American International Group, Inc.

Good day and welcome to AIG's fourth quarter and full year 2025 financial results conference call. This conference is being recorded. Now at this time, I'd like to turn the conference over to Quentin McMillan. Please go ahead.

Thanks very much and good morning. Today's remarks 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 9, 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 are presented on a comparable basis, which reflects year-over-year comparison on a constant dollar basis and adjusted for the sale of 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 page 29 of the earnings presentation for reconciliations of such metrics reported on a comparable basis. With that, I'd now like to turn the call over to our chairman and CEO, Peter Zafina. Good morning, everyone.

Thank you for joining us to discuss our fourth quarter in 2025 full-year financial performance. I will begin with prepared remarks, after which Keith will provide a detailed overview of our financial performance. John Hancock will then join us for the Q&A session. On our call today, I will briefly share key highlights from our excellent fourth quarter performance, review our outstanding full-year financial performance, provide brief commentary on AIG's January 1 reinsurance renewals, discuss our fourth quarter strategic transactions, and highlight our progress on our Gen AI and data and digital strategies. Finally, I will conclude with how AIG is positioned for continuing momentum into 2026. Let me begin with a brief overview of our fourth quarter performance and some of our key highlights. We delivered adjusted after-tax income per diluted share of $1.96, a 51% increase year over year. Underwriting income was $670 million, an increase of 48% year-over-year. Global commercial net premiums written grew 3%, despite North America retail property contracting due to our reduced appetite given the current market environment. We had strong new business growth led by international commercial, which grew an impressive 14% year-over-year. The action year combined ratio as adjusted was 88.9%, our 17th consecutive quarter with a sub 90% result. The calendar year combined ratio was 88.8%, an improvement of 370 basis points from the prior year quarter. Overall, Our fourth quarter performance reflects our consistent underwriting and operating discipline and closes out an exceptional 2025 for AIG. Now let me walk you through our full year financial performance. Adjusted after-tax income per diluted share was $7.09, an increase of 43% year-over-year. Adjusted after-tax income for the year was $4 billion, an increase of 24% year-over-year. For the full year 2025, we generated underwriting income of $2.3 billion, an increase of 22% year over year. 2025 was the first year since 2008 that we delivered greater than $2 billion in underwriting income, excluding divested businesses, an important milestone in AIG's journey. For full year 2025, Global commercial net premiums written were $17.4 billion, an increase of 3% year over year. Adjusting for the large closeout transaction in our casualty portfolio that benefited overall growth in that prior year, net premiums written increased 4%. North America commercial grew net premiums written by 4% or 5% when adjusting for the large closeout transaction. With balanced growth across the portfolio, that was partially offset by retail property, which contracted 8%. International commercial grew net premiums written by 3%, primarily driven by property and global specialty, and partially offset by financial lines, which contracted 5%. In global personal, net premiums written contracted 3%, driven by higher seeded premiums under the high net worth quarter share reinsurance treaty that we entered into at 1-1-25. In early January, Ross Buckmuller was named Executive Chairman of Private Client Select. We have tremendous confidence in his ability to guide the high net worth business and believe he will have an immediate and positive impact in positioning the business for the future. Overall, global commercial new business grew 9% year over year. International new business grew 10%, driven by global specialty, which grew 15%. North America Commercial Insurance produced over $2.6 billion of new business in the year, an increase of 8% year-over-year. We made strong progress reducing our expense ratio, which ended 2025 at 31.1%, down 90 basis points from the prior year, and remain focused on achieving our investor-day target of a sub-30% expense ratio by 2027. Our full year action year combined ratio was 88.3%, and our calendar year combined ratio was 90.1%, both outstanding results. For the full year 2025, excluding North America property, global commercial lines pricing, which includes rate and exposure, increased 2%, with a 6% increase in North America and a 1% decrease in international. As we've discussed throughout the year, property markets in North America remained under pressure with increased competition in both the admitted and non-admitted markets. Retail property pricing was down 10% and excess and surplus lives pricing was down 13% for the year. Despite the challenging market dynamics, the action year and calendar year combined ratios remained excellent in property. In North America casualty lines, pricing remained favorable and continued to outpace lost cost trend with percentage increases in the mid-teens in wholesale and excess casualty. In North America financial lines, pricing was down 2% for the year. Pricing reductions moderated in the second half of the year with segments of our D&O portfolio ending the year with a positive rate change. In international commercial, overall pricing was down 1% or flat excluding financial lines. Unlike the U.S., pricing in international property was up 3% for the year, offset by energy, where pricing was down 10% driven by abundant capacity. Net investment income on an APTI basis was $3.8 billion, an increase of 8% year-over-year, reflecting our shift to higher-yielding assets with strong financial ratings. Core operating ROE was 11.1%. a 200 basis point improvement year over year, and AIG's first adjusted ROE metric above 10% in over 10 years. Importantly, we delivered a strong performance in 2025 while maintaining our disciplined approach to capital management. We returned $6.8 billion in capital to our shareholders, including $5.8 billion in share repurchases and $1 billion in dividends. We also increased our quarterly dividend by 12.5%, the third consecutive year, with a dividend increase of 10% or more. Debt outstanding at year-end was $9 billion, and our debt-to-total capital ratio was 18%. We continued to reduce our ownership of Corbridge Financial, generating approximately $2.5 billion in gross proceeds over the course of 2025. At the end of 2025, our remaining ownership stake was 10.1%. This week, Nippon Life waived AIG's 9.9% retention requirement, which gives us the ability to sell down our position throughout 2026, which we intend to do, subject to market conditions and regulatory approvals. Since we announced Blackstone's purchase by 9.9% equity ownership in Corbridge Financial in November of 2021, AIG has realized nearly $20 billion from our core bridge holdings when accounting for share sales, receipt of extraordinary and common dividends, and transition service fees. What's even more extraordinary is that AIG has been able to replace 100% of core bridge financial and validus REITs earnings per share in just two years. Going forward, we're very well positioned with significant financial strength and liquidity to execute against our strategic objectives, our growth ambitions, and our capital management priorities. I'll now turn to reinsurance, but before I provide more details on our January 1st renewals, I want to share a brief context on the reinsurance market. 2025 started with the California wildfires, and that initially tempered reinsurance rate reductions for the industry. What followed was benign cat loss activity in the second half of the year, resulting in increased reinsurance capacity. This dynamic drove a favorable renewal environment for insurers at January 1. As a general statement, although reinsurers were prepared to compromise on pricing, they remained disciplined on attachment points at 1-1. Our long-term belief in holding firm on attachment points has proven to be advantageous for AIG. We've always said, once you give it up, you don't get it back, and that remains true today. Turning to our January 1st renewal outcomes, AIG achieved enhanced terms and favorable pricing. We benefited significantly from the current environment with more aggregate capacity available in the market, our consistent buying, an attractive portfolio, and the exceptional relationships we've developed with our reinsurance partners. Here are a few highlights. Our property catastrophe program continued to improve. The weighted average risk-adjusted rate decrease for AIG on property catastrophe is in excess of 15%, yielding substantial year-over-year savings. The return periods of the attachments of our property catastrophe coverage is broadly lower across our geographies and businesses. Our exhaust limit is at a comparable level for all regions worldwide. We were able to collapse the high net worth placement into our North America occurrence layer for the 500X to 500 layer. And finally, we achieved further efficiency in our aggregate protection, including a single maximum contributing loss rather than a separate one for each of the North America commercial and global personal portfolios. For casualty, we're in a reinsurance market that differentiates for quality, and as a result, our treaty is renewed with exceptional pricing in terms and conditions. Our quota share in North America maintained a very attractive seating commission in the low 30s, Our excess of loss attachment and limits remain the same as the expiring treaties. However, our rate on subject premium decreased year over year. Finally, we were able to add the Evers portfolio into the treaty at AIG's pricing and terms without an increase in nominal cost. Overall, I'm very pleased with our 1-1 renewals. Our approach to reinsurance continues to be an important component of our strategy to minimize volatility in our portfolio and positions AIG well for 2026. In the fourth quarter, we announced several strategic transactions. These are innovative, capital-efficient deals without balance sheet complexity, technology debt, legacy liabilities, or meaningful expense investment. All are expected to contribute to AIG's earnings, earnings per share, and return on equity in 2026, and we believe these transactions should be more accretive in 2026 and 2027 than share repurchases. I'll take a moment now to provide an update on our progress. In October, we were very pleased to announce a renewal rights deal for Everest's global retail insurance portfolio. The portfolio is well-balanced across geographies and expands our global retail commercial footprint and distribution access while adding business that is complementary to our portfolio today. As a reminder, the purchase price relating to Everest is calculated as a percentage of the total renewable premium of the Everest portfolio, which we now expect to be close to $1.8 billion after doing more work with Everest. This would adjust our purchase price down from approximately $300 million to $270 million, with possible further downward adjustments of up to $70 million if less than 80% of the portfolio is renewed. We're making very good progress with the conversion of the Everest portfolio. We accelerated the conversion of $65 million in gross premiums written in the fourth quarter. In January, we had a retention rate of 75%, reflecting approximately $180 million in gross premiums written. an impressive result considering that we did not commence work to convert the book in Europe until we received the required regulatory approvals in December. This is a terrific performance and a validation that clients and brokers want AIG to have an expanded role on their insurance placements. AIG has many advantages in executing this conversion. We have ample capacity to grow, reinsurance treaties that will benefit the business at a lower cost, and a more advantageous expense base given we did not need to replicate Everest's infrastructure to service the business. We expect the combination of these factors to drive a 10-point benefit to the combined ratio of the converted business. To support the conversion, we leverage our GenAI capabilities to evaluate the Everest portfolio and prioritize the accounts we want to renew in a fraction of the time. As we've discussed, we've deployed a robust ontology of AIG's businesses and were able to quickly build an Everest ontology. In essence, a digital twin of that portfolio, which allowed us to prioritize how the portfolios could blend together, enabling us to deliver compelling solutions for clients and our broker partners. We reviewed Everest's portfolio to determine account limits, attachment points, and pricing, and to identify conversion strategies. In addition, we leverage our GenAI solution, underwriting by AIG Assist, to accelerate the conversion process in key lines of business, increasing renewal speed significantly. We're pleased with our progress and are focused on ensuring a smooth transition in the portfolio over the next three quarters. Now, I'd like to share more detail regarding our investment in Convex Group. where we took an approximately 35% equity interest coupled with a 9.9% ownership stake in Convex's majority owner, Onyx Corporation. These investments close on February 6th, and they are expected to be accretive to AIG's earnings within the course of the year. As part of the Convex transaction, we also took a 7.5% whole account quota share of Convex's business for 2026, which we'll earn in over the year. our share will increase to 10% in 2027 and 12.5% in 2028 and thereafter. This transaction was a rare opportunity to secure a long-term strategic partnership with one of the most highly respected specialty insurance companies and its majority shareholder. AIG has led the industry in utilizing third-party capital to develop innovative structures that create tailored risk sharing solutions. After successfully launching Syndicate 2478 at the start of the year, we closed 2025 with the formation of Syndicate 2479, a new special purpose vehicle launched in partnership with Amwins and Blackstone in December with a stamp capacity of $300 million of premium income. This partnership represents a differentiated model for portfolio underwriting supported by third party capital, including capital committed by the largest US wholesale broker. We expect it will generate premium growth and fee income for a modest incremental capital commitment. This is also the first time we've deployed our GenAI capabilities in an SPV transaction. Partnering with Palantir, we use large language models to match data and define risk characteristics within Amwin's program business that were aligned with the syndicate's risk appetite. In addition to assessing future opportunities, This capability enables us to use advanced analytics to help shape the current portfolio. We have a strong pipeline of SPV opportunities and will continue to pursue future opportunities for expansion in our specialty and other lines of business. I'll take a moment now to update you on our GenAI initiatives. We've made significant progress in embedding GenAI across our core underwriting and claims processes and expanding it across AIG. As this work continues, our confidence has only grown in our ability to drive industry-leading impact on our deployment of Gen AI. Our top Gen AI priorities for 2026 include deploying underwriting by AIG Assist and claims by AIG Assist across the majority of our commercial businesses, enhancing AIG's ontology by developing a comprehensive digital twin of AIG's processes, workflows, and data elements to drive enhanced speed and efficiency, developing an orchestration layer to coordinate AI agents to drive better decision-making and reduce costs across the organization, and further utilizing GenAI for AIG's SPV strategy, portfolio analytics, and compute. Since our initial rollout of underwriting by AIG Assist, we've expanded its use to seven additional lines of business, including our Lexington business. We remain on track to complete our accelerated rollout to the rest of North America, UK, and EMEA in 2026. We're already seeing benefits from these efforts. For example, Lexington's business has seen a 26% increase in submission count year over year. As a reminder, At our investor day, we shared our ambition of reaching 500,000 submissions by 2030. As of the end of last year, we've already reached over 370,000 submissions, demonstrating the robust opportunity. We believe our use of GenAI gives us a strong advantage going forward in this dynamic market. It's early days, but by deploying underwriting by AIG Assist in Lexington, we've delivered significant productivity gains. For example, for Lexington middle market property, our submit to buy-in ratio increased 35%. Building on our foundation, we're exploring the next phase of our Gen AI strategy. Focus on the orchestration of AI agents that can act as a force multiplier for our team. To do this, we're building an orchestration layer whereby we assign responsibilities to AI agents and determine when these agents are activated, the sequence of their tasks, what information they can access, how work is handed to other agents, and instances when greater human oversight is required. We think of these AI agents as companions that operate alongside our teams with specific roles such as knowledge assistants that can provide relevant information in real time, advisors that can provide additional insight based on historical use cases, and critic agents that challenge the knowledge and advisor agents as well as the underwriters' decisions. Through the orchestration layer, we can coordinate these agents to work together to help streamline simple, repetitive, and lengthy processes to support decision-making. We made substantial progress on our GenAI strategy in 2025 and remain focused on continuing to pursue the opportunities we see ahead to support our business goals. 2025 was an outstanding year of accomplishment in which we delivered against our strategic, operational, and financial commitments and positioned the company for an exceptional 2026. Overall, we remain on track to meet or exceed the financial objectives we outlined at our investor day. We have strong momentum with growth expected to come from multiple sources, including organic growth initiatives, savings from excess or loss reinsurance, the continued successful conversion of the Evers portfolio, our whole account quota share with Convex, our special purpose vehicles, and the repositioning of our high net worth quota share at 1.1. Given our strategic transactions and several of the drivers I just mentioned, we're well positioned to drive premium growth into 2026. Because it's always hard to forecast, I'd like to take a minute to provide some perspective on what we see for net premiums written growth for the full year 2026, noting that this guidance reflects our views and assumptions as of today. For the full year 2026, we expect low to mid-teens net premiums written growth in general insurance, and we believe that 2026 is already off to a very strong start. Before I hand it over to Keith, I want to briefly speak about the leadership transition we announced last month. I'm incredibly proud of our colleagues and the work we've accomplished together, and I could not be more confident in AIG's future. With the company well positioned for its next phase, I felt it was the right time to retire as Chief Executive Officer and transition to the role of Executive Chair of the Board. I'm very excited to welcome Eric Anderson to AIG on February 16th as President and CEO-elect. Eric is the right leader to take AIG into the next phase of its journey. He's a highly respected executive with nearly 30 years of experience at Aon. His accomplishments are widely recognized throughout the industry, and he has consistently made positive contributions in every role he's held. Eric will be on the first quarter call and can share his perspective then. I want to assure you that he's fully committed to our Investor Day financial guidance and strategic objectives. I look forward to working with him and our outstanding management team to drive AIG forward from a position of strength. As AIG enters this next chapter, I have great confidence in our company's leadership, the foundation we've built, and our ability to drive sustainable, profitable growth and create long-term value for all of our stakeholders.