American International Group Inc (AIG) 2025 Q4 法說會逐字稿

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

Thanks very much and good morning. Today's remarks may include forward-looking statements, which are subject to risk, 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 US 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 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 29 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.

Good morning, everyone. Thank you for joining us to discuss our fourth quarter and 2025 full year financial performance. I will begin with prepared remarks, after which Keith will provide a detailed overview of our financial performance. John Hancock will then join us for the Q&A session.

On our call today, I will briefly share key highlights from our excellent fourth quarter performance, review our outstanding full year financial performance, provide brief commentary on AIG's January 1 reinsurance renewals, discuss our fourth quarter strategic transactions and highlight our progress on our Gen AI and data and digital strategies.

Finally, I will conclude with how AIG is positioned for continuing momentum into 2026. Let me begin with a brief overview of our fourth quarter performance and some of our key highlights. We delivered adjusted after-tax income per diluted share of $1.96, a 51% increase year-over-year. Underwriting income was $670 million, an increase of 48% year-over-year.

Global Commercial net premiums written grew 3% despite North America retail property contracting due to our reduced appetite given the current market environment. We had strong new business growth led by international Commercial, which grew an impressive 14% year-over-year.

The accident year combined ratio as adjusted was 88.9%, our 17th consecutive quarter with a sub-90% result. The calendar year combined ratio was 88.8% and an improvement of 370 basis points from the prior year quarter.

Overall, our fourth quarter performance reflects our consistent underwriting and operating discipline and closes out an exceptional 2025 and for AIG. Now let me walk you through our full year financial performance. Adjusted after-tax income per diluted share was $7.09, an increase of 43% year-over-year. Adjusted after-tax income for the year was $4 billion, an increase of 24% year-over-year. For the full year 2025, we generated underwriting income of $2.3 billion, an increase of 22% year-over-year.

2025 was the first year since 2008 that we delivered greater than $2 billion in underwriting income, excluding divested businesses, an important milestone in AIG's journey. For full year 2025, Global Commercial net premiums written were $17.4 billion, an increase of 3% year-over-year. Adjusting for the large closeout transaction in our casualty portfolio that benefited overall growth in that prior year, net premiums written increased 4%.

North America Commercial grew net premiums written by 4% or 5% when adjusting for the large closeout transaction. With balanced growth across the portfolio, that was partially offset by retail property, which contracted 8%. International Commercial grew net premiums written by 3%, primarily driven by Property and Global Specialty and partially offset by financial lines which contracted 5%.

In Global personal, net premiums written contracted 3% driven by higher ceded premiums under the high net worth quota share reinsurance treaty that we entered into at 1/12. In early January, Ross Buck Muller was named Executive Chairman of Private Client Select.

We have tremendous confidence in his ability to guide the high net worth business and believe he will have an immediate and positive impact in positioning the business for the future. Overall, Global Commercial new business grew 9% year-over-year. International new business grew 10% driven by Global Specialty, which grew 15%. North America Commercial Insurance produced over $2.6 billion of new business in the year, an increase of 8% year-over-year.

We made strong progress reducing our expense ratio which ended 2025 at 31.1%, down 90 basis points from the prior year and remain focused on achieving our Investor Day target of a sub-30% expense ratio by 2027.

Our full year accident year combined ratio was 88.3% and our calendar year combined ratio was 90.1%, both outstanding results. For the full year 2025, excluding North America Property, Global Commercial Lines pricing, which includes rate and exposure increased 2% and with a 6% increase in North America and a 1% decrease in international.

As we've discussed throughout the year, property markets in North America remained under pressure with increased competition in both the admitted and non-admitted market. Retail property pricing was down 10% and excess and surplus lines price was down 13% for the year.

Despite the challenging market dynamics, the accident year and calendar year combined ratios remained excellent in property. In North America Casualty lines, pricing remained favorable and continue to outpace loss cost trend with percentage increases in the mid-teens in wholesale and excess casualty.

In North America Financial lines pricing was down 2% for the year. Pricing reductions moderated in the second half of the year with segments of our D&O portfolio ending the year with a positive rate change. In International Commercial, overall pricing was down 1% or flat excluding financial lines.

Unlike the US, pricing and international property was up 3% for the year, offset by energy where pricing was down 10%, driven by abundant capacity. Net investment income on an APTI basis was $3.8 billion, an increase of 8% year-over-year, reflecting our shift to higher-yielding assets with strong financial ratings.

Core operating ROE was 11.1%, a 200 basis point improvement year-over-year and AIG's first adjusted ROE metric above 10% in over 10 years. Importantly, we delivered a strong performance in 2025, while maintaining our disciplined approach to capital management. We returned $6.8 billion in capital to our shareholders, including $5.8 billion in share repurchases and $1 billion in dividends. We also increased our quarterly dividend by 12.5% and the third consecutive year with a dividend increase of 10% or more.

Debt outstanding at year-end was $9 billion, and our debt to total capital ratio was 18%. We continued to reduce our ownership of Core bridge Financial, generating approximately $2.5 billion in gross proceeds over the course of 2025. At the end of 2025, our remaining ownership stake was 10.1%.

This week, Nippon Life waived AIG's 9.9% retention requirement, which gives us the ability to sell down our position throughout 2026, which we intend to do subject to market conditions and regulatory approvals. Since we announced Blackstone's purchase by 9.9% equity ownership in Core bridge Financial in November of 2021.

AIG has realized nearly $20 billion from our Core Bridge Holdings when accounting for share sales, receipt of extraordinary and common dividends and transition service fees. What's even more extraordinary is that AIG has been able to replace 100% of Corebridge Financial and Validus Re's earnings per share in just two years.

Going forward, we're very well positioned with significant financial strength and liquidity to execute against our strategic objectives, our growth ambitions and our capital management priorities. I'll now turn to reinsurance. But before I provide more details on our January 1 renewals, I want to share a brief context on the reinsurance market. 2025 started with the California wildfires and that initially tempered reinsurance rate reductions for the industry. What followed was benign cat loss activity in the second half of the year, resulting in increased reinsurance capacity.

This dynamic drove a favorable renewal environment for insurers at January 1. As a general statement, although reinsurers were prepared to compromise on pricing, they remain disciplined on attachment points at 1/1. Our long-term belief in holding firm on attachment points has proven to be advantageous for AIG. We've always said, once you give it up, you don't get it back. and that remains true today.

Turning to our January 1 renewal outcomes. AIG achieved enhanced terms and favorable pricing. We benefited significantly from the current environment with more aggregate capacity available in the market, our consistent buying an attractive portfolio and the exceptional relationships we've developed with our reinsurance partners.

Here are a few highlights. Our property catastrophe program continued to improve. The weighted average risk-adjusted rate decrease for AIG on property catastrophe is in excess of 15%, yielding substantial year-over-year savings. The return periods of the attachments of our property catastrophe coverage is broadly lower across our geographies and businesses. Our exhaust limit is at a comparable level for all regions worldwide.

We were able to collapse the high net worth placement into our North America occurrence layer for the 500X to 500 layer. And finally, we achieved further efficiency in our aggregate protection, including a single maximum contributing loss rather than a separate one for each of the North America commercial and global personal portfolios.

For Casualty, we're in a reinsurance market that differentiates for quality. And as a result, our treaties renewed with exceptional pricing and terms and conditions. Our quota share in North America maintained a very attractive ceding commission in the low 30s. Our excess of loss attachment and limits remain the same as the expiring treaties. However, our rate on subject premium decreased year-over-year.

Finally, we were able to add the Everest portfolio into the treaty at AIG's pricing and terms without an increase in nominal cost. Overall, I'm very pleased with our 1/1 renewals. Our approach to reinsurance continues to be an important component of our strategy to minimize volatility in our portfolio and positions AIG well for 2026.

In the fourth quarter, we announced several strategic transactions. These are innovative, capital-efficient deals without balance sheet complexity, technology debt, legacy liabilities or meaningful expense investment.

All are expected to contribute to AIG's earnings, earnings per share and return on equity in 2026, and we believe these transactions should be more accretive in 2026 and 2027 than share repurchases. I'll take a moment now to provide an update on our progress.

In October, we were very pleased to announce a renewal rights deal for Everest global retail insurance portfolio. The portfolio is well balanced across geographies and expands our global retail commercial footprint and distribution access while adding business that is complementary to our portfolio today.

As a reminder, the purchase price relating to Everest is calculated as a percentage of the total renewable premium of the Everest portfolio, which we now expect to be closer to $1.8 billion after doing more work with Everest. This would adjust our purchase price down from approximately $300 million to $270 million, with possible further downward adjustments of up to $70 million if less than 80% of the portfolios renew. We're making very good progress with the conversion of the Everest portfolio. We accelerated the conversion of $65 million in gross premiums written in the fourth quarter.

In January, we had a retention rate of 75%, reflecting approximately $180 million in gross premiums written, an impressive result considering that we did not commence work to convert the book in Europe until we receive the required regulatory approvals in December.

This is a terrific performance and a validation that clients and brokers want AIG to have an expanded role on their insurance placements. AIG has many advantages in executing this conversion. We have ample capacity to grow reinsurance treaties that will benefit the business at a lower cost and a more advantageous expense base given we did not need to replicate Eves' infrastructure to service the business.

We expect the combination of these factors to drive a 10-point benefit to the combined ratio of the converted business. To support the conversion, we leverage our Gen AI capabilities to evaluate the Everest portfolio and prioritize the accounts we want to renew in a fraction of the time.

As we've discussed, we've deployed a robust oncology of AIG's businesses and we're able to quickly build in Everest Ontology, in essence, a digital twin of that portfolio, which allowed us to prioritize how the portfolios could blend together, enabling us to deliver compelling solutions for clients at our broker partners.

We reviewed Everest's portfolio to determine account limits, attachment points and pricing and to identify conversion strategies. In addition, we leverage our Gene solution underwriting by AIG Assist to accelerate the conversion process in key lines of business increasing renewal speed significantly.

We're pleased with our progress and our focus on ensuring a smooth transition in the portfolio over the next three quarters. Now I'd like to share more detail regarding our investment in Convex Group, where we took an approximately 35% equity interest, coupled with a 9.9% ownership stake in Onex majority owner, Onex Corporation.

These investments closed on February 6, and they are expected to be accretive to AIG's earnings within the course of the year. As part of the Convex transaction, we also took a 7.5% whole account quota share of Onex business for 2026, which will earn in over the year. Our share will increase to 10% in 2027 and 12.5% in 2028 and thereafter.

This transaction was a rare opportunity to secure a long-term strategic partnership with one of the most highly respected specialty insurance companies and its majority shareholder. AIG has led the industry in utilizing third-party capital to develop innovative structures that create tailored risk-sharing solutions.

After successfully launching Syndicate 2478 at the start of the year, we closed 2025 with the formation of Syndicate 2479, a new special purpose vehicle launched in partnership with Amwins and Blackstone in December with a stamp capacity of $300 million of premium income. This partnership represents a differentiated model for portfolio underwriting, supported by third-party capital, including capital committed by the largest US wholesale broker.

We expect it will generate premium growth and fee income for a modest incremental capital commitment. This is also the first time we've deployed our Gen AI capability in an SPV transaction. Partnering with Palantir we use large language models to match data and define risk characteristics within Amlin's program business that were aligned with the syndicates risk appetite.

In addition to assessing future opportunities, this capability enables us to use advanced analytics to help shape the current portfolio. We have a strong pipeline of SPV opportunities, and we'll continue to pursue future opportunities for expansion in our specialty and other lines of business. I'll take a moment now to update you on our Gen AI initiatives.

We've made significant progress embedding Gen AI across our core underwriting and claims processes and expanding it across. As this work continues, our confidence has only grown in our ability to drive industry-leading impact on our deployment of Gen AI.

Our top Gen AI priorities for 2026 include deploying underwriting by AIG assist and claims by AIG assist across the majority of our commercial businesses. Enhancing AIG's oncology by developing a comprehensive digital twin of AIG's processes, workflows and data elements to drive enhanced speed and efficiency.

Developing an orchestration layer to coordinate AI agents to drive better decision-making and reduce costs across the organization, and further utilizing Gen AI for AIG's SPV strategy, portfolio analytics and compute. Since our initial rollout of underwriting by AIG Assist, we've expanded its use to seven additional lines of business including our Lexington business. We remain on track to complete our accelerated rollout to the rest of North America, UK and EMEA in 2026. We're already seeing benefits from these efforts.

For example, Lexington's business has seen a 26% increase in submission count year-over-year. As a reminder, at our Investor Day, we shared our ambition of reaching 500,000 submissions by 2030. As of the end of last year, we've already reached over 370,000 submissions, demonstrating the robust opportunity. We believe our use of Gen AI gives us a strong advantage going forward in this dynamic market. It's early days, but by deploying underwriting by AIG Assist and Lexington, we've delivered significant productivity gains.

For example, for Lexington Middle Market property, our Sumit to bind ratio increased 35%. Building on our foundation, we're exploring the next phase of our Gen AI strategy, focus on the orchestration of AI agents that can act as a force multiplier for our team. To do this, we're building an orchestration layer, whereby we signed responsibilities to AI agents and determine when these agents are activated.

The sequence of their tasks, what information they can access, how work is handed to other agents and instances when greater human oversight is required. We think of these AI agents as companions that operate alongside our teams with specific roles such as knowledge assistance that can provide relevant information in real time, advisers that can provide additional insight based on historical use cases and critic agents that challenge the knowledge and adviser agents as well as the underwriters decisions.

Through the orchestration layer, we can coordinate these agents to work together to help streamline simple, repetitive and lengthy processes to support decision-making. We made substantial progress on our Genii strategy in 2025 and remain focused on continuing to pursue the opportunities we see ahead to support our business goals.

2025 was an outstanding year of accomplishment in which we delivered against our strategic, operational and financial commitments and position the company for an exceptional 2026. Overall, we remain on track to meet or exceed the financial objectives we outlined at our Investor Day.

We have strong momentum with growth expected to come from multiple sources, including organic growth initiatives, savings from excess of loss reinsurance, the continued successful conversion of the Everest portfolio, our whole account quota share with Convex, our special purpose vehicles and the repositioning of our high net worth quota share at 1/1.

Given our strategic transactions and several of the drivers I just mentioned, we're well positioned to drive premium growth into 2026. Because it's always hard to forecast, I'd like to take a minute to provide some perspective on what we see for net premiums written growth for the full year 2026, noting that this guidance reflects our views and assumptions as of today.

For the full year 2026, we expect low to mid-teens net premiums written growth in general insurance, and we believe that 2026 is already off to a very strong start. Before I hand it over to Keith, I want to briefly speak about the leadership transition we announced last month. I'm incredibly proud of our colleagues and the work we've accomplished together and I could not be more confident in AIG's future. With the company well positioned for its next phase, I felt it was the right time to retire as Chief Executive Officer and transition to the role of Executive Chair of the Board.

I'm very excited to welcome Eric Anderson to AIG on February 16 as President and CEO Elect. Eric is the right leader to take AIG into the next phase of its journey. He is a highly respected executive with nearly 30 years of experience at Aon.

His accomplishments are widely recognized throughout the industry, the has consistently made positive contributions in every role he's held. Eric will be on the first quarter call and can share his perspective then, I want to assure you that he's fully committed to our Investor Day financial guidance and strategic objectives.

I look forward to working with him and our outstanding management team to drive AIG forward from a position of strength. As AIG enters this next chapter, I have great confidence in our company's leadership, the foundation we've built, and our ability to drive sustainable, profitable growth and create long-term value for all of our stakeholders.

Thank you, Peter, and good morning. We had a strong fourth quarter and full year. Starting with the quarter, we continue to make good progress with 51% growth in adjusted EPS and solid investment in underwriting results. This marks another quarter of improvement in our key financial metrics while continuing to build the financial strength of our balance sheet. Adjusted after-tax income for the quarter was $1.1 billion, an increase of 31% year-over-year.

Underwriting income was $670 million, an increase of 48% year-over-year and net investment income was $954 million, an increase of 9%. Turning to General Insurance. Net premiums written were $6 billion, an increase of 1%. This was driven by global commercial with growth of 3%. We continue to post excellent underwriting margins across general insurance, building on our multiyear track record.

Accident year combined ratio as adjusted was 88.9%, a 30 basis point increase year-over-year. Accident year loss ratio was 56.8%, a 100 basis point increase year-over-year or 70 basis points, excluding travel. The increase was driven by additional margin in our casualty loss picks, favorable loss experience in the prior year quarter in Global Specialty and change in business mix as we grow more casualty over property, partially offset by underlying improvement in global personnel.

General insurance expense ratio was 32.1%, a 70 basis point improvement year-over-year, driven by the acquisition ratio, partially offset by a higher GOE ratio due to the reapportionment of expenses into the business from other operations. This will be the last quarter we talk about the push down of expenses into the business from our lean parent initiative. We achieved this in 2025 and have a clean baseline to compare 2026.

Total catastrophe losses for the quarter were $125 million or 2.1 loss ratio points, predominantly driven by Hurricane Melissa. Prior year development, net of reinsurance and prior year premium was $116 million favorable, which included $120 million of favorable loss reserve development, $31 million of ADC amortization and $35 million prior year premiums.

The favorable development almost entirely stemmed from North America commercial with $94 million, primarily driven by US financial lines, property and Canada Casualty. Overall, the general insurance calendar year combined ratio was 88.8%, a 370 basis point improvement compared to the prior year quarter, an excellent result.

Now moving to the segments. North America Commercial Insurance grew net premiums written by 3%. The growth was driven in targeted areas, notably programs, which increased 17%. Western World was up 14% and and excess casualty grew 11%. This was partially offset by retail and Lexington property, which declined 19% and 10%, respectively.

These lines continue to be where rate pressure remains most prevalent. Retention in North America was 89% in admitted lines and 76% in Lexington, an excellent outcome for an excess and surplus lines business. New business grew 8% year-over-year, driven by financial lines and casualty.

North America Commercial accident year combined ratio as adjusted was 87.2%, an increase of 260 basis points over the prior year quarter. The accident year loss ratio of 62.2% was up 100 basis points, owing to changes in business mix as we reduced certain property lines and earning more casualty and captives business, which are beneficial to the overall combined ratio but carry a higher loss ratio.

The expense ratio of 25.0%, was up 160 basis points, including a 60 basis point increase in the acquisition ratio due to change in business mix and a 100 basis point increase in the GOE ratio owing to lean parent. North America commercial calendar year combined ratio was 84.7% and an outstanding result and an improvement of 14.1 points from the prior year, driven by continued strong margins, lower catastrophe losses and favorable prior year development.

Turning to International Commercial. Fourth quarter net premiums written increased 4%. This growth was led by Global Specialty up 9%, driven by Marine and casualty, which increased by over 15%. This was partially offset by financial lines, which was down 6% as retention remains strong, but rate pressure continues to weigh on growth. International retention remained strong at 87%, which was balanced across the portfolio.

New business was excellent, up 14% year-over-year. Accident year combined ratio as adjusted was 85.9%, an increase of 230 basis points. The accident year loss ratio was 54.2%, a 130 basis point increase year-over-year. This was primarily owing to energy, where market loss experience in 2025 was higher compared to an unusually favorable 2024. The expense ratio rose 100 basis points to 31.7% and due to movement of expenses from other operations. The international commercial calendar year combined ratio was 88.8%, underscoring the strength and consistency of the portfolio.

Turning to Global personnel. Net premiums written were down 6% year-over-year, largely driven by the high net worth quota share reinsurance treaty, which was a headwind in 2025. Accident year combined ratio as adjusted was 95.3%, a 360 basis point improvement year-over-year, adjusting for the divested travel business.

The accident year loss ratio of 52.9% improved 60 basis points, driven by the personal auto portfolio, both from rate and underwriting actions within certain international markets leading to stronger underlying profitability.

The expense ratio improved 300 basis points to 42.4% as the acquisition ratio benefited from improved commission terms in the US high net worth business. The global personal calendar year combined ratio was 94.3%, an improvement of 110 basis points year-over-year.

Moving to fourth quarter pricing, starting with North America. Excluding the property business, our North America commercial renewal pricing increase was 6%. In North America Casualty, the overall pricing environment remains favorable, with retail excess casualty up 15% and Lexington Casualty up 12%. Both remained above loss cost trend. In US Financial lines pricing was down 2%, in line with the third quarter. We continue to believe our portfolio is strong, and we are well positioned as a market leader.

In North America Property, competition persisted across both the admitted and E&S markets with incremental softening in mid-market from the third quarter. We remain disciplined in our underwriting standards, and focus on targeted areas where we can achieve adequate risk-adjusted returns. Our cumulative rate increases over the past several years and disciplined approach enabled us to maintain strong profitability across our admitted and E&S businesses during this market cycle.

International Commercial overall pricing was down 2%. Casualty pricing increased 2%. Global Specialty pricing was down 1%, an improvement from the third quarter. Overall pricings remains above our technical view following several years of cumulative rate increases, and we continue to see global specialty as an area of growth.

Property pricing was down 2% and Financial lines pricing was down 4%. Our well-diversified portfolio allows us to navigate different market conditions, prioritizing lines of business that offer the most compelling risk-adjusted returns.

Moving to other operations. Fourth quarter adjusted pre-tax loss was $129 million versus the prior year quarter of $150 million. Looking at full year results, adjusted after-tax income was $4 billion, an increase of 24% year-over-year.

The improvement was primarily driven by stronger underwriting results, an increase in net investment income and expense benefits from AIG next. For 2025, General Insurance net premiums written grew 2%. General Insurance full year accident year combined ratio as adjusted was 88.3%, largely in line with the prior year.

The accident year loss ratio was 57.2%, a 100 basis point increase year-over-year or 40 basis points increase excluding travel. The increase was driven by the reapportionment of unallocated loss adjustment expenses, additional margin in our casualty loss picks, favorable loss experienced in the prior year quarter in Global Specialty and business mix change as we grew more casualty over property.

This was partially offset by a 120 basis point improvement in global personnel. General insurance expense ratio was 31.1% compared to 32.0% for the prior year. This is an outstanding result given the absorb of nearly $300 million of corporate parent expenses in general insurance in 2025.

We are pleased with our progress and believe we are on track to achieve our target expense ratio of below 30% by 2027. Total catastrophes related charges were $920 million or 3.9 points of loss ratio. Prior year reserve development, net of reinsurance and prior year premium was $472 million, a benefit of 2.1 points to the loss ratio. The full year 2025 combined ratio was 90.1%, an outstanding result and an improvement of 170 basis points versus 91.8% in 2024.

Moving to net investment income. The fourth quarter net investment income on an APTI basis was $954 million, an increase of 9% year-over-year. Total insurance net investment income was $881 million, growing 13% year-over-year.

During the fourth quarter, the average new money yield on our core fixed income portfolio, including the fixed maturity and loan portfolio was roughly 65 basis points higher than sales and maturities. The annualized yield was 4.59%, a 68 basis point improvement over the prior year quarter.

For the full year, general insurance net investment income reached $3.4 billion a 12% increase over 2024. This was primarily driven by our core fixed income portfolio, contributing $3.1 billion, up 17%. This increase reflects the execution of our strategy to reposition the public fixed income portfolio globally to capitalize on higher yields while maintaining a strong overall credit quality of A+.

We recently announced a new partnership with CVC, a world-class global investment manager with deep capabilities across credit and private markets in over EUR200 billion of assets under management. AIG will be a cornerstone investor in CVC's newly established private equity secondaries Evergreen platform, providing up to $1.5 billion from our existing $3 billion private equity portfolio.

In addition, AIG will invest up to $2 billion in a separately managed credit account, of which $1 billion will be deployed in 2026. CVC's new secondaries platform allows us to rebalance our private equity portfolio while driving operational simplification.

Turning to other operations. Net investment income of $73 million declined $20 million over the prior year quarter and largely reflects income from our parent liquidity portfolio of $60 million and Corebridge financial dividend income of $12 million.

Turning to capital management. For 2026, we intend to repurchase at least $1 billion of common shares, subject to market conditions. As Peter mentioned, we are no longer subject to the 9.9% retention requirement from Nippon on our Core Bridge ownership.

As we receive proceeds from the sell-down of our remaining core bridge position, we expect the majority will likely be deployed to additional share repurchases. We continue to execute our balanced capital management strategy, driving long-term value through investment in organic and inorganic opportunities as well as prudent capital return to shareholders.

Book value per share at December 31 was $76.44, up 9% from December 31, 2024 reflecting strong growth in net income as well as the favorable impact of lower interest rates, offset by $6.8 billion of capital returned to shareholders through dividends and share repurchase. Adjusted tangible book value per share was $7.37, up 4% from December 31, 2024.

In summary, we delivered an excellent 2025 with disciplined underwriting, strong earnings growth, balanced capital management and execution of our strategic initiatives while investing for the future. We are well positioned to meet or exceed all of our Investor Day targets by 2027 or earlier.

With that, I will turn the call back over to Peter.

Keith, thank you. Michelle, we're ready for questions. .

(Operator Instructions)

Alex Scott, Barclays.

Hey, thank you. First one I had for you is on the expense ratio. There's obviously been some moving pieces with corporate expenses coming in and some work to remove a portion of those as well as some of the AI initiatives. So I was hoping you can sort of talk us through what we can expect from the expense ratio over the next few years as you're working through some of that.

Thanks, Alex. If I start -- let's start with the fourth quarter. One is it's like seasonally lumpy, and it's always due to the highest. So I wouldn't really anchor up the fourth quarter, but I'll give you at least the variables. It's primarily and almost entirely the parent expenses.

We had the last quarter in terms of taking a portioning and assigning expenses that set and other operations and parent into the business, which has done an exceptional job of absorbing creating bandwidth for the additional expenses.

Also in the fourth quarter, we had some onetime approximately $20 million of PCS cleanup there were some things that were left over in terms of the transition, and we just recognize those in the fourth quarter. I would take a look at the full year. I mean, if you look at the full year, where again, we were allocating parent expenses north of $250 million, going from $12.6 million to 13% was de minimis. The business did an exceptional job of managing, again, additional expenses.

It's fully loaded. We're not going to be talking about this in 2026 as to additional allocations or expenses. And I would expect the expense ratio to be lower on a run rate basis when you compare '26, '25. I mean we're all over the expenses. We made enormous progress in terms of total expenses. And this organization is incredibly focused on every single one of our Investor Day objectives and the expense ratio below 30% is a top priority, and we will get there.

Very helpful. Thanks. The next one I wanted to ask on is just at a high level, the general insurance, net premium written growth that you mentioned sounded pretty strong relative to what I was thinking. So I'd be interested what portion of that is from the deals that you've announced as opposed to the organic growth. And the organic growth, where are some of the places you're getting that? And do we need to consider sort of new business penalty or mix shift or anything like that as we're thinking through our loss ratio trajectory?

Can I say a nice try on asking for further guidance. No, I can't break out. Look, we -- I want to just make sure that we gave you a line of sight as to what we're seeing as of today in terms of the growth. It comes from a variety of different places. And we have absolutely initiatives in place where we think that we can drive growth in the core business.

The reinsurance at 1:1 was very beneficial for AIG and was not dropping coverage, as I said in my prepared remarks. I mean we look at the return period attachment points on cat, they're lower. The exhaust is the same. We're not changing our risk tolerance. We kept the casualty the same.

So it is really just on sort of same-store sales, getting the benefit of that. I don't know if we outlined it enough in terms of the convex sort of whole account quota share and the benefit of assuming that business. Amwins, this was -- for the SPV, it was the first one where we did third-party risk. And so we are taking some of that on our balance sheet and then the remaining is going into the SPV. So we'll see some organic growth from there.

And I don't know how much I want to go into this just because I want to be able to take some other questions. But the high net worth was always supposed to be -- I mentioned this well over a year ago that we were going to do a whole account quota share to bring in partners. We brought in five and we would determine in a year or so if we wanted to reduce that.

And so we did reduce it to three and the three partners that we have could be likely insurance company paper options down the road for the MGA. And so there will be less session throughout 2026. So I think all of those are contributing in a way that is positive to growth and not one in particular is driving the outcome.

Very helpful. Thank you.

Thanks.

Meyer Shields, KBW.

Great. Thanks so much. Keith, in your comments, you mentioned additional margin in Casualty lines. I was hoping you could add a little detail to that.

Thanks, Meyer. Yes, we did talk about that. I wanted to just maybe level set a bit. One of the things we have talked about is we've been very conservative, I think, on our casualty and probably ahead of the curve over the last several years. We talked about at the Investor Day, we raised our loss cost trend assumptions back in -- of 2019 to double digits in this line.

And so -- and by 2022, all excess casualty segments were at 10% or greater on our loss trend. But more recently, we're being conservative in our accident year picks, putting extra margin in for our longer tail lines. It really puts us in a position where we view our reserves as a position of strength and we've put that additional margin in our casualty loss picks, and it's largely related to macro uncertainties and it's not related to any deterioration in our underlying portfolio. And while it's not specific to any risk. It's intended to cover uncertainties for things like social inflation and rising litigation costs. And so we feel really good about our positioning there. I wanted to highlight that.

Okay. That's helpful. Also within GI, there was a decent sequential step-up in interest and dividends. And I was hoping you could just break it down. Is there anything unusual in there? Or is that like a good starting run rate?

No. Thanks, Meyer. There's a lot going on in the investment portfolio, and the team really has done an exceptional job this year and really transforming that. Just to give you a little bit of journey that we've been on. We've gone from a largely in-house asset manager when we owned Core Bridge to largely outsourced at this point with key partners.

And at this point to give you a stat, Core bridge of our $80 billion portfolio only manages less than $3 billion at this point. And so we've really made that change. One of the things the team did this year is that we had many parts of the world, we had much lower yields on the portfolio. We did actively turned over about 40% of the portfolio.

And just to put that in perspective, and reinvested in higher yields, of course. Just to put that in perspective, a normal turnover for us would be about 15% of the portfolio a year. So that's an active 25% we turned over to reinvest at higher yields. Additionally, as you can imagine, we've been actively working with our private equity partners. We've sold down our real estate portfolio and push the proceeds to one of our partners.

And with the CVC deal we just announced, we're really cleaning up on the PE secondaries where we just weren't earning an adequate return on where we were, and we think we're better positioned there. So it's a combination of many things, but the piece you're talking about is really the reinvestment into higher yields around the world.

Okay. That's helpful. Thank you very much.

Next question.

Bob Huang, Morgan Stanley.

Hi, good morning. Just want to just maybe dig a little bit deeper on to the AI commentary. Maybe starting with when you talked about 2026 being the implementation for orchestration layer on AI agents, not sure if you have an answer for this, but if we think about the infrastructure software side of things, would this be an orchestration that sits on top of all the technology for AIG and then thus manage that way? Or is the orchestration layer just for localized AI systems and then they essentially would manage localized AI initiatives. Like is there a way to think about that?

Yes. So thanks for the question. I think what we were referencing, we have made incredible progress in terms of the implementation of Gen AI and also trying to stay aligned the advancements of the tech companies that are making.

You can see it in this quarter, just massive CapEx, but also making material progress on their capabilities. So like when we talked out at Investor Day, we didn't really even talk much about orchestration. And we thought that what we had outlined in March was aspirational. And 6 to 12 months later, we see the capabilities are much greater. And so not only are we making massive advancements with data ingestion, shrinking digital workflow, but also in the large language models and the advancements. I'll use entropic as an example, we start off with Claude 2.0 and we're now at 4.6. And so like a lot of those advancements.

What I was referencing on the orchestration is just that the implementation of single agents throughout organizations is real. And there's great opportunities in functions in mid-office and front office, but orchestrating that in an orderly way of being able to get that at scale is what we're going to focus on in 2026. And so we've been experimenting with multiple agents on the underwriting side, than the functional side.

I'd also add into like our back office, we outsourced to Accenture, I'll give you an example there. And they're doing an incredible job in terms of reinventing themselves in their ability to create agent large language models. We share in the savings, we share in the design of the orchestration and how it actually comes into our workflow.

So I would expect to be giving you updates throughout the year in terms of the progress that we're making and making sure that it's not only -- it will be on the technology stack, but I'm talking more about orchestrating a significant amount of agents within the organization that are more organized.

Got it. So it sounds like a lot of opportunities on integration and AI side of things.

Absolutely.

But maybe just a follow-up on that. you've been on this technology and AI journey for some time now. Given the progress you've made thus far, what are the low-hanging fruits that you think that are -- readily you're ready to take advantage of. And then that can maybe show up in the numbers. And what are more of the complicated projects that you're excited about that perhaps is more further out five years down the road?

Yeah. Thanks, Bob. I mean the first one is absolutely to reduce cycle time with the higher quality data to the underwriter. I mean we're seeing like a massive shift in our ability to process a significant submission flow way beyond our expectations without additional human capital resource. So that's been the biggest surprise.

There's some training that's going to be required for us in terms of what does the underwriter look at if it has all of this rich information in a fraction of the time. So that's a part of our training, and we've been doing that in '25, and we'll accelerate in '26.

I want to repeat the answer that I just gave you, but I think the real long-term opportunity is going to be getting the orchestration of agents in an organization to be able to scale and be able to analyze that information that's not biased in a way that's through the entire workflow. So I think like -- if you think of a digital workflow from front to mid to back, you can shrink all of that with the implementation of and multiple agents with a proper orchestration.

And there's a lot of companies that actually have orchestration capabilities. It's just a matter of doing it within your own sort of framework and making sure that you're working with the regulators and being very forward thinking and the partnership there. But I think the acceleration and the opportunity is greater than I thought at Investor Day.

Got it. Really appreciate that. Thank you.

Thank you.

Elyse Greenspan, Wells Fargo.

Hi, thanks. Good morning. My first question is on the expense ratio. So you guys [31.1%] for '25. You guys reaffirmed the 30% 2027 target. Should we think of that as the improvements split between the next two years? Or is there anything, I guess, you would highlight what the expense ratio we think about getting from where you guys are to your target?

No, I think, Elyse, I think I outlined that really the expense ratio was a direct correlation to the parent expenses being taken from other operations and putting into the business. And again, I have to say the business did an exceptional job. We will not have that headwind in 2026.

And I think from the expense discipline I think this company deserves a lot of credit for its ability to execute transformations, whether it was AIG 200 or what we did in the underwriting or what we did with AIG next. This is in the DNA of the company.

We will get the expenses out and we'll also get leverage from very strong premium growth. So I think that there's -- I don't want to revise guidance, but we are not nervous about getting to this in '27, and we expect to see meaningful improvement in 2026, and it will be much more predictable.

Thanks. And then my second question is just on the capital color. Keith, I think you said a minimum of $1 billion. I just want to make sure understanding. So that's the baseline. And then if the corporate stake is monetized, that would come on top of the $1 billion in 2026.

Hi, Elyse, yes, that is correct. So we said at least $1 billion is our baseline. And then any core bridge proceeds, the vast majority of that will be deployed into additional share repurchase.

Thank you.

Paul Newsome, Piper Sandler.

Good morning. I was hoping, Peter, to maybe ask a big picture question as we get closer to the early call. About your experience in the soft market and what you think generally how things will evolve? You can tie it to what you think that's going to happen to revenues in the next year or just in general, if you think that this -- this is an extended soft market or something that could be short.

Thanks, paul. And I'm going to ask John. I can't have Jon fly away from London to answer your question and he has more experience on the underwriting side than IV. But the one big material item is you have to prepare for this well in advance.

I mean, so in terms of how you're shipping a portfolio, if you want to be opportunistic, I think we've been incredibly thorough throughout the globe in terms of looking at and being very consistent on underwriting standards, and we always talk about getting the best risk-adjusted returns. We look at volatility, look at loss costs.

We look at margin on loss cost and we look at our ability to scale and also a very real and honest with humility, discussion around our relevance on those products in the marketplace. And I think we have leadership on so many of the products. And also not always looking at just the index. In other words, like we've seen property come off with rates. We want to be very careful.

We're not looking to grow it. The property had its best year on an accident year basis, on a calendar year basis, from a combined ratio across AIG. I mean -- so like we want to make sure we're not overreacting, but being very conservative in terms of how we're actually deploying capital. So I don't think the entire market is in a soft market.

I mean, property always gets the headline where the minus 10s and E&S might be slowing down. But I'm like E&S, again, I like to look at submission count retentions and our submission counts retentions and our submission counts in parts of Lexington are 30%. That's a positive. And then you want to make sure that you're positioned the dislocation. I think when I look at like Lexington, Global Specialty, the next time there's a market turn, we are going to be able to grow substantially.

John, maybe you could talk a little bit about cycle management.

Yes. Thanks, Peter. And I agree. I know we all talk about the market. I don't think for 20, 30 years has been such a thing as the market, there's multiple markets, multiple cycles going on at any one time. And it's not the entire market that dipping now.

And this is all about being ready for it, isn't it? We have had, in some places -- when people talk about the hard market for last years, not everywhere it's been hard in rate. So we've been planning for this for a long time. We've changed some of our processes, our robustness over our reserve revenues are lots picked on inflation planning.

Our margin planning is -- has been strong anywhere. We've improved it hugely in readiness for this. We monitor micro segments, we monitor new versus new, we monitor different geographies. And we really do know, firstly, where the big growth opportunities are and also where the highest margin opportunities are. But we're also very, very clinical on where our risk-adjusted returns are and what we will and won't write.

So -- and we talk a lot on these calls and in other forum. We have this diverse portfolio across the whole globe. And there is no single market on the process, of course, we're not in denial about that. It's not everywhere. It's not at the same time, different products, different geographies are at different stages of the cycle. So we react to that and we go looking for where the best opportunities are that suit us.

And I'll just and I think it's important to note that the risk is sounding arrogant. We are really well positioned to manage this, and we are not an index for the market. If I saw our rate, our risk-adjusted returns exactly the same as the market. I've been very disappointed actually because we try and do things differently and use our capacity and our capability together.

That's great, John. And I think also, Paul, I'd just add one other thing is that you set the entire company of these markets, just not the underwriting portfolio. What's your leverage, what's your cash flow, what do you have for liquidity? How strong is the balance sheet. How strong have your loss picks been?

How confident you are on the accident year loss ratios when you're looking to improve combined ratios like we are, we're taking it out of the expense because of efficiencies and how much have you been investing for the future as the world changes at a rapid pace, where I think we've been a leader in Gen II. So I think that we do a kind of like look at it really broadly and then making sure that the underwriters are really focused on delivering those returns.

Okay. You want -- Paul, do you want to last follow-up?

I was just going to ask you about M&A. You may send in your comments that the recent deals have been hopefully better than buybacks. Is that kind of the baseline, if you take perspective for the M&A.

Not always. I mean I think I want to be able to tell you how do we think about it in terms of earnings, EPS, ROE and how is it compared to share repurchase, for sure. I don't want to say always or never. But in today's environment, that's why Keith gave the guidance he gave is we think the best use of the proceeds from Corebridge today is in share repurchases that we've done some compelling investments that are going to help propel AIG over the next two years. And then as we get to the back half of '26. We'll look in terms of what those trade-offs are in the future. Okay. Thanks, everybody. We really appreciate you participating today, and everybody, have a great day.

Appreciate. Thank you very much.

Thanks everybody. We really appreciate you participating today. Everybody have a great day.

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