AIG(AIG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - AIG reported adjusted after-tax income of $702 million, or $1.17 per diluted share, for Q1 2025, reflecting strong performance despite a challenging environment [9][10] - Net premiums written increased to $4.5 billion, an 8% year-over-year growth on a comparable basis, driven by a 10% growth in global commercial [10][34] - The general insurance expense ratio improved to 30.5% from 31.8% in the prior year quarter, primarily due to the divestiture of the travel business [11][12] Business Line Data and Key Metrics Changes - North America commercial insurance net premiums written grew 14% year-over-year, with Lexington growing 23%, led by a 27% increase in Lexington casualty [10][34] - International commercial insurance net premiums written grew 8% year-over-year on an FX adjusted basis, with property growing 35% and marine growing 17% [11][12] - The accident year combined ratio as adjusted was 87.8%, the best first quarter result for AIG since the financial crisis, compared to 88.4% in the prior year quarter [12][34] Market Data and Key Metrics Changes - The market remained favorable in Q1, particularly in segments with strong underlying fundamentals, with North America seeing rate increases led by excess casualty at 16% [14][15] - In international markets, casualty rates increased by 7% while property rates increased by 2%, offset by declines in global specialty and financial lines [17][18] - AIG returned $2.5 billion of capital to shareholders in Q1, including $2.2 billion in share repurchases and $234 million in dividends [17][18] Company Strategy and Development Direction - AIG aims to leverage its underwriting culture, reduce volatility, and enhance its capital management strategy to maximize strategic and financial flexibility [7][8] - The company is focused on deploying Gen AI across its operations to improve underwriting processes and risk assessment [7][8] - AIG is strategically positioned in the growing Indian insurance market through its joint venture with Tata Group, expecting significant growth driven by India's economic expansion [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term strategic and financial goals despite geopolitical and macroeconomic challenges [9][10] - The company anticipates a 20% plus earnings per share compound annual growth rate over the next three years and aims for a core operating ROE of 10% to 13% [30][31] - Management highlighted the importance of monitoring tariff impacts and inflation on underwriting pricing and loss costs [27][29] Other Important Information - AIG's book value per share increased by 10% year-over-year to $71.38, while adjusted tangible book value per share decreased by 8% to $67.96 due to the impact of CorBridge deconsolidation [45][46] - The company has a debt to total capital ratio of 17.1% and parent liquidity of $4.9 billion, indicating strong financial flexibility [18][46] Q&A Session Summary Question: Inquiry on the transformation to using GenAI - Management explained that the transformation began with digitizing workflows and improving data quality, enabling the adoption of GenAI to enhance underwriting processes [52][53] Question: North America commercial pricing metrics - Management acknowledged headwinds in property pricing but emphasized strong technical pricing and positive trends in casualty rates [55][56] Question: Underwriting pricing policy in light of tariff uncertainty - Management indicated that they are cautious and building risk margins into pricing to account for potential impacts from tariffs and inflation [75][76] Question: Impact of expenses moving from other operations to general insurance segments - Management clarified that while expenses are expected to remain stable, the integration of costs from other operations into general insurance segments has been managed effectively [78][80] Question: M&A environment and capital deployment - Management stated that the uncertainty does not change their disciplined approach to acquisitions, focusing on long-term value and strategic fit [84][85]