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    American International Group Inc (AIG)

    Q2 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$74.91Last close (Aug 1, 2024)
    Post-Earnings Price$74.00Open (Aug 2, 2024)
    Price Change
    $-0.91(-1.21%)

    What went well

    • Strong Growth in Key Business Segments: AIG is experiencing significant growth, with year-to-date submissions at Lexington up 42%, building on 39% growth through the same period last year, indicating a flight to quality in the market. Internationally, the Global Specialty business grew 8% in the quarter, driven by marine new business up 15% and energy new business up 13% year-over-year.
    • Positive Underwriting Performance and Profitability: AIG is achieving growth while maintaining outstanding loss ratios in the core business. The company expects the 2025 calendar year combined ratio to be the same or lower than the full year 2023 adjusted figure of 91.6%, demonstrating continued underwriting discipline and expense reduction efforts.
    • Strategic Flexibility and Potential for Inorganic Growth: With significant financial and strategic flexibility from recent divestitures, AIG is exploring inorganic opportunities to expand in existing businesses and complementary geographies. This includes potentially investing further in successful ventures like AIG Tata in India, a fast-growing, large-scale business and industry leader.

    What went wrong

    • The sale of the travel insurance business is expected to reduce net premiums written by $750 million, potentially impacting growth in North America Personal Insurance.
    • The projected combined ratio for 2025 is approximately 91.6%, the same as 2023, indicating limited anticipated improvement in underwriting profitability.
    • AIG is exploring inorganic growth opportunities, which may introduce execution risks and could strain capital resources if not managed carefully.

    Q&A Summary

    1. 2025 Combined Ratio Guidance
      Q: What is the 2023 adjusted combined ratio for guidance?
      A: The adjusted 2023 combined ratio is 91.6%. AIG expects the full-year 2025 combined ratio to be the same or lower than this figure.

    2. Loss Ratio Outlook
      Q: Will loss ratios improve in 2025 guidance?
      A: The 2025 guidance does not assume any improvement in loss ratio; all improvements are expected in the expense ratio.

    3. Property Pricing Trends
      Q: How will flat property rates affect loss ratios?
      A: Property rates were flat this quarter after several years of double-digit increases. Despite this, AIG is comfortable with portfolio profitability and does not expect loss ratio deterioration.

    4. Travel Insurance Sale Impact
      Q: What is the impact of the travel insurance sale?
      A: The sale will reduce net premiums written by $750 million , but the impact on the overall combined ratio will be de minimis after adjustments.

    5. Excess Casualty Reserve Development
      Q: Can you explain the reserve development in Excess Casualty?
      A: There was $66 million adverse development in the 2021 accident year, offset by $33 million favorable development from years prior to 2016, netting to $22 million unfavorable.

    6. Inorganic Growth Opportunities
      Q: What are your plans for inorganic growth?
      A: AIG is exploring selective and disciplined inorganic opportunities, focusing on increasing scale in existing businesses, expanding in complementary geographies, and investing in fast-growing businesses like AIG Tata in India.

    7. Accident Year Loss Ratio Guidance
      Q: What drives the loss ratio guidance for the back half?
      A: It's driven by business mix. Personal Insurance loss ratio improved over 400 basis points in North America , while Commercial loss ratio remained flat. Similar trends are expected to continue.

    8. High Net Worth Business Expansion
      Q: Why invest more in high net worth now?
      A: AIG is expanding in this area by building both admitted and nonadmitted platforms and partnering with Ryan Specialty. This strategic approach allows access to 40,000 independent agents and growth in the nonadmitted property market.

    9. Shift to Growth Mindset
      Q: How is AIG shifting back to growth?
      A: AIG has pivoted to a growth mindset after transforming the business , focusing on retention and new business. In North America, year-to-date submissions at Lexington are up 42%. Internationally, the Global Specialty business grew 8% this quarter.

    10. Executive Retirement Announcement
      Q: Any notable executive changes?
      A: Tom Bolt is retiring at the end of the year after significant contributions to AIG's underwriting standards and governance.

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