American International Group - Earnings Call - Q3 2025

Executive Summary

• AIG delivered strong Q3 with adjusted EPS of $2.20, up 77% YoY, and GAAP EPS of $0.93; General Insurance underwriting income rose 81% to $793M and the combined ratio improved 580 bps to 86.8%.
• Versus Wall Street: Adjusted EPS beat consensus by ~+$0.49 (≈+29%); reported revenue was below consensus by ~$0.52B (≈-8%)—see Estimates Context for details and SPGI data caveats.*
• Strategic catalysts: announced renewal rights for ~$2B of Everest retail commercial premiums (effective largely 1/1/26) and long-term investments in Convex (35% stake + quota share) and Onex (9.9% stake; up to $2B commitments)—management expects accretion to earnings, EPS and ROE post close.
• Capital returns remained robust: ~$1.5B returned (buybacks ~$1.25B; dividends ~$250M); Core Operating ROE reached 13.6% (10.9% YTD) and debt-to-capital was 18%.

What Went Well and What Went Wrong

• What Went Well

  • Material underwriting improvement: GI combined ratio 86.8% (from 92.6% LY) as catastrophe losses fell to $100M (1.6 pts) vs $417M (6.9 pts) LY and expense ratio declined 100 bps.
  • Strong adjusted EPS and ROE: AATI/share $2.20 (+77% YoY), Core Operating ROE 13.6% on higher GI underwriting income and higher NII on an APTI basis (+15% YoY to $1.0B).
  • Strategic optionality: Everest renewal rights, Convex and Onex transactions expected to be accretive; renewal rights structured without assuming legacy liabilities and minimal incremental capital needs.

• What Went Wrong

  • Accident-year loss ratio ticked up: AYLR increased 100 bps YoY (to 57.4%) and AYCR stayed flat at 88.3%; NA Property rates remain pressured, though profitability remains strong.
  • Global Personal topline contracted: NPW down 11% YoY (reported) due to reinsurance changes in U.S. High Net Worth; CR improved to 95.2% but AYCR remains elevated at 95.5%.
  • International expense pressure: International Commercial AYCR rose to 86.0% (+260 bps YoY) given higher reapportioned corporate expenses, partly offset by lower CATs.

Transcript

Operator (participant)

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

Quentin McMillan (VP, Managing Director, and Head of IR)

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 Corebridge Financial on June 9, 2024, the historical results of Corebridge 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 the 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 27 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 Zaffino.

Peter Zaffino (Chairman and CEO)

Good morning, everyone. Thank you for joining us today to review our third quarter 2025 financial results. Following my remarks, Keith will provide more detail, and then John Hancock and Don Bailey will join us for the Q&A portion of our call. This has been an exceptional third quarter for AIG, and an incredibly busy one. We achieved tremendous EPS and ROE results as we continued to execute on our strategy to deliver sustainable, profitable growth. Last week, we had several announcements involving Convex Group, Onyx Corporation, and Everest Group. The key takeaway is that they are all expected to be earnings, EPS, and ROE accretive in the first year post-closing. We believe each will accelerate AIG's progress and create long-term value for our company and our stakeholders. This was made possible due to our strong balance sheet, prudent capital management, and financial flexibility.

It's simply been an outstanding quarter, and I'm very proud of our colleagues for all they've accomplished together. For our call this morning, I will share a high-level overview of our third quarter results, provide a perspective on our strategic investments and renewal rights acquisition, give a brief update on our GenAI initiatives, and conclude with an overview of our capital management strategy and the progress against our Investor Day financial objectives. In the third quarter, we delivered adjusted after-tax income per diluted share of $2.20, which is an increase of 77% year-over-year. Adjusted after-tax income for the quarter is $1.2 billion, an increase of 52% year-over-year, driven by our general insurance business. Underwriting income was $793 million, an increase of 81% year-over-year. Net investment income on an adjusted pre-tax basis was $1 billion, an increase of 15% year-over-year. The accident year combined ratio, as adjusted, was 88.3%.

In line with the prior year quarter and our 16th consecutive quarter with a sub-90% result. The calendar year combined ratio was 86.8%, an improvement of 580 basis points from the prior year quarter. Now, let me provide some detail on our performance across the three business segments. Let's start with North America commercial insurance. Net premiums written were flat year-over-year. It's worth noting, which we mentioned on our third quarter 2024 earnings call, that we had a closeout transaction in our casualty portfolio that benefited overall growth in the prior year quarter. Adjusting for this, net premiums written would have increased 3%. This growth was driven in targeted areas, notably programs, which increased 27%. Western World, which increased 11%, and excess casualty, which increased 8%. This was partially offset by retail property, which declined 10%, and Lexington property, which declined 8%, where rate pressure has been most prevalent.

We spoke about property quite a bit last quarter. Keith will go into more detail in his prepared remarks, and we can discuss further in Q&A. Despite pressure on rates, the accident year and calendar year combined ratios remain exceptional for the property portfolio. North America new business was very strong. While Lexington's new business was flat year-over-year, it was the biggest nominal contributor to new business in North America. Its submission count was up 18% year-over-year, following significant increases over the last two years of 34% in the third quarter of 2024 and 47% in the third quarter of 2023. Financial Lines new business was up 16%, led by M&A. Turning now to international commercial insurance, net premiums written increased 1% year-over-year, driven by Marine, which increased 11%, and property, which increased 6%. This was partially offset by Financial Lines, which declined 6%.

International commercial had an outstanding quarter for new business, led by Specialty, which increased 17% year-over-year, driven by Marine, which increased 35%, and energy, which increased 30%. Property increased 24%, and Financial Lines increased 12%, driven by higher M&A activity in the quarter. In global personal, net premiums written decreased 4%, driven by the high net worth quota share reinsurance treaty that we entered into at January 1, 2025. While this continues to improve profitability in the portfolio for 2025, it negatively impacted global personal net premiums written. We expect to see this premium trend reverse in 2026. Overall, it was a great quarter of performance for AIG, and it positions us for a strong finish to 2025. Last week was a momentous one for AIG. We announced strategic investments with Convex Group, Onyx Corporation, and a transaction with Everest Group.

These will strengthen AIG's long-term value and strategic positioning, and we expect they will be earnings, EPS, and ROE accretive one year after closing, aligned with the objectives we outlined at Investor Day. This is in line with my previous comments that we would look for compelling opportunities to deploy capital in ways that would be accretive to our financial metrics and to further build our business. As a point of reference, over the last three years, we've returned a total of $19 billion of capital to shareholders through approximately $16 billion of share repurchases and $3 billion of common stock dividends. In addition, we reduced debt by $4.5 billion. We now believe we have a capital structure that's optimal for our current business. When you look at the global insurance industry, there's a scarcity of high-quality insurance assets.

We've been fortunate to secure a long-term investment in one of the very best global specialty and reinsurance companies, Convex Group. I know Convex Group extremely well. I have known and traded with its Chairman, Stephen Catlin, and Chief Executive Officer, Paul Brand, for over 20 years. I have deep respect for their expertise, leadership, and the culture they have built. With Convex, we will gain access to a world-class underwriting platform for complex specialty risks with a strong underwriting culture, a growing premium base, and a proven track record of outstanding performance and profitability. Stephen and Paul have earned a reputation for building exceptional underwriting teams, and this is reflected in the company's impressive performance. Convex was founded in 2019 and has consistently delivered very strong underwriting and financial results.

With a combined ratio in the high 80s, no historical reserve issues, no legacy technology debt, a highly scalable platform, and significant potential for continued growth. Over the last three years, Convex delivered a 25% compound annual growth in gross premiums written and an 18% average return on equity, demonstrating the strength of their business model and ability to produce sustainable long-term value. Last week, AIG agreed to acquire 35% equity interest in Convex, while Onyx Corporation took a 63% ownership position to be held directly on their balance sheet rather than through one of their investment funds. In addition, to benefiting from the ongoing success of Convex through an equity investment, AIG will also participate in Convex's portfolio through a whole-account quota share, which enables us to share directly in Convex's underwriting growth and expected profitability over the short, medium, and long term.

The agreement gives AIG the opportunity to participate in 7.5% of Convex's portfolio on January 1, 2026, and that will progressively increase to 10% by 2027 and 12.5% by 2028. The Convex transaction is expected to close in the first half of 2026. As part of our discussions with Convex Management, we were presented with an opportunity to acquire a minority ownership stake in Onyx Corporation. With headquarters in Toronto, Onyx is a leading private equity and credit investor with $56 billion of assets under management and 120 investment professionals based across Canada, the U.S., and the U.K. Our strategic relationship with Onyx presents a unique opportunity for AIG to partner through an equity investment with a global asset manager with a strong record of investing in the insurance sector.

Onyx has made a number of notable and highly successful strategic investments in specialized insurance platforms, including Convex, Ryan Specialty, One Digital, and USI. Let me unpack the details of our investment in Onyx. We've agreed to acquire a 9.9% equity interest. Additionally, in line with our investment guidelines, we've committed to invest $2 billion over three years across Onyx's broad asset management platform, which will provide us with a broader view of opportunities and deepen our market position within the global insurance industry. Keith will provide more detail in his remarks, but just to give you a brief overview, these investments have the potential to deliver a higher yield for AIG, supporting earnings growth and enhancing return on equity. We've evaluated investment opportunities in several fund managers in the alternative asset space over time and believe this is the right opportunity for us.

Post-transaction, over 40% of Onyx's total balance sheet net asset value is expected to relate to its majority ownership of Convex. The Onyx transaction is also expected to close in the first half of 2026. Finally, last week, we also announced our acquisition of the renewal rights for the majority of Everest's core retail commercial property and casualty portfolios, representing approximately $2 billion of gross premiums written across multiple geographies. We greatly appreciate Everest's willingness to engage in a bilateral discussion to structure a transaction that further strengthens both companies and our mutual business relationship. We purchased the renewal rights for approximately $300 million, with a potential downward adjustment of up to $70 million, depending on how much of the portfolio is renewed with AIG.

Under the terms of the transaction, AIG did not take any of the in-force portfolio or unearned premium for policies with effective dates prior to December 31, 2025, and we will not assume any liabilities for any of the policies previously underwritten by Everest. Everest employees will remain with Everest Group, though in certain geographies and businesses, we will work with Everest to offer opportunities to select staff members. We have also entered into a transition service agreement with defined service levels to ensure continuity for clients and brokers as the portfolio is transferred to AIG. In terms of the portfolio, it is well-diversified across geographies and classes of business. The largest portion of the in-force eligible gross premiums written is in the United States at $1.3 billion, followed by Europe at $400 million, the U.K. at $150 million, Australia at $80 million, and Singapore at $70 million.

Approximately 60% of this portfolio will renew in the first half of 2026. Canada, Latin America, and certain lines of business, including aviation, surety, and wholesale, are specifically excluded. From a business mix perspective, the portfolio is approximately 40% casualty, 30% property, 25% financial lines, with the balance being specialty classes. Everest's view, as stated on their earnings call, is that there was no further re-underwriting of the casualty portfolio required, and 80% of the adverse development in their casualty portfolio in the back years are from policies that have not been renewed. We will complete our own assessment but believe they've done a very good job of remediating the portfolio. We have extensive experience repositioning portfolios, particularly in casualty.

It's my view that we have the best casualty underwriters in the business, and when combined with stricter underwriting standards that Everest implemented over the last 12 months, we are confident that the portfolio will be positioned for success. AIG can absorb the business in our current infrastructure with no additional capital, and we will deliver an improved offering to clients and our distribution partners. The reaction from our broker partners to the transaction has been incredibly positive. They're very excited to work with us and committed to converting the book to AIG, providing welcome continuity to their clients. We anticipate being able to add this portfolio into our 1/1 reinsurance treaty renewals with no change in terms and conditions. This transaction adds further scale to AIG's upper-middle and large-account retail insurance book, providing an opportunity to drive premium growth without adding meaningful costs.

The actions we have taken over the past several years have positioned us with the balance sheet and liquidity to pursue compelling opportunities when they materialize. Convex, Onyx, and Everest are unique opportunities that came to AIG first because of our strong brand, strong performance, and the personal relationships that we've developed over time. As a result of these transactions, we are enhancing our earnings potential, driving incremental ROE, and putting our capital to work to drive long-term sustainable profitable growth. Now, I want to provide a brief update on GenAI and how we are strategically embedding it into our core underwriting and claims processes. Each quarter, and especially since Investor Day, we have meaningfully advanced progress. Now we're deploying GenAI solutions on a more accelerated basis.

In my career, I've never seen anything progress at the pace and scale like I've witnessed in the last six months with GenAI and compute. We at AIG want to be in a position to be able to adapt to these changes as effectively as possible. As a reminder, our objective has always been to provide more insight on the data that we receive from distribution partners through the submission process to enhance our underwriting. Supplement that data with reliable and verifiable additional sources and significantly reduce cycle time for our underwriters to make informed decisions in a fraction of the time. That is our future. We started late last year with the rollout of underwriting by AIG Assist in our North America financial lines business, and we continue to see strong results.

For our private and not-for-profit business today, we're processing 100% of the applicable submissions using underwriting by AIG Assist, which has increased our submit-to-bind ratio. This quarter, we deployed underwriting by AIG Assist in our Lexington middle market property and casualty business. In the E&S market and for Lexington in particular, speed drives growth. As I outlined earlier and in prior calls, the middle market submission counts are growing dramatically. We have nearly 200,000 submissions year to date. We simply cannot get to all the submission activity, and this is a problem that's not going to be solved by simply adding underwriters. We are accelerating the rollout of underwriting by AIG Assist and will deploy across the rest of our Lexington business by the end of 2025. We've also moved up the rollout to the rest of North America, U.K., and EMEA commercial lines by six months.

As a reminder, we've also been piloting claims by AIG Assist since last quarter, and we're seeing terrific results. We're reducing the time it's taking our claims teams to receive first notice of loss reports and to issue coverage letters. One of the main challenges in implementing GenAI solutions is the time and effort needed to build an accurate source of data from a heterogeneous population of documents. To make it easier, we developed a patent-pending approach called Autoextract. Autoextract is a capability that uses large language models to pull specific structured information from unstructured text, such as documents in multiple formats, websites, and conversations. It works by developing a content-specific large language model that generates prompts containing instructions on what to extract and then analyzes the text and returns the requested data in a structured format.

This solution makes it easier to process, analyze, and use large amounts of data that would otherwise require extensive manual effort. Another use case we've developed is a capability to ingest the Schedule P information for over 225 U.S. insurance companies. We leverage this information for a variety of insights to determine correlations among loss ratios over certain development periods, specific reserve development, and other insights across specific lines of business, such as other liability occurrence. We gathered over 4 million data points, augmented the data with publicly available information, created an ontology, and trained an agent in the ontology to identify trends. We use this in our portfolio management efforts to support our business and provide unique insights. I'll now shift to capital management. In the third quarter, we continue to execute against our discipline and balance strategy while maintaining our financial strength.

Keith will take you through the specifics. As we look to the future. Subject to market conditions, we intend to continue our share repurchases in 2026, albeit at a normalized level. Over time, we will also look for more compelling opportunities to deploy capital to drive long-term strategic value. Before I close, let me give you a little more specificity on how we're tracking to our Investor Day metrics. We set very aspirational objectives at Investor Day, and through the first nine months of the year, we are ahead of what we outlined at the beginning of the year, which is an enormous achievement. As I noted earlier, EPS has been very strong in 2025. We achieved a core operating ROE of 13.6% in the third quarter, up 430 basis points year over year.

Year to date, our core operating ROE is 10.9%, which is well within the 10-13% range we stated at Investor Day and believe we can maintain and grow this metric through 2027. We are continuing to make progress towards an expense ratio below 30% for general insurance and believe we have further opportunities to streamline our expense structure going forward. Finally, we grew our dividend per share by over 10% in 2025, and subject to board approval, we expect to be in a position to do the same in 2026. In summary, we had an outstanding third quarter, made significant advancements in our strategic deployment of capital with three unique opportunities, and we're very committed to delivering on our three-year guidance. I'll now turn the call over to Keith.

Keith Walsh (EVP and CFO)

Thank you, Peter, and good morning. I'm going to expand on the financial highlights for the quarter.

Adjusted pre-tax income, or APTI, was $1.6 billion, an increase of 51% from the prior year quarter. This was driven by strong results from the business and execution of our investment portfolio strategy. General insurance gross premiums written were $8.7 billion in the third quarter, an increase of 1% from the prior year. Net premiums written were $6.2 billion, a decrease of 1%. As Peter discussed, we had strong new business and retention in the quarter. I will comment on the rate environment later in my remarks. For the third quarter, general insurance accident year combined ratio as adjusted was 88.3%, which is the same as the prior year quarter. Accident year loss ratio was 57.4%, a 100 basis point increase year over year.

This was primarily driven by the reapportionment of unallocated loss adjustment expenses, and we had more favorable actual versus expected recognized in specialty in the prior year quarter. This was partially offset by underlying improvement in global personal. Our general insurance expense ratio was 30.9%, a 100 basis point improvement year over year. For the first nine months of 2025, the general insurance expense ratio was 30.8% compared to 31.7% for the prior year period. This demonstrates our operational excellence and discipline in driving efficiencies as we have shifted expenses from other operations into general insurance while investing in underwriting capabilities, technology, and infrastructure. For context, since 2023, the business has absorbed an additional $400 million of parent costs that used to be in other operations. We expect to be at $350 million of other operations expense for full year 2025.

Our teams have done a fantastic job of managing expenses, and we expect to achieve our target of below 30% by 2027. Total catastrophe losses for the quarter totaled $100 million, or 1.6 loss ratio points, an excellent result. Prior year development net of reinsurance was $205 million favorable, which included $174 million of favorable loss reserve development and $31 million of ADC amortization. North America commercial was favorable $139 million across our property, casualty, and financial lines. International commercial was also favorable by $47 million, primarily driven by shorter tail lines and global specialty, partially offset by movements on select longer tail lines, largely driven by auto trends and adverse development on pre-2018 general liability reserves. Global personal was $19 million favorable. These results include a reapportionment of the remainder of our uncertainty provision across all three segments, predominantly into longer tail lines.

Similar to last quarter, this was not related to any observable deterioration in our book. We continue to build on our strong balance sheet and have a high level of confidence in our reserve position, supported by the favorable actual versus expected trends we continue to observe. Overall, general insurance calendar year combined ratio was outstanding at 86.8%. A 580 basis point improvement compared to the prior year quarter. Now moving to the segments. North America commercial accident year combined ratio as adjusted was 85.4%, an increase of 30 basis points over the prior year quarter. The accident year loss ratio of 62.1% was up 30 basis points, owing to changes in business mix as we continue to earn in casualty business and reduce certain property lines. A partial one-time offset due to last year's casualty closeout transaction.

The expense ratio was flat to last year at 23.3%, including a 60 basis point improvement in the acquisition ratio, offset by a higher GOE ratio due to the movement of expenses into the business from other operations. The quarter included 310 basis points of catastrophe losses and 590 basis points of favorable prior year development. North America commercial calendar year combined ratio was 82.6%, an improvement of almost 13 percentage points. Turning to international commercial, the accident year combined ratio as adjusted was 86.0%, an increase of 260 basis points. The accident year loss ratio was 54.4%, a 170 basis point increase year over year, largely from reapportionment of unallocated loss adjustment expenses and less favorability in specialty, as we mentioned earlier. The expense ratio rose 90 basis points to 31.6%, driven by movement of expenses from other operations.

This quarter included 80 basis points of catastrophe losses and 190 basis points of favorable prior year development. The international commercial calendar year combined ratio was 84.9%. This is the 10th consecutive quarter of a sub-90% combined ratio for the international commercial segment, which speaks to the quality of our portfolio. Turning to global personal, the accident year combined ratio as adjusted was 95.5%, a 330 basis point improvement year over year, adjusting for the divested travel business. The accident year loss ratio improved 90 basis points to 55.3%, driven by underwriting actions leading to stronger underlying profitability and lower reinsurance costs. The expense ratio improved 240 basis points to 40.2%, driven by the acquisition ratio, which is benefiting from a combination of improved commission terms in the U.S. high net worth business, operational efficiencies, and changes in business mix.

This quarter included 80 basis points of catastrophe losses and 110 basis points of favorable prior year development. The global personal calendar year combined ratio was 95.2%, an improvement of 520 basis points year over year. We continue to make steady progress, increasing the profitability of global personal as outlined at Investor Day. Moving to rates. In North America, market conditions for pricing have remained largely stable. Excluding the property business, our North America commercial renewal pricing increase was 5%. In North America casualty, the overall pricing environment remains favorable, with retail excess casualty up 13% and Lexington Casualty up 14%. In North America financial lines, pricing was down 2% in line with the second quarter. The pricing reductions have moderated, and we continue to focus on our differentiated offering and leadership position.

North America property continued to see pricing pressure, with the overall portfolio showing improvement from last quarter, largely as a result of mix. The property market rate environment remains challenging, and we continue to have strong profitability across our retail and wholesale business while prioritizing underwriting discipline. International commercial overall pricing was down 2%. Across our international property portfolios, pricing was up 4%, driven by 16% rate increases in Japan. Global specialty pricing was down 4%. Since 2018, the cumulative rate increases on our global specialty book have been very strong, with over 100% increase in energy where rates are currently challenged. Overall pricing remains above our technical view. Talbot and financial lines pricing was also down 4%. AIG's well-diversified global portfolio allows us to manage across geography and products, prioritizing lines of business that offer the best risk-adjusted returns. Moving to other operations.

Third quarter adjusted pre-tax loss was $116 million versus the prior year quarter of $135 million. This reflects a significant reduction in general operating expense and lower interest expense, partially offset by lower net investment income as we reduced our corporate financial stake. Total GOE across both general insurance and other operations was $866 million in the third quarter, up 1% from the prior year adjusting for travel. For the nine months of 2025, total GOE was $2.5 billion, down 2% year over year, while net premiums earned grew by 5%. This is an impressive outcome, reflecting positive operating leverage, allowing us to create bandwidth for future investments. The third quarter net investment income on an APTI basis reached $1 billion, an increase of 15% year over year. General insurance net investment income was $945 million, growing 22% year over year.

The increase was driven by fixed maturity securities owing to the optimization of our lower yielding portfolios, asset growth, and higher reinvestment yields, in addition to improved alternative returns. During the third quarter, the average new money yield on the fixed maturity and loan portfolio was roughly 95 basis points higher than sales and maturities. The annualized yield was 4.58%, a 69 basis point improvement over the prior year. Alternative investment income was also very strong this quarter at $137 million, yielding 13.6%, compared to $43 million and 4.3% in the prior year quarter. Our well-diversified private equity portfolio contributed to this excellent performance. At Investor Day, we talked about opportunities to optimize our core portfolio, particularly in some lower yielding geographies, as well as prudently increasing the allocation to private credit when we see attractive premiums over public credit.

As part of the reshaping of our portfolio, we have reduced hedge funds and global real estate by $1.5 billion collectively since 2021. We largely have completed the rebalancing of public credit across multiple geographies. Yields are now more consistent with where we believe we should operate, and we expect net investment income growth going forward to be more in line with asset growth, given the current and projected level of global interest rates. Over the next few years, we will opportunistically allocate funds to private credit, which currently stands at $6.4 billion at the end of the third quarter, or 8% of the GI portfolio. Overall allocations to private credit have not materially changed since Investor Day. As stated at Investor Day, we intend to take that up to 12-15% over time, subject to market conditions. Private credit is a large and diverse asset class.

We expect to participate in the highest quality assets where we will get paid for the risk. We have private credit mandates with a small group of strategic partners who follow strict investment guidelines. We do a detailed review of every transaction we enter into and are very thoughtful about deployment and aggregation. We are pleased Onyx will be one of those strategic partners. We have committed to invest $2 billion over three years across Onyx's broad asset management platform, including insurance co-investments outside of Onyx's funds, which will provide us with a broader view of opportunities in the industry. We are in the process of divesting some non-core legacy private assets, mostly in real estate, and we will look to deploy some of those proceeds in Onyx-managed strategies over time, such as CLOs and broadly syndicated loan portfolios where Onyx has a strong track record.

Our expectation is that our investment opportunities with Onyx will be accretive to our investment yield. Turning to other operations, net investment income of $77 million declined $43 million over the prior year quarter and largely reflects income from our parent liquidity portfolio of roughly $50 million and corporate financial dividend income of $20 million. This quarter, we updated the investment portfolio disclosure in our financial supplement to more clearly show the split between our general insurance portfolio and the assets sitting within other operations. Turning to capital management. In the third quarter, we continued to execute against our strong, disciplined, and balanced strategy while maintaining our strong ratings and financial flexibility. We completed the sale of another 31 million shares of Corebridge Financial for proceeds of approximately $1 billion. This brings our ownership in Corebridge to roughly 15.5%.

We returned $1.5 billion of capital to shareholders in the third quarter through approximately $1.25 billion of share repurchases and approximately $250 million of common stock dividends. Through the first nine months of the year, we have repurchased $5.3 billion, reducing shares outstanding to roughly 544 million. We continue to actively repurchase shares at what we view as attractive levels. Subject to market conditions, we intend to continue our share repurchase in 2026, albeit at more normalized levels. As we stated at Investor Day, we generate roughly $3 billion of ordinary dividends from our insurance subsidiaries annually. We expect share repurchases up to $1 billion for 2026. We maintained our outstanding financial position in the third quarter with strong parent liquidity and a debt-to-total capital ratio of 18%.

Over time, we will also look for ways through additional investments and acquisitions to drive long-term strategic value for the company and our shareholders. Book value per share at September 30th was $75.45, up 6% from September 30th, 2024, reflecting strong growth in net income as well as the favorable impact of lower interest rates on investment AOCI. Adjusted tangible book value per share was $70.07, up 3% from September 30th, 2024. In summary, we delivered an excellent third quarter with annualized core operating ROE of 13.6% and 10.9% through the first nine months of 2025. While the macro and insurance market remain dynamic, we are well positioned with multiple levers to drive continued strong performance. With that, I will turn the call back over to Peter.

Peter Zaffino (Chairman and CEO)

Thanks, Keith. Michelle, we're ready for questions.

Operator (participant)

Thank you. If you'd like to ask a question, please press star 11.

If your question has been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Alex Scott with Barclays. Your line is open.

Alex Scott (Insurance Research Analyst)

Hey, good morning. I was hoping you could talk about the expected underwriting profitability from both the quota share as well as the renewal rights. And just hearing some of the things Everest was talking about on their call, it sounded like maybe the profitability—I'm sure it's improved from the underwriting actions they've taken—but it sounded like probably closer to 100% combined ratio type stuff right now. Just wondering what that, on both kind of sides of the deals, will look like out of the gate and where you expect it to get to over time.

Peter Zaffino (Chairman and CEO)

Yeah. Alex, good morning. I just want to clarify that you're talking about the quota share with Convex?

Alex Scott (Insurance Research Analyst)

Yeah, the quota share with Convex and then also the renewal rights with Everest. If you could comment on them separately. Thanks.

Peter Zaffino (Chairman and CEO)

Okay. First of all, Convex, it's a whole-account quota share. It's a great company with a tremendous track record of profitability, and we are so pleased to be participating. At eleven with a 7.5% share that will grow to 10% in 2027 and then 12.5% in the subsequent year. That is really positive across their entire book, and we will benefit from that because of the combined ratios that they run. In terms of Everest, I'm going to make some comments, and I'm going to ask John Hancock to make a couple of comments because John ran the business process for the renewal rights for AIG. It's a $2 billion portfolio. You have to take it in pieces. The international portfolio has performed very well.

I mean, when we look at the combined ratios of their international business, it's similar to ours. I would expect the conversion for the combined ratios to be at ours and maybe even a little bit better over time because of the scale that can help the expense side. When you look at the U.S., I'll give you, just in the spirit of time, the three pieces. First is property. Property portfolio runs very well. Attritional loss ratios are similar to ours. We may put a little bit more cat load on their portfolio, but AIG's cat load for our funded AAL will not go up. We've been doing an exceptional job on our gross book as well as reinsurance, and so that will be at our combined ratios, which have been exceptional.

If you look at financial lines, I think their loss ratios for their book run a little higher than ours, but the expense ratio with the conversion of the portfolio will run lower. I would think on the financial line, the overall combined ratio will be at ours. There will be very similar conversion in terms of overall economics on a combined ratio basis. The one that gets all the attention is the casualty. The casualty, when Everest reports out, they are doing it on their backbook, the earned book, not necessarily on a written basis. I think it is really important to take a look at that as to how it is run. I put in my prepared remarks because it was their own comments in terms of the further reserve strengthening required was from a part of a portfolio, 80% that does not exist anymore.

The other piece, and I'll get to the reinsurance in a second, is that I think it's my view that we have the best casualty underwriters in the marketplace led by Barbara Luck. We've done this before. We've looked at a portfolio and said, "This is what we think. The structure needs to be in terms of conditions and pricing." I think we have a really strong track record of delivering that. Even if we deliver, the majority of the casualty portfolio will still be less than 20% of our overall casualty. We have a very sound, attractive, and one of the best structures, I believe, in casualty reinsurance, which means we protect it from volatility. The seeding commission will absolutely be a tailwind and accretive to the combined ratio. We have a low 30% seed. We're bringing very little expense over.

The acquisition expenses are at or slightly below ours. I would look to forecast them at ours. We would expect, even on a written basis, same-store sales with the way we're structured, the way we underwrite, and the way we structure reinsurance, that the combined ratios are going to improve in a meaningful way. John, do you want to just give a quick overview in terms of how you looked at the book when we were doing diligence?

Jon Hancock (EVP and CEO of International Commercial and Global Personal Insurance)

Yeah, I will. Thanks, Peter. I mean, I'd start by saying I think this is a great deal for everyone, for us, for Everest, and critically for those brokers and clients. We're getting great reaction from all of them. It's a strong AIG with a global footprint in lines of business that we like, we know, and we already like a lot of.

Where we have already got big and existing relationships with everyone, this is about building on that rather than starting from scratch. I love the fact we did the deal at pace. We both decided very early on it was the right thing for us, hence the bilateral discussions that you talked about, Peter. We wanted to do it, but we did it thoroughly, and we did it quickly. Everybody knows AIG's commercial business is incredibly strong. You see that through our results every quarter. We want it to grow faster. I think this is a great opportunity to help do just that. AIG and Everest, we have got to know each other pretty well through this transaction. As you say, we think they have done a really good job of building their business, reunderwriting where they need to be.

I would stress, I agree with you, it's not everywhere. It's in certain places. It's a great fit for our existing business to add to it, to sort of business we like. Being the incumbent is important in our industry. It's important for us, for the broker and client. It means we don't have to reunderwrite all over again. We do have that continuity. We renew together rather than starting again. A renewal rights deal like this brings that into play. There's an advantage to all of us. As you say, we're determined to renew the whole portfolio. We've looked at the portfolio carefully. I want to say as well, we know there are some overlaps. Of course, there are. Sometimes we're on the same risks, same or different layers, and we're really comfortable with that. We've looked at the portfolio.

We've been managing our limits and exposures, waiting for growth opportunities like this. We know we've got plenty of capacity, and everything will be well within our risk appetite. That's how we looked at it. Now we'll get it renewed by making it seamless, straightforward, giving that continuity that is so important. We've already reached out to thousands of brokers and hundreds of clients, as have Everest. We started those conversations. We've got tremendous support from all of those brokers and clients. We're very grateful for that. We're totally focused now on getting this business into the portfolio.

Peter Zaffino (Chairman and CEO)

Thanks, John. That's great. Alex, do you have a follow-up?

Alex Scott (Insurance Research Analyst)

Yeah. As a follow-up, I noticed the comments suggested you're continuing to look for further opportunities. I just wanted to get a feel for.

How much more capacity do you have to continue to do deals like this? What type of stuff are you looking at?

Peter Zaffino (Chairman and CEO)

I said it at Investor Day. I have said it on these calls in the past, and I will reiterate it now, which is that we look for opportunities that are strategically enhancing to AIG. We have laid out financial metrics in terms of earnings, EPS, and ROE accretion. I think the really important point to think about is Convex, Onyx, and Everest were all bilateral negotiations, meaning it was just us involved. There was not a process. We are getting more reach-outs for that just based on our capability, speed to execution, just the quality in terms of how we have positioned the business. As John said, we have managed our gross and net limits. As Keith outlined in his prepared remarks, we have a lot of financial flexibility.

We will continue to look at opportunities that fulfill sort of that strategic intent. I would expect to see more. We saw quite a bit before we did these deals. I mean, this was not the first opportunity that was presented to us. We will make sure that it is very additive to AIG and that there is alignment with whoever we are working with. I think we just have to have confidence that we will execute, and we do, on the sort of financial metrics that we have outlined.

Alex Scott (Insurance Research Analyst)

Great. Thank you.

Peter Zaffino (Chairman and CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Brian Meredith with UBS. Your line is open.

Brian Meredith (Managing Director)

Yeah. Thank you. First one, just back on the capital situation. If I look at what you said about $5 billion of whole-co liquidity at quarter end, and you have got the corporate deal, and.

You've got a fair amount of whole-co liquidity right now. I'm just curious what your thoughts are and what's kind of the minimum level of whole-co liquidity you want to keep on your balance sheet.

Peter Zaffino (Chairman and CEO)

Yeah. Thanks, Brian. And good morning. I'll have Keith fill in the details. I mean, of course, the quarter-end liquidity didn't contemplate that we're going to have to use that for some of the investments we've just outlined and the strategic acquisitions. Keith just kept in his prepared remarks before the queue as to our ownership within Corebridge. We exercised last night a sale of around 32 million shares. That's another $1 billion of proceeds to fund the acquisitions, but also our continued capital management. We will be very consistent in what we outlined at Investor Day.

We returned so much capital to shareholders, and that was the right thing to do based on the liquidity and the divestitures of Corebridge. I think we're in a more normal state now where we're going to have those balanced investments and continue to build inorganic opportunities. Keith?

Keith Walsh (EVP and CFO)

Yeah. Thanks, Peter. Good morning, Brian. As you stated, we have about $5.3 billion of liquidity at the end of the third quarter. We are well-capitalized. We're also very patient, and we are going to keep several billion dollars of liquidity always at the company, just prudently as we measure it. As we look through how we deploy capital going forward, we're going to be patient, balanced, and consistent, right? It's got to make sense for shareholders and for growing the company. I think that's the way to think about this as we go forward.

As we stated in our remarks, we think about $1 billion of run rate as far as the share repurchase is a good indication for 2026. I will leave it at that. Thank you.

Brian Meredith (Managing Director)

That is helpful. Thanks. Second question, just curious, I want to hit on your expense ratio target of 30% below. I am just curious, given what is going on with the Everest transaction, which obviously is going to be beneficial to your expense ratio, and these AI investments that you are making, which I am assuming you are already seeing some productivity improvements from the underwriters, is that 30% just kind of a starting point? Is there meaningfully more we could see improvement in that ratio?

Peter Zaffino (Chairman and CEO)

I am not a big fan, Brian, of giving guidance on guidance, but I think to try to address the question is. Let me go with GenAI first.

I do think that's going to give us a benefit in terms of growth and operational efficiency. We just rolled it out to private nonprofit, one of our smaller businesses. We're going to be sort of rolling that out to bigger businesses and do expect exactly what you outlined, but I don't really have exactly the timeframe. 30%. With Everest and other ways in which I think we can grow. We have the Everest conversion on the renewal rights. We have a whole account quota share with Convex. We think that organic growth this quarter is not indicative of where we think we can drive organic growth. We are going to have some operating leverage. Our focus, like the 10%-13%, like the 10% increase in the dividend, is to get to the 30%. We're going to do everything we can to accelerate that.

We'll revisit what we think is the appropriate expense ratio for the business that we have at that time.

Brian Meredith (Managing Director)

Makes sense. Thank you.

Operator (participant)

Thank you. Our next question comes from Mayor Shields with KBW. Your line is open.

Meyer Shields (Managing Director)

Great. Thank you so much. Peter, I was hoping you could talk through, I guess, the earnings power of Convex or, I guess, the whole account quota share in the context of, I guess, both volatility and price declines in property cat reinsurance. In other words, without getting too specific in numbers, how vulnerable are its earnings to what we think will be weakening pricing at 1/1?

Peter Zaffino (Chairman and CEO)

Thanks, Mayor, for the question. They have a very diversified portfolio, balance and insurance and reinsurance. Reinsurance is not just property. That's a percentage of their overall, but they're very prevalent in the specialty classes, casualty. They're like an exceptional underwriting group.

I do not think that, look, do they have property cat in the portfolio? Yes. But it is not. If you look and compare and contrast it to a Validus, which had significant property cat and was exposed to the big regions within the U.S., it is apples and oranges. Also, in the U.K., companies are particularly, like a Convex, very smart in terms of how they buy ILWs, how they buy cat bonds, and how they reduce their overall volatility to a single loss. I think, look, we look at it. It is well within our risk appetite for our own assumed property. As I mentioned, we do not expect AALs to go up. We will manage those exposures to have not big volatility. It is not something I would be concerned about.

Meyer Shields (Managing Director)

Okay. That is very helpful.

I just wanted to confirm that the renewal rights deal is already active. In other words, that does not have to wait for any sort of regulatory approval for you to start looking at their renewal book.

Peter Zaffino (Chairman and CEO)

John, maybe you could just give a very quick overview of where we are in terms of Mayor's question.

Jon Hancock (EVP and CEO of International Commercial and Global Personal Insurance)

Yeah. It is active. Yes, Mayor, there is one important point here that in the E.U. we are in the process of seeking regulatory approval. When we get that, and we expect it fairly soon, or we hope for it fairly soon, we are in active conversations. Everywhere else, this is live. As I say, we are having active conversations with the brokers, the clients, and with Everest underwriters and other folks to get this going as quickly as possible. We are up and running, Mayor.

We are working incredibly hard with the distribution and clients and showing continuity. And a huge commitment to this portfolio.

Meyer Shields (Managing Director)

Okay. That's perfect. Thank you so much.

Jon Hancock (EVP and CEO of International Commercial and Global Personal Insurance)

Okay. Next question.

Operator (participant)

Thank you. Our next question comes from Michael Zerimsky with BMO Capital Markets. Your line is open.

Mike Zaremski (Senior Equity Research Analyst and Managing Director)

Hey, thanks. Good morning. I guess broad question on the competitive dynamics in the industry. The number one question we've been getting for a while, and I'm sure it's up there on your list too, has just been the pricing power environment in commercial insurance being soft-ish or soft, depending on how one must define it, and whether we as analysts should start embedding a bit of loss ratio degradation as a result into our models. And I know you've done a good job explaining to us in recent quarters kind of why you feel it's not a great.

That's not a great way to model. Any update would be helpful. Thanks.

Peter Zaffino (Chairman and CEO)

Yeah. Thanks for the question. I have gone through it at length in some of my prior comments on these calls. What I would think about as you're modeling, whether it's rate, loss cost, all the different variables that drive combined ratio, is looking at the mix of the portfolio is really important because large companies, in particular, like an AIG, we give you an index on rate, but there's so much that's underneath that. As Keith outlined, casualty was strong, property had headwinds. The difference between E&S and retail can be different depending on what's going on with the quarter, cyclicality. I think it's really important we don't put out cumulative rate increases to be defensive on the current environment.

We do it because we've delivered a significant amount of margin over time that gives us the ability to cycle manage. I spent a lot of time on property. With the cost of goods sold as to how you actually build up the loss cost. Yes, we're in a competitive environment. We're going through a shift. Property has been the one outlier this particular year. I think it's a combination of a lot of factors. I still think it's a very profitable segment. If you underwrite it well and you protect volatility, the other place that's seeing a little bit of price headwind is specialty, where we're sizable. Again, it has the same underlying dynamics, which has been very profitable. Setting terms and conditions, being a lead underwriter, structuring opportunities for clients. You can see, even in a market that has headwinds, flight to quality matters.

We see new business up, submission count up. I think you just have to differentiate between companies as well just to see who's going to sustain versus being an index in the market. That's some high-level commentary.

Mike Zaremski (Senior Equity Research Analyst and Managing Director)

Got it. If I can ask Pivot to ask my follow-up on the update you gave us on AIG Assist and the exciting things you all are doing using technology and AI. Specifically on the submission response stats you gave out about almost 200,000 submissions year to date in one area of middle market. I just want to make sure we're thinking about this correctly and that over time, as this technology is deployed throughout the entire organization, that it will likely result in kind of a material change to the topline revenue trajectory relative to market conditions. Is that fair?

Peter Zaffino (Chairman and CEO)

Yes. A few comments.

I mean, of course, when we talk about GenAI, it could go in a variety of different directions. What I would say is that we are focused on the example I've outlined in earnings and the example I've outlined at Investor Day is about getting more effective in digesting data and actually accessing more data points to make the underwriters more constructive and allowing them to make better decisions. When we talk about the example I gave now with Lexington, if you can ingest broker data faster and take unstructured, structured, PDFs, all different formats, and get it into an underwriting process and then have large language models accelerate that to the underwriter, that's why I said speed matters. I mean, that's what will drive growth. It's not about driving more underwriting appetite.

It's about getting to things that are within our appetite and being able to service that business faster and at scale. The other thing to think about is, are you prepared in a market turn? It will happen. When there are parts of our business that there's going to be either supply issues or there's not going to be the same capacity, can you take advantage of those opportunities by servicing clients and brokers and scaling significantly? We are prepared to do that. The last comment I would make is that we are preparing this company to compete in the environment that's going to exist across the world. When you think about the technology, I'm not saying it because it's a soundbite of things that are progressing over the last six months. This happens to be true. What's happening with.

Advancements in large language models or the orchestration in the future of agents that exist within organizations in different functions and different parts of underwriting, how do you manage through that? We are trying to accelerate implementation so we're prepared for the changes that are happening at a rapid pace based on the capital expenditures from the large tech companies and feel very good about what we've done, actually feel like we have advanced our guidance from Investor Day, and want this to be a big part of how we talk about our business in the future. It is going to be better quality data, more data sources. Speed to execution is going to be accelerated, and the underwriters are going to be able to make decisions faster and make more effective decisions. That is where I want to be. I feel very good about it. Okay.

Thank you very much for the questions. I mean, as I said at the top of the call, it's been an exceptional quarter for AIG. The progress, the announcements that we made are just great examples of how we're moving the company forward with purpose and executing on our strategy. I'm incredibly proud of all of our colleagues. Without them, none of this happens. I want to thank all of my AIG colleagues for working at pace. I want to wish everybody a great day. Thank you.

Operator (participant)

Thank you for your participation. You may now disconnect. Everyone, have a great day.