of additional expenses that were booked in other operations in 2024. Other operations' general operating expenses were $85 million in the quarter. The accident year combined ratio, as adjusted, was 87.8%, the best first quarter result for AIG since the financial crisis. The prior year quarter was 88.4%. The calendar year combined ratio was 95.8% for the quarter, which included $520 million in catastrophe losses driven by the California wildfires, which came in at $460 million. The combined ratio represented 9.1 loss ratio points and is a testament to our strategy for managing volatility. While industry losses from natural catastrophes are the second highest for the first quarter of the year on record, we expect our net retained catastrophe losses to be within expectations for 2025, largely based on our reinsurance structures. If you apply our current loss projections for the wildfire catastrophe to our aggregate cover, We will have approximately $35 million net of annual aggregate deductible remaining for all other perils in North America, excluding wind and earthquake. And approximately $385 million net left for all perils, both subject to a $50 million each and every loss deductible for the rest of this calendar year. We also continue to have significant property catastrophe occurrence limit available. Overall, the market remained favorable in the first quarter, particularly in segments with very good underlying fundamentals. Keith is going to cover rate in more detail in his remarks, but I wanted to provide some perspective. For North America, the rate increases in the quarter were led by excess casualty at 16%. In the last five calendar years, excess casualty has had double-digit rate increases each year with cumulative rate above loss trend. Gladfelter had a 6% rate increase, These increases were offset by financial lines, which decreased 5%, retail property, which decreased 7%, and Lexington property, which decreased 10%. In financial lines, we have the benefit of a highly diversified business by product and segment. This enables us to position the portfolio for the best risk-adjusted returns, even in a competitive market. To further outline, we have meaningfully reduced our excess capacity. where pricing is increasingly commoditized. We're focused on our primary business where we have a differentiated offering and a leadership position. Our financial lines portfolio has gone from representing 30% of North America commercial net premiums written in 2021 to representing 19% of the portfolio today. Next, let me give some context on property rate. Over the past five years, We have had cumulative rate increases of 113% in retail property and 96% in wholesale property. Pricing continues to be above our technical view. Nonetheless, we continue to be very disciplined and will monitor market conditions throughout the year. In international, the environment was more balanced. Casualty had a 7% rate increase. Property had a 2% rate increase, offset by global specialty and Talbot, which decreased 1% and 4% respectively, and financial lines, which decreased by 3%. And please recall that we report rate on gross premiums written. And because many of our lines are heavily impacted by reinsurance in the first quarter, there's not a direct correlation to net premiums written, which are lower in certain businesses, such as our global specialty business. Turning to capital management, We returned 2.5 billion of capital to shareholders in the first quarter. This included 2.2 billion of share repurchases and 234 million of dividends. We ended the quarter with a debt to total capital ratio of 17.1% and parent liquidity of 4.9 billion. As I announced on Investor Day, as of April 1, the AIG Board of Directors increased our share repurchase authorization to $7.5 billion, inclusive of the outstanding authorization amount, of which approximately $7.1 billion remains available. Additionally, the Board approved a 12.5% increase in our quarterly dividend of 45 cents per share yesterday. We expect to repurchase a total of $5 to $6 billion of shares in 2025, subject to share price and market conditions, which should bring us to a range of 500 to 550 million shares outstanding over time. Now I'd like to transition to discuss one of our strategic partnerships. While we covered a lot of content on Investor Day, one part of our business that we did not address in any detail is Tata AIG. With this in mind, I'd like to share some observations on the rapidly growing market in India and insights about our joint venture with the Tata Group. India as a country has made remarkable progress over the last decade. Over that time, the economy has grown from the 10th largest to the fifth largest economy in the world, and is likely to become the third largest economy after the United States and China by 2030. Real GDP is estimated to grow approximately 7% over the next two years, with nominal GDP growing nearly two times higher. The changing demographics in India are well known, but worth highlighting. In a country of nearly 1.5 billion people, half of the population is below the age of 30. The middle class is projected to more than double by 2030, with some of the fastest growth happening in Tier 3 and Tier 4 cities. Pivoting to the insurance industry, the general insurance market in India is over $35 billion in gross premiums written as of 2023 and had a compound annual growth rate of around 11% over the last five years. We expect the market will sustain this type of growth through 2030. And there's a massive opportunity for growth given the changing dynamics. In India, non-life insurance penetration is still relatively low at 1% of GDP. In contrast, the United States is at 9% of GDP. Our presence in India began 25 years ago when we partnered with Tata Group to establish a joint venture, Tata AIG. The Indian insurance market opened to private insurance companies and direct foreign investment in 2000. At the time, the maximum allowable foreign investment was 26%, which is what we currently hold today. Prior to 2000, India's insurance market was dominated by public sector insurance companies, which had 100% market share. Opening up the market to private insurance and foreign direct investment dramatically shifted India's insurance landscape. Today, private sector insurance companies represent 60% of the non-live market. While India offers tremendous opportunity, it's a complex and highly competitive market. For foreign companies, it's important to choose the right partner, a company with deep and broad knowledge of India and one with a strong reputation. For AIG, there's no better choice than Tata Group, one of the highest quality global companies. Tata Group operates 30 companies in over 100 countries across diverse industries. is 26 publicly listed enterprises have a combined market cap of $365 billion with over 1 million employees. Over the last decade, Tata Group has been consistently ranked as one of India's most valuable brands. Tata AIG is highly respected and is ranked as the number two private insurer in the commercial insurance and motor insurance sectors. It serves 27 million customers with 8,500 employees, and leverages 85,000 captive agents operating across the country. Tata AIG had $2.1 billion of gross premiums written in 2024, and its mix of business is approximately 75% personal insurance and 25% commercial insurance. Tata AIG is a high growth business. From 2020 to 2025, we had a compound annual growth rate of 20% outpaced in the market. Through 2030, We expect to continue to grow at the same compound annual growth rate fueled by India's accelerating economy, rising insurance adoption, and Tata AIG's market leading brand and reputation. The business has exceptional technology and data capabilities that have enabled it to scale rapidly and support the continued ambition for accelerated growth. Tata AIG's products and services are digital first. with clients and agents enabled by technology at every stage of the value chain, providing a complete digital customer experience, which is what clients in India expect. Additionally, Tata AIG benefits from access to AIG's multinational network, with AIG supporting the joint venture's domestic multinational corporate clients. In close partnership with Tata Group, we're prepared to significantly invest in growth organically and possibly inorganically should opportunities present themselves. And I expect this business to continue to scale faster than any other geography in our portfolio. There's been a lot of discussion about tariffs, and I'd like to share a perspective, understand that there is still significant uncertainty around the topic of tariffs. To start, let me provide some relevant facts. First, There are only seven countries worldwide that export more than $100 billion to the United States, and China, Canada, and Mexico are the only countries that export over $250 billion. When looking at a country's level of exports to the United States as a percentage of their total exports, Mexico is 79%, Canada is 74%, and China is less than 20%. Altogether, tariffs create uncertainty, which may lead to lower levels of transactional activity in the near term, impacting certain commercial businesses, but it's premature to predict any specific outcomes related to these emerging macro trends. The greatest challenge for companies is understanding the real impact of tariffs and how they are changing and their implications. There's a complexity not only with tariff policies evolving, but also with the potential impact on supply chains. It's also important to consider the implications to loss costs and inflation. To help parse through this complexity, let me share a property example. Typically, in a high net worth claim, and of course it's subject to the particular type of loss, approximately 60% of the loss would be for rebuilding costs, 30% for contents, and 10% or thereabouts for allocated loss adjustment expense. When considering materials such as lumber, floor coverings, windows, steel, marble, or granite, you need to take into account increased inflation rates. Then you should consider which of these items are imported. For example, Canada represents roughly 85% of all U.S. softwood lumber imports. This added dimension further complicates the calculation of future loss costs. Additionally, if there's another major catastrophe in 2025 beyond the January wildfires, we could see demand surge, supply constraints, and further inflation, which may also lead to extended business interruption. Lastly, insurance companies need to monitor the effects of sales, payroll, and other factors to calculate the potential impact on future premiums, if any. We will continue to monitor the implications for our business as more information becomes available. Before I close, I want to touch on the financial targets that we announced on Investor Day. These are multi-year goals, so I'm not going to give updates every quarter, but I did want to provide some insight. Operating EPS is on track, and the key drivers for earnings growth remain favorable. We produced strong top-line growth and managed volatility in a very heavy catastrophe quarter. We are on our way to fully replacing core bridge earnings by 2026, and we expect to achieve a 20% plus earnings per share compound annual growth rate over the next three years. We continue to make progress towards our goal of achieving 10 to 13% core operating ROE. Our first quarter core operating ROE was 7.7%, which was impacted by catastrophe losses. We expect to meet our 2025 objective of a 10% plus core operating ROE as we outlined on Investor Day. We've made terrific progress towards our goal of achieving an expense ratio below 30% for general insurance with the first quarter coming in at 30.5%. We will continue our significant focus to maintain an expense structure that aligns with the size of the company that we are while investing in our data and digital strategies. And finally, turning to our dividend, We announced our intent at Investor Day to grow the dividend per share by 10% plus in 2025 and 2026. Yesterday, the AIG Board of Directors approved a 12.5% increase in our quarterly dividend to 45 cents per share starting the second quarter of 2025. In summary, we've entered an exciting new chapter for AIG, and we're executing on all aspects of our strategy. With that, I'll turn the call over to Keith.