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    American International Group Inc (AIG)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$78.10Last close (May 2, 2024)
    Post-Earnings Price$77.76Open (May 3, 2024)
    Price Change
    $-0.34(-0.44%)

    What went well

    • AIG's premiums in Excess Casualty were up 46% in the quarter, with rate increases of 16%, indicating strong growth and pricing power in a market where competitors are pulling back.
    • AIG plans to retain more risk and reduce reliance on reinsurance due to improved underwriting and volatility control, potentially enhancing earnings as they take more net in 2025.
    • Deconsolidation of Corebridge is expected before the end of the second quarter, allowing AIG to focus on core operations and unlock shareholder value.

    What went wrong

    • Uncertainty around the timing and execution of the Corebridge deconsolidation may impact AIG's strategic plans and financial performance. Peter Zaffino stated, "we would expect to try and do something before the end of the second quarter," but emphasized that it is "subject to market conditions" and there's "not a whole lot more I can offer" on the timeframe.
    • Potential increase in net retained risk due to plans to reduce reinsurance protection may expose AIG to higher volatility and potential losses. While discussing reinsurance strategies, Peter Zaffino mentioned the possibility of taking "more net if we decide to as we enter 2025" and that the company is considering "where do we want to take more net."
    • AIG's share repurchase goals are dependent on successful sell-down of Corebridge stake, which may be uncertain due to market conditions. Peter Zaffino acknowledged, "we would need to sell down to be able to do the $1.5 billion in the third and fourth quarter," and future share count reduction "does contemplate several transactions that would take place in the next 4 quarters."

    Q&A Summary

    1. Corebridge Deconsolidation Timeline
      Q: Is the Corebridge deconsolidation still expected by Q2 end?
      A: Yes, subject to market conditions, we expect to complete the Corebridge deconsolidation before the end of the second quarter, as previously guided.

    2. Share Count Target and Corebridge Impact
      Q: What does the new share count target assume for Corebridge?
      A: By continuing $1.5 billion in share repurchases per quarter, which includes further sell-downs of Corebridge, we aim to reduce our shares outstanding to 550–600 million by end of 2025. This plan involves several transactions over the next four quarters but doesn't assume fully exiting our Corebridge stake.

    3. $10 Billion Share Repurchase Authorization
      Q: Is the $10B buyback limit until 2025?
      A: The $10 billion share repurchase authorization is based on our expected capital management strategy over the next six quarters. It's an update, not a hard cap beyond 2025.

    4. Reinsurance Strategy and Retaining More Net Risk
      Q: Will you retain more net risk in underwriting?
      A: We're comfortable taking more net risk and have strategically positioned our reinsurance to control volatility. As we enter 2025, we see opportunities to retain more net, depending on our portfolio and appetite for volatility.

    5. Underwriting Leverage and Capital Position
      Q: How are you thinking about underwriting leverage?
      A: We have the capital to grow, especially in Property, with significantly reduced PMLs. Our U.S. General Insurance pool has a risk-based capital ratio of around 460%, well above peers, enabling us to support growth.

    6. Excess Casualty Growth Opportunities
      Q: What opportunities are you seeing in Excess Casualty?
      A: We see great opportunities in Casualty. Excess Casualty premiums increased 46% this quarter, with rates up 16%, the strongest in years. Despite reduced policy counts and limits compared to 3–4 years ago, we believe there are real opportunities for growth in the current market.

    7. Market Conditions for Growth
      Q: Is it a conducive environment for opportunistic growth?
      A: Yes, it's conducive to grow. We focus on profitable growth without sacrificing combined ratios. Our retention rates were 89% in International and 88% in North America this quarter, with good new business and investment in areas like Excess & Surplus lines.

    8. Capital Management and Inorganic Opportunities
      Q: Will share repurchases remain the base case?
      A: We're committed to our capital management structure, including share repurchases for 2024 and 2025. While we wouldn't rule out compelling inorganic opportunities that add product or geography, it's not a short-term priority.

    9. Corebridge Sell-down Options and ASR
      Q: Could you do a significant Corebridge sell-down and an ASR?
      A: We're considering all options for Corebridge sell-downs, depending on market conditions and stakeholder interests. Regarding accelerated share repurchases, we've preferred consistent daily repurchases via a 10b5-1 plan, but an ASR is a tool we could use if we wanted to redeploy proceeds quickly from a larger Corebridge sale.

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