AIG(US:AIG)2022-09-08 03:39Summary of AIG's KBW Insurance Conference 2022 Call Company Overview - Company: American International Group, Inc. (NYSE:AIG) - Event: KBW Insurance Conference 2022 - Date: September 7, 2022 - Key Participants: Peter Zaffino (Chairman and CEO), Meyer Shields (KBW) Core Points and Arguments Company Transformation and Strategy - AIG has undergone significant transformation since 2018, focusing on repositioning and changing its operational strategy to address fundamental issues in its core Property & Casualty (P&C) business [2][3] - The company has implemented a turnaround program known as AIG 200, which aims to improve underwriting results, reduce volatility, and modernize operations [5][6] - AIG has exited or repositioned ineffective businesses and established a new reinsurance strategy focused on combined ratio improvement and risk-adjusted returns [4][6] Underwriting and Financial Performance - AIG has reduced gross limits by over $1 trillion since 2018 and achieved cumulative rate increases of over 50% across its gross portfolio [8][10] - The company reported a sub-90 calendar year combined ratio in General Insurance for the first time since the financial crisis, marking a significant milestone [11] - AIG has experienced seven consecutive quarters of net premium growth in Commercial Lines, with an 85% retention rate on its Global Commercial business [10][11] Cost Management and Capital Strategy - AIG achieved $1 billion in cost savings six months ahead of schedule as part of the AIG 200 initiative [11][12] - The company has executed a capital management strategy that includes reducing leverage, returning capital to shareholders, and buying back shares [12][13] - AIG aims for a return on capital employed (ROCE) of 10% or greater, focusing on underwriting excellence, expense reduction, and the separation of its life and retirement business [13] Market Dynamics and Competitive Position - The wholesale insurance market has changed dramatically, with wholesale brokers growing faster than retail brokers, capturing significant market share [30][31] - AIG has adapted to these changes by focusing on dual distribution and specialized underwriting strategies [32][33] - The company has seen consistent double-digit rate increases in property wholesale, indicating a strong market position [33] International Operations and Growth Opportunities - AIG's Japanese market is a significant growth area, with opportunities to improve combined ratios and expand into digital capabilities [24][26] - The company is optimistic about growth in cyber insurance, which is currently underdeveloped in Japan [27] Reinsurance Strategy - AIG has improved its reinsurance strategy, with significant enhancements in ceding commissions and a focus on quality underwriting [60][64] - The company has reduced its net retention in casualty from $100 million to a maximum of $15 million, reflecting a more conservative risk appetite [10] Future Outlook - AIG is committed to continuous improvement in operational capabilities and digitization as part of its long-term strategy [70][71] - The company plans to maintain expense discipline and improve efficiency as it transitions to a new operating model post-separation of its life and retirement business [72] Additional Important Insights - AIG's operational transformation has been as significant as its underwriting turnaround, with a focus on data management and process improvement [68][71] - The company is cautious about the impact of external factors such as inflation and supply chain issues on its insurance portfolio [40][41] - AIG is actively monitoring the recovery of its travel insurance segment, which was impacted by the COVID-19 pandemic [52][54] This summary encapsulates the key points discussed during the AIG conference call, highlighting the company's strategic initiatives, financial performance, market dynamics, and future outlook.