American International Group, Inc.

Good day and welcome to AIG's first quarter 2026 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, Michelle, 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 gap figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on our website at AIG.com. With that, I'd now like to turn the call over to our Chairman and CEO, Peter Zaffino. Good morning, everyone.

Thank you for joining us today to review our first quarter financial results. Following my remarks, Eric Anderson will provide his initial perspectives on AIG and share some commentary on the quarter. and then Keith Walsh will provide more detail on our financial performance. John Hancock will join us for the Q&A portion of the call. We had a very strong start to 2026 and delivered an exceptional first quarter, the strongest first quarter that we've seen since I've been at AIG. During my remarks, I will share key first quarter highlights and discuss our outstanding progress towards our Investor Day objectives. provide a perspective on the property market, since it's receiving a lot of attention this quarter, and outline the progress we're making on our AI and digital strategies. Before we get started, I'd like to take a moment to address the ongoing conflict in the Middle East and what it means for our people, our clients, and the broader environment in which we operate. We have a significant number of colleagues in the region, and their safety remains our top priority. From the outset, our teams quickly shifted to enable remote operations and we remain in close contact to make sure our colleagues have the support and resources they need. The impact on our industry will continue to evolve and we remain focused on managing risk in a complex global market. Demand for expertise in property and energy, trade credit, and political risk insurance is increasing as clients navigate heightened uncertainty related to shifting trade policies. The direct impact on IIG is not material based on what we've seen to date, but we're not complacent. We're monitoring accumulation risk, adjusting underwriting guidelines where warranted, stress testing our investment portfolio, and staying very close to our reinsurance partners. Just as important, we are continuing to stay close to our clients and brokers, helping them understand coverage, navigate claims issues, and manage through this volatile environment. Now let me turn to our results. We had an excellent start to the year and have been very focused on advancing our strategic investments and delivering on the ambitious three-year guidance that we provided at Investor Day in 2025. In order to achieve these objectives, We intend to continue delivering balanced net premiums written growth with excellent accident year combined ratios to support earnings expansion across our core businesses while also focusing on our nominal expense base. Net premiums earned growth is expected to benefit AIG in the back half of 2026 and as we enter 2027. In the first quarter, General insurance net premiums written increased 18% year over year on a constant dollar basis, driven by our global commercial insurance business, which increased 21% year over year, and our global personal insurance business, which increased 11% year over year. All three business segments performed exceptionally well, supported by our recent strategic transactions, our differentiated reinsurance strategy, and profitable organic growth that's in line with market peers. I want to provide a little bit more context on reinsurance. As I discussed during our fourth quarter call, AIG achieved enhanced terms and conditions and favorable pricing during the January 1st renewal cycle. We negotiated substantial year-over-year savings, which included the Everest portfolio, providing a meaningful tailwind to our net premiums written in the first quarter. It's worth noting that AIG's property catastrophe placements have lower model detachment points and higher exhaust limits for each geography on a risk-adjusted basis. For AIG, our strategy of maintaining a consistent low net retention for natural catastrophes through the cycle means that we will benefit from more attractive reinsurance pricing as evident in the positive impact to our net premiums written. We've discussed our global personal insurance business in prior quarters, and I want to recognize the significant improvement in the financial performance, which has been deliberate. We grew net premiums written 11% in the first quarter, benefiting from the restructuring of our related reinsurance treaties and organic growth, along with meaningful improvement in the expense ratio, which decreased 410 basis points. The action year combined ratio, as adjusted, improved 570 basis points to 89.9%. The calendar year combined ratio was 89.4%, a strong improvement from 107.9 in the prior year. We continue to make outstanding progress in our global personal insurance business. Shifting back to overall general insurance financial results, the expense ratio was 29.3%, an improvement of 120 basis points year over year. The accident year combined ratio, as adjusted, was 86.6%, an improvement of 120 basis points year over year. The calendar year combined ratio was 87.3%, an improvement of 850 basis points year over year. Adjusted after-tax income per diluted share was $2.11, an increase of 80% year over year. Core operating ROE was 12.2%. Overall, we achieved very impressive financial results across the entire company, another exceptional quarter of execution from all of our AIG colleagues from around the world. Turning to capital management, during the quarter, we returned $760 million of capital to shareholders, including $519 million of share repurchases and $241 million of dividends. As we announced yesterday, the AIG Board of Directors approved an 11 percent increase in our quarterly dividend to 50 cents per share starting in the second quarter of 2026. This marks the fourth consecutive year of double-digit percentage increases and reflects the Board's confidence in our strategy and AIG's long-term outlook. Our total debt to total adjusted capital ratio was 17.7 percent at quarter end. As we discussed on our last earnings call, we've continued to reduce our ownership of Corbridge Financial. At the end of the first quarter, our equity interest in Corbridge was approximately 5.6%. We anticipate fully exiting our position by selling down our remaining stake in 2026, subject to market conditions. We expect the primary use of these proceeds will be for additional share repurchases. As we look ahead, AIG has tremendous financial strength and strategic optionality to execute against our objectives, profitability ambitions, and our capital management priorities. Turning to the property market, on our second quarter call last year, we spent time discussing the market's competitive dynamics and providing detail on our portfolio. I wanted to provide a further update based on current market conditions and the pricing pressure we have seen across the market on the U.S. large account segment. As a reminder, we have multiple points of entry into the global property market where we deploy capital for the best risk-adjusted returns. First, our balanced and profitable international property business represents approximately 40% of AIG's $6.5 billion gross premiums written property portfolio. I'm using gross premiums written because it's more accurate reflection of our performance without the impact of reinsurance. As a point of reference, the international property portfolio's calendar year combined ratio was on average in the low 70s across 2024 and 2025. The international property market rate environment is very different from the US. International pricing was down 4% in the quarter, And this was only the second quarter of rate reductions that we have had in the last five years. In the U.S., we have a strong performing retail property portfolio, which is majority shared and layered, and had calendar year combined ratios in the 70s in 2024 and 2025. In excess and surplus lines, the Lexington middle market portfolio has performed exceptionally well. This has been one of the fastest growing segments in property and continues to deliver one of the best combined ratios in our global property portfolio. We've been deliberate in our growth and believe our AI implementation, which I will discuss later in more detail, will further enable this. The Lexington large account shared in layered business and excess and surplus lines are which is less than 10% of our global property portfolio, has been under significant pricing pressure over the last year, and that's a different story. Given continued pressure on rate on a policy year basis and our general observations, we have been contracting our Lexington large account portfolio, and you should expect that to continue throughout the year if the current market environment persists. We have been and will continue to be more selective on new business within the portfolio, which decreased 19% year over year. Across the portfolio, we are willing to non-renew accounts that no longer meet our expected risk-adjusted returns. As part of this disciplined approach to underwriting, we're able to quickly redeploy capacity to areas of the market that provide more attractive opportunities for profitable growth. Now I want to discuss the progress that we continue to make on AI and digital. After years of extensive work exploring how to embed AI into our underwriting workflow, we outline our blueprint at our investor day in 2025. That work reinforced our conviction that AI has the potential to materially improve performance and drive better solutions for our clients and for AIG. Our approach to using AI has been focused on three important components. First, you have to have an understanding of the technology and capabilities of large language models. Second, you have to have pattern recognition in order to know how to apply AI to your business. And third, you have to have a culture and a track record of execution in order to effectively deploy AI within an organization. While we expected the technology would develop meaningfully over time, we could not have predicted the rapid pace of advancement over the last nine months or the breadth of AI's potential application. We started our AI journey at the core of our business in underwriting, where we felt the impact would be most profound. At the time, large language models could handle discrete tasks, like answering a question or reviewing documents, with limited autonomous time. In 2025, we launched underwriting by AIG Assist to help our underwriters review our submissions with more and higher quality information in a fraction of the time. After a successful launch, we began to deploy AIG Assist across eight lines of business. We're very encouraged by the impact on underwriting metrics and improved data quality. In Lexington middle market property, which is an area we have targeted for growth, AIG Assist has helped deliver a 30% improvement on quoting more submissions, reduced time to quote for the underwriters by 55%, and increased binding of submissions by approximately 40%. Now, with advancements in reasoning models, AI agents can review, challenge, and eventually recommend underwriting observations so that our underwriters can make more informed decisions. and provide more robust insights to supplement their experience in underwriting judgment. We're advancing our business model and AI implementation programs to leverage this potential. To illustrate the magnitude of recent advancements in AI, when we began our work with Cloud 2.0, AI agents could operate autonomously for less than an hour. Today, they can run autonomously for as long as 30 hours. This quarter, in close partnership with Palantir and Anthropic, we've begun the next phase of agentic AI at AIG that builds on early successes of AIG Assist. Using Palantir's Foundry platform, we expanded our ontology, a digital map of our business that included our underwriting processes, workflows, and data relationships. This ontology, coupled with orchestration, will enable us to deploy multiple AI agent teams to integrate with our core systems, which will improve decision making and reduce costs over time. As the logical next step in our AI deployment, we're creating a multi-agentic solution with a strong orchestration layer that coordinates specialized and trained AI agents to seamlessly supplement our underwriters analysis and should further augment our underwriter's ability to assess risks and rate and provide coverage with real-time alignment. In this phase, we expect each AI agent to be purpose-built for a specific underwriting function. For example, one agent may handle submission ingestion and data extraction, another may perform risk evaluation against our underwriting guidelines, and another could benchmark pricing against our portfolio targets. all with a collaboration agent to synthesize input from other agent large language models. These agents will communicate and hand off work to each other to augment our underwriters, just like a well-functioning underwriting team, but operating at machine speed and with inherent consistency. To illustrate an example of how quickly agents can learn a business, I want to outline a beta test that was recently conducted by Anthropic. As part of a closed evaluation, Anthropic hired a professional claims adjuster to review 100 claims, rank each as fraudulent or legitimate, and document the reasoning. CLAUD was then used to assess the same 100 claims. CLAUD's determination aligned with the adjuster's 88% of the time, a very strong baseline for an out-of-the-box model with no claim-specific tuning. Fast forward to today, the latest version of CLAUD can elevate the performance of an entire claims team, surfacing patterns across submissions that are easy to miss when reviewing files one at a time, making our most experienced adjusters even more effective. Large language models can now hold a full file of claims information in context, every endorsement, every loss run, every guideline, and reason across it with an audit trail. Examples of what Claude routinely flags include timeline inconsistencies, geolocation mismatches, linguistic fingerprints, prior claim patterns, document tampering signals, and coverage gaps. The intuitive nature of the large language models and its ability to learn all of the information the claims expert had access to demonstrates the potential of large language models to work alongside our underwriting and claims professionals to drive improved data, decision making, more timely responses, and more accurate outcomes. Importantly, we will be able to see what every agent is doing and can intervene in real time if needed. Human oversight is and will continue to be essential to our underwriting processes. Overall, we're very pleased with the progress we're making, and we are beta testing the use of multi-agentic solution to enhance our team's productivity, efficiency, and learning and development. AIG entered 2026 with significant momentum, and our performance in the first quarter was outstanding. We achieved impressive results in a complex operating environment and have a very good foundation to accelerate our strategic progress. Finally, as I discussed last quarter, Eric Anderson joined AIG in February and will officially become our next CEO on June 1st. Building on his decades of experience in the industry, Eric has hit the ground running, developing a detailed understanding of AIG, our business and our functions, and engaging with key stakeholders, including the AIG board, colleagues, rating agencies, regulators, and our clients, brokers, and partners. We look forward to Eric's impact and leadership in 2026 and for years to come.