American International Group, Inc. — 2024 Q1
Transcript
Each turn shows the speaker, their inferred role, the section, and that turn's net sentiment (×1000).
Good day, and welcome to AIG's First Quarter 2024 Financial Results Conference Call. This conference is being recorded.
Good morning, and thanks very much. 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.
Good morning, and thank you for joining us today to review our first quarter 2024 financial results. Following my remarks, Sabra will provide more detail on the quarter and then we'll take questions. Kevin Hogan will join us for the Q&A portion of the call.
first, I will provide some financial highlights in the quarter focused on the General Insurance business, including some insight into our net premiums written; second, I will talk briefly about the results in Life and Retirement; third, I will provide an update on our capital management strategy, specifically our plans for 2024 and 2025; and finally, I will discuss our path to a 10%-plus ROCE and provide more detail on AIG Next and our future state operating structure that will create value through a leaner and more unified company.
to maintain very strong insurance company capital levels to support organic growth and a steady source of operating subsidiary dividends to service parent company needs; to reduce our total debt outstanding and improve our leverage ratios, providing a well-structured and well-laddered debt portfolio with no outsized amounts due in any given year, particularly over the next 5 years; to return excess capital to shareholders in the form of share repurchases and dividends; to increase our dividend as our earnings and financial flexibility improved; and to maintain a strong parent liquidity position.
Thank you, Peter. This morning, I will provide details on AIG's first quarter results, including General Insurance, investment income in Life and Retirement and a balance sheet update.
Thank you, Sabra. And operator, we're ready for questions.
[Operator Instructions] Our first question comes from Mike Zaremski with BMO.
Looking over the -- your prepared remarks, Peter, and you used the term inorganic opportunities should they exist in reviewing reinsurance. So you also talked about the capital management expectations. So I guess would -- should we be thinking about the repurchase program as kind of a base case, but should there be other opportunities you might look to do something organic? Or just was there anything kind of new in there, in that wording that we should -- that you're trying to get us to think about?
Thanks, Mike. It's a very good question. We are going to stay very committed to the capital management structure we outlined, which is why I gave guidance on not only '24 but '25 in terms of share repurchases.
Okay. Understood. And my follow-up is just on the overall competitive environment relative to growth. So you guys have been very open. You have lots of pricing gauges. You've talked about Financial Lines being -- continue to be a soft-ish marketplace. but you've also said that you estimate pricing above loss cost trend.
Yes. Thanks. It's a very good question. Let me start on growth. You can't -- one is you can't always look at broker index. Again, I don't know what Marsh index tracks, but sometimes, they don't catch fee business. They don't really catch the entire sort of market, which is the market we play in.
Specialty; Financial Lines; and Casualty. The first quarter was impacted in International by energy within the Specialty class. But it's a great business, we're a world leader in that class, great underwriting capabilities and global distribution. And expect us to continue to grow that, and it's a very attractive combined ratio.
Our next question comes from Elyse Greenspan with Wells Fargo.
Peter, my first question, last quarter, you had implied that a Corebridge deconsolidation would come by the end of the second quarter. Does that time frame remain intact?
There's not a whole lot more I can offer in terms of the prepared remarks. Every sell-down has been important, but this one is particularly important just because we would likely become a seller of shares that will deconsolidate Corebridge. So we continue to focus on making certain we're looking at every option available.
And then my follow-up is on the new share count target that you provided for the end of '25, that 550 million to 600 million. I'm just trying to get a case of -- what the base case is for just Corebridge within that. Does that assume additional secondaries? If you did an exchange offer, would that be accretive to that share count target? I just want to get a sense of when you guys came up with this 550 million to 600 million, what you're assuming for Corebridge within that share count target.
Yes. Thanks, Elyse. I think while we gave the guidance into 2025 is -- what I said in my prepared remarks is that by the end of the second quarter, if we exercise on the share repurchases that we've outlined, we would be at the higher end of the range of the 600 million to 650 million. And if we continue the $1.5 billion a quarter, which, yes, would contemplate doing a sell-down of Corebridge. But there's other forms of liquidity that come into AIG, but we would need to sell down to be able to do the $1.5 billion in the third and fourth quarter, but that gets us to the lower end of the range.
Our next question comes from Ryan Tunis with Autonomous.
Just a follow-up, I guess, on that last question, Peter. Just, I guess, the messaging on the $10 billion share repurchase authorization. Are you trying to say that the intention is to do kind of no more than $10 billion until the end of '25? Or is that -- should we just take this as an update of what you think you can do based on what you're seeing today?
I would take it as just an update. We would have gone past our current Board authorization with the 2025 guidance and worked very closely with the AIG Board of Directors to talk about what we expected the capital management strategy to be in the next 6 quarters. And that's really how we derive the $10 billion. But I wouldn't think about it anything more than that.
Got it. And then a follow-up, I guess, just thinking about the reinsurance. And obviously, you're continuing to add more, but you're saying potentially, like in the future, maybe scaling back on that a bit could be a way you could use some of your excess capital.
Well, in terms of the portfolio, I'm comfortable today taking more net. But what we've done over this multiyear period in terms of strategically positioning the reinsurance is working very closely with our reinsurance partners, looking across multiple lines of business and multiple geographies in the placement of reinsurance. And then also making certain that we control volatility in this period of transition. That's been really important.
Our next question comes from Rob Cox with Goldman Sachs.
First question on underwriting leverage. If I take comments on capital at the insurance companies with opportunities in Property post the sale of Validus, it seems like AIG could meaningfully increase underwriting leverage here, which could obviously contribute to the 10%-plus ROCE. Could you provide any additional color on how you're thinking about underwriting leverage here, and maybe some metrics you'd point us to?
Sure. I'll ask Sabra to comment on some of the leverage within the insurance company subsidiaries. We see great opportunities for us to grow within -- across the world. And you've mentioned Property and specifics. We have significantly reduced PMLs, which means we have aggregate to grow. And we have the capital to grow.
Yes. Thank you, Peter. What I would just observe is, as we've stated in the past, and I'll reiterate today, all of our General Insurance subsidiaries or Tier 1 subsidiaries on a global basis have capital at or above our target ranges. And within the United States pool, which is the largest pool of our General Insurance capital, our risk-based capital ratios at the end of last year were around 460%, which is well higher than many of our peers.
That's really helpful color. Yes, just a follow-up on Excess Casualty. I appreciate the comments. The premiums were up 46% in the quarter, and it seems like pricing is up meaningfully. It seems like AIG is taking advantage of market conditions where perhaps some others are pulling back. So I was hoping you could provide a little bit more commentary on the opportunities you're seeing there. And what makes AIG comfortable with the current environment?
Thank you. We do see great opportunities in Casualty. We highlighted some of the performance in the quarter. We had to start, because of the portfolio that existed, reunderwriting the Casualty portfolio well before, I think, it was discussed really in the industry. And with that, became a new underwriting philosophy, new underwriting strategy, new terms and conditions, new attachment points, net limit, gross limits, pricing, margin. And so that's been a journey for us for years.
Our next question comes from Michael Ward with Citigroup.
I'm a little bit curious just on the potential sell-down of Corebridge. How do you weigh the options between doing several smaller chunks of sell-down from here versus maybe the potential for doing a sell-down of the remaining stake? And then another thing on the other side, right, we sort of think about this $500 million a month buyback. Is there the option to potentially do an ASR post sell-down?
I wish I could provide a little bit more detail on the first part of the question. We're looking at all alternatives, all size. I mean, so much is market-dependent. You have certain windows. And we want to make sure -- we have multiple stakeholders, I mean, within Corebridge shareholders, AIG shareholders, so sort of balancing that is really important for us.
Yes, thanks. The thing you should keep in mind is that with the amount of shares that we can repurchase or can be repurchased by a company in any given month, whether it's an ASR or it's a 10b5-1 plan or open market purchases, it's constrained by the same factor, which is the average daily trading volume.
Thanks, Sabra. And in closing, I just want to thank all of our colleagues around the world for their continued dedication, teamwork, execution on all the progress we've made. And I want to thank everybody for joining us today and your questions. Everybody, have a great day.
Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.