Q4 2024 Earnings Summary
- AIG has largely completed the divestiture of non-core businesses and now has the portfolio positioned for organic growth, leveraging its strong capital base for potential strategic and accretive M&A opportunities.
- The high net worth personal lines business is showing significant improvement in loss ratios and is expected to contribute to profitability in 2025, enhancing overall performance.
- AIG is experiencing strong organic growth in its North America and International Commercial businesses, driven by high retention rates (e.g., 91% in North America Retail and 88% in International Commercial) and increased new business (e.g., 15% year-over-year increase in North America new business), indicating potential for continued growth and profitability.
- AIG's expense ratio has been running higher than expected for a while, which could pressure margins. An analyst noted that the expense ratio "has been running a bit higher than expected for a while now" and asked for more specific guidance on future levels.
- AIG reallocated $150 million of uncertainty reserves from excess workers' compensation to excess casualty, indicating potential concerns about reserves in excess casualty lines. The company stated they "decided to reduce the provision in excess workers' comp and reapportion approximately $150 million of the provision within excess casualty," due to the development factors and length of the tail in excess casualty reserves.
- Softening pricing environment in certain lines, particularly in property and financial lines, could pressure underwriting margins. An analyst mentioned "declines in property pricing in E&S," and AIG's executives acknowledged that the "rating environment today... is different to what it was in Q4."
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Share Repurchases | FY 2025 | $10 billion | $10 billion | no change |
Core Operating ROE | FY 2025 | 10% | 10%-plus | raised |
Adjusted Effective Tax Rate | FY 2025 | no prior guidance | in line with 2024 | no prior guidance |
Dividend | FY 2025 | no prior guidance | anticipates increasing dividend | no prior guidance |
Expense Ratio | FY 2025 | no prior guidance | approximately $90 million per quarter | no prior guidance |
Global Personal Segment Impact | FY 2025 | no prior guidance | reduces net premiums written by ~$720 million (~10 percentage point growth impact) | no prior guidance |
Parent Liquidity | FY 2025 | no prior guidance | $7.7 billion | no prior guidance |
Investment Income | FY 2025 | no prior guidance | expects continued pressure on private equity returns | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Completion of non-core business divestitures and portfolio repositioning | Q1–Q3: Focus on sales of Validus Re, Crop Risk Services, global travel insurance, and sell-down of Corebridge. Emphasis on simplifying portfolio and streamlining operations. No specific mention in Q3 [question 2]. | CEO states non-core divestitures are largely complete; portfolio is where they want it, with emphasis on organic growth and strategic flexibility. | Consistently mentioned; near completion in Q4 |
Potential strategic M&A to leverage capital | Q1: Inorganic opportunities possible but not a near-term priority. Q2: Being selective; must be “additive” and “strategic”. Q3: Gained financial flexibility; will remain disciplined and patient. | Discipline remains key. CEO says any M&A must be compelling and accretive to ROE. AIG is open to opportunities but prefers organic growth. | Continued discipline; focus still on organic |
High net worth personal lines improvement | Q1: Expect material financial improvement as loss ratio decreases. Q2: Addressing TIV exposure issues; partnered with Ryan Specialty. Q3: Transition to MGU structure impacting acquisition ratios but showing progress. | Significant loss ratio improvement; renegotiated ceding commissions and quota share expected to further boost profitability; sees continued progress into 2025. | Steady improvement; continued optimism |
Elevated expense ratio pressure | Q1: Expense ratio actually improved (31.8%). Q2: Highlighted further improvements; no mention of elevated pressure. Q3: GOE ratio showing improvement; early retirement and restructuring planned. | Disciplined expense management remains a focus. AIG has removed ~$125M in costs but added ~$200M in other areas. CEO expects further reductions in 2025. | Reiterated cost discipline; slight net pressure |
Reallocation of uncertainty reserves from excess workers’ comp to excess casualty | Q1–Q3: No mention [question 29, 30, 31]. | $150 million reallocated from excess workers’ comp to excess casualty. Rationale: longer-tail nature of casualty lines. | New topic introduced in Q4 |
Softening pricing environment in property, financial lines, and E&S | Q1: Acknowledged slowdown in property, continued headwinds in financial lines, strong E&S demand. Q2: Flat property rates, some softening, strong E&S results. Q3: Expect property rate slowdown to reverse in 2025; financial lines stabilizing, E&S casualty growing. | Seeing further pricing pressure in property/E&S but disciplined approach. Financial lines rates moderating, still relatively stable internationally. | Ongoing softening but disciplined underwriting |
Integration of GenAI into underwriting processes | Q1: No mention [question 49]. Q2: Building AI-powered underwriting tools. Q3: Early pilots show improved data accuracy and faster processing. | Detailed ecosystem includes partnerships (e.g., Palantir, Anthropic). GenAI-powered Underwriter Assist helps extract unstructured data, boosting top-line growth prospects. | Increasing focus; rapidly expanding tool usage |
Plan to return $10 billion to shareholders through share repurchases | Q1: Announced $10B authorization for 2024–2025, aiming for 550–600M shares outstanding. Q2: Maintaining goal, subject to market conditions. Q3: Proceeds from Corebridge sales to fund buybacks. | Already returned $6.6B in 2024. $3.4B remains for 2025. Potential to exceed the $10B guidance but expects normal levels in 2026 if no further Corebridge proceeds. | On track; could exceed $10B |
Lexington E&S growth and expanded submissions | Q1: 24% growth; strong submission volumes. Q2: 16% growth; record new business. Q3: 24% new biz growth; submissions up 35%. | 14% increase in NPW; 42% jump in submissions, Lexington is 48% of new NA business. Continues to lead E&S growth. | Consistent strong momentum |
Core ROE target of 10% by 2025, lower than peers | Q1: 10%-plus ROCE target reaffirmed; hitting 9.3% overall. Q2: Current ROE ~8.9%, goal remains 10%-plus. Q3: Management acknowledges target is below peers but expects to reach 10% by 2025. | Reiterated 10%-plus goal by 2025, including impact from a $500M wildfire loss. Confident in underwriting and expense actions. | Unchanged target; reaffirmed confidence |
Potential increased financial leverage to pursue M&A | Q1: Not a short-term priority; well-capitalized. Q2: No explicit mention [question 41]. Q3: Comfortable within high teens leverage; open to increasing if compelling M&A arises. | CEO reiterates no immediate need; M&A must be compelling. Focus on organic growth, with ample capital flexibility. | Maintained prudence; no urgent leverage plan |
Expansion into casualty lines with higher loss ratios | Q1: High rate increases in excess casualty, disciplined approach. Q2: Continued rate in excess casualty; ~16% NPW growth. Q3: Strong E&S casualty submissions; 22% new NA commercial biz. | Selective expansion with strong rate (14% in Lexington Casualty). Focus on underwriting discipline in higher-risk lines. | Steady expansion; disciplined risk appetite |
Strong growth in North America and International Commercial lines | Q1: NA +4% NPW, Int’l flat but growth in property lines. Q2: NA +10% NPW, Int’l +6%. Q3: NA +11%, Int’l +3%. | NA +9% NPW, strong new business; Int’l +4% with $2B in new biz. High retention across segments. | Continued robust growth |
Growth in global specialty segments (marine, energy) | Q1: Mixed results; marine +7%, energy +8% in Int’l but specialty segment saw softness. Q2: Marine +15%, energy +13%, Talbot +12%. Q3: 25% new biz in marine, strong energy. | Strong marine and energy performance, with 46% increase in marine submissions, 40% strike rate in energy. | Segment remains a growth driver |
Positive underwriting performance with improved or stable combined ratio | Q1: Continued improvements; GI calendar year CR 89.8%. Q2: Accident year CR ex-cats 87.6%; stable or better across segments. Q3: Calendar year CR 92.6%, accident year CR ex-cats 88.3%. | Exceptional results: GI combined ratio 92.5%, accident year CR ex-cats 88.6%. Sixth consecutive year of improvement. | Steady improvement; underscores underwriting |
Deconsolidation of Corebridge | Q1: Planned by end of Q2; 53% stake remains. Q2: Triggered on June 9, net after-tax loss but strategic simplification. Q3: Reflected as discontinued operations. | Major milestone completed. Removed complexity, sold an additional 22% stake to Nippon Life. | Transformational step now finished |
Sale of travel insurance business reducing net premiums written | Q1: No mention [question 46]. Q2: Expected ~$750M reduction in NPW. Q3: Not discussed [question 47]. | Closed in December 2024, removing ~$720M from NPW (about 10% of Personal lines). | Deal closed; impacting Personal lines NPW |
Plans to retain more risk and reduce reinsurance reliance | Q1: Comfortable raising catastrophe attachment; potential to retain more net risk. Q2: No specific mention [question 51]. Q3: AIG has capacity and risk appetite to retain more; focusing on correct attachment points. | Retaining more risk with lower excess loss attachments. Industrywide shift to carriers holding ~90% of cat losses. AIG also launched a new Lloyd’s syndicate. | Ongoing move to higher net retentions |
Share repurchase goals dependent on successful sell-down of Corebridge stake | Q1: Repurchases rely on liquidity from Corebridge transactions. Q2: Expected progress after sell-down to Nippon Life. Q3: Proceeds to fund buybacks; continuing $10B plan. | Mostly executed 2024 portion; $3.4B remains for 2025. Future repurchases dependent on additional Corebridge sells or other liquidity. | Close to targets; future depends on Corebridge |
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ROE Guidance and Wildfire Impact
Q: Does core ROE guidance include the wildfire impact?
A: Peter Zaffino confirmed that the 10%+ ROE guidance includes the $500 million wildfire loss in January. He attributed this to effective global portfolio structuring and reinsurance strategies, keeping losses within expectations even with elevated activity. He emphasized positive momentum and reaffirmed the guidance. -
Organic Growth and Price Adequacy
Q: Where are you targeting for organic growth, given property pricing declines?
A: Peter Zaffino and executives highlighted strong growth through client retention and new business, focusing on risk-adjusted returns. They see opportunities despite declines in property pricing in E&S, with significant increases in new business submissions, such as 24% in Global Specialty, resulting in over $2 billion of new business in International Commercial. They remain confident in price adequacy, managing quality and price closely. -
Impact of AI on Underwriting
Q: How will AI deployment affect underwriting and loss ratios?
A: Peter Zaffino explained that AI will enhance data ingestion and provide underwriters with richer data faster. This will propel top-line growth and improve underwriting decisions but he did not quantify the impact on loss ratios. -
High Net Worth Personal Lines Profitability
Q: What's the timeline to profitability in high net worth personal lines?
A: Peter Zaffino stated they've been improving combined ratios and loss ratios in this segment. They expect significant improvements in 2025 due to actions like consolidating under one leader, improving attritional loss ratios, renegotiating ceding commissions, and support from strong partners. -
Expense Ratio Guidance
Q: Guidance on future expense ratio levels?
A: Peter Zaffino acknowledged that while the expense ratio has been higher than expected, they remain disciplined and are working on reducing expenses. They absorbed additional expenses from other operations but believe there are opportunities to reduce expenses and improve ratios through 2025. -
M&A and Divesting Non-Core Businesses
Q: Any plans for M&A or divesting non-core businesses?
A: Peter Zaffino indicated they are largely done with divesting non-core businesses and are focused on the current portfolio. They are open to compelling M&A opportunities that add value but are confident in organic growth and don't need to add anything urgently. -
Casualty Pricing Trends
Q: Are you seeing acceleration in casualty pricing?
A: Peter Zaffino mentioned that the casualty rate environment is strong, with 14% rate increases in 2024 for Lexington Casualty. They are getting rates above loss cost, have repositioned the portfolio, and see opportunities to be an industry leader while remaining cautious. -
Regulatory Environment in California
Q: Thoughts on regulatory changes, especially in California?
A: Peter Zaffino discussed challenges in California due to peak zone exposures like wildfire and earthquake. He emphasized the need for insurers to work closely with regulators to address issues and aims for more flexibility in the future.