AIG - Earnings call transcript Q4 2017 | American International Group, Inc.

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Operator

Good day and welcome to AIG's Fourth Quarter 2017 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Liz Werner, Head of Investor Relations. Please go ahead.

Elizabeth A. Werner

Paul. you, Thank

available update The obligation slides on or uncertainty started or third opportunity that future get statements, disclaims GAAP hear are this our measures. financial for presentation This to XXXX time, I'd to as may guarantees subject expressly like on forward-looking included from and financial Brian. like of CEO circumstances. of Today's Before are to forward-looking of XX-Q to our Kevin At measures morning, Discussion first, today's statements. figures our information, supplement, include otherwise. differ we'll any Retirement, and cause Hogan. the Actual statements new to General any Duperreault; our Factors. to is have this Risk result over presentation this such performance CFO, I'd our Zaffino; the could CEO, our Management's may the Brian events most in you factors and the not CEO is Sankaran; materially Operations a call our and website. to from are XXXX reconciliation possibly second and Sid today's such Financial turn current forward-looking future of our not are Peter obligation that comparable which of and non-GAAP changes of which Form contain Insurance, Life the presentation any and contain and whether may remind under Results in management's Any Form performance we of under in described expectations morning, Factors and under events. forward-looking AIG based events Conditions statements, XX-K and Analysis and and

Brian Duperreault

XXXX XXXX recent a everyone. and strategic end results, to We I'll and strong a views had direction. XXXX off our busy speak to on is my fourth-quarter start. to Good and our full-year actions morning, Today, our financial

In quarter quarter I'm and earnings with across quarter actions stability results took businesses. development the reserve General Insurance, showed we needed, fourth of were our of and where mostly reserves which That modest in Europe. review. fourth Our the pleased for our our operating was solid decisive the outcome the majority of

Importantly, estimate impacted our largely see improvement. were in full-year wildfires by in of losses. contributor Despite losses $X.X of our our Across and CAT adjusted fourth efforts with to improve diversification. catastrophes. business, were operating on third Commercial and billion year income. greatest U.S. Retirement delivered solid quarter meaningfully are to stabilize full line pre-tax the Insurance and highest Life Personal year our results fourth accident benefits and continued business The and to underwriting ever, CAT our we AIG billion, reflected California quarter quarter and our the $X.X the fourth quarter

manage in As another AIG on to volatility risks. that loss mentioned on and past an best calls, of to reinsurance set I manage portfolio It my our underwriting, tool for it is provides eyes exposure. its important of control is helps philosophy

a us reinsurance. Going predictable can to expect be forward, you buyer of

to our International fourth strong talk Japan more that decisively have managing Personal completed remarks. U.S. calls. and we've a and business number of assessed will General Insurance, to similar Commercial our You General rate we European where in hard a to had our we portfolio our merger the will our Peter his in we approach, approach focused quarter, prior market overall respect at insurance across environment improvement International with side more you year strategy we Insurance and the prudently. look and about hear the International from a see acted lines. on in our about very Insurance, of took Peter With

out As with and we respect a I the people, to the laid where structure XXXX underwriting. foundation view year, point closed starting we as

changes Insurance for the efficiencies. our and our General completed and changes have structure, structural We and market in internal greater better both simplify our position allowing Life Retirement. people in These

over lot While organization a and the years, of size company progress scale to made underwriting on has couple reducing both and last the performer top-quartile a needs expense be expenses our of of an management. in

a continuing In direction that progress and XXXX, to manner. committed our in action are General We reserve thoughtful underwriting Insurance. a to set prudent meaningful baseline in for and make

growth. profitable weeks of them Validus, growth. As profitable our strategy and is before, at distribution. our announced deliver committed prudent Validus step a Year The for to and couple taking underwriters the XXXX underwriting said philosophy AIG of accountable we holding of significant risks forward shares ago, of across Underwriter I've empowering and A driving I'm acquisition to products the in

well-positioned the diversification As we when AIG the business includes the also our another we're to announced step brings year, legacy Validus stated transaction, forward runoff companies This company manage sources a AIG. growth strategy talent DSA in new our company's of that providing taking accretive reserves. of we and formation of mix value majority and enhancing. The financially the will with for Bermuda important Re, is

You'll on from priorities. Sid hear more DSA's

They I'll turn positive on its an of re-measurement believe of forward. performance forward the results Last I'm look With execute in are AIG the taking net over tax previous with will which the the priorities. going it that, management urgency are line deferred tax We this tax growth. to was spoke for expectations. quarter, I has the XXXX providing and be at changes momentum company our additional for that benefits Sid. bill positive on long impact Lastly, over to overall economic our of team confident reflect our term the the to strategic in bill to the place asset, and the AIG.

Siddhartha Sankaran

capital Legacy quarter liquidity. and Thank the results, to morning, and and impact fourth Brian, everyone. tax progress our Portfolio comment I'll morning, our on regards you, reform, good with of This financial our

and which the Retirement. fourth results during Turning Markets our organizational Insurance you quarter. to slide see structure, is is Insurance effective Commercial included Insurance Institutional Personal with of the can being Life reported with and segment our X, new now became part General presented as under

As shown supplement, normalized our longer metric. as present in no financial we reporting a recast ROE

to noteworthy shown share to they the items you from included slide $XXX and normalized Northern $X.XX, which Southern as X. continue We total of California on for per U.S. Insurance use earnings quarterly well million we and adjusted However, earnings million as $XXX include storms. the derive wildfires losses that General of are can reported and reflected catastrophe losses after-tax

earnings modestly expected. lower estimate claims actual wildfires and in than California a we for $XXX preliminary Northern on came the of we million As provided reminder, third a quarter our call

the quarter quarter third Harvey, in relative were million initial are Maria between and $XXX overall Our catastrophe million Irma split fourth to for our total estimates $XXX in Insurance. and well holding The Commercial losses for Personal estimates. up

another with year XX.X% and an of adjusted solid and Retirement the delivered investment year, quarter ROE Life returns. full businesses of XX.X% quarter better-than-expected in the from full for results Our benefiting

Our for Legacy the and delivered also quarter year. full returns solid Portfolio

million. to completed prior-year recorded slide DVRs we net detailed the on quarter of X, development in Turning our adverse our $XX fourth valuation reserve or reserves and reviews

Special North expected Our Property America U.K. DVRs individual the had saw and to large we unfavorable in were lines of business on development ADC. Financial of net Risks as million, claims amortization largely development including and International primarily Lines. development of in $XXX and the long-tail $XX million, related favorable

our improved loss our in to year to the ultimate points respect Turning that as claims full than International partially deterioration on accident DVRs fourth portfolio, a loss points With X, the see America our year slide ratios fourth associated Insurance I was quarter quarter X year adjusted offset Commercial ratios with by accident basis. ratios year-on-year, X.X Commercial has General include note which year loss progress last approximately adjustment our underlying been Insurance XX.X% in North ratio would Insurance point. Commercial ultimate year X loss review. catch-up and ultimate or for lower having by for an we by full International

ratios for going the loss Commercial are starting for of year representative International full more point profitability forward. Our

they Personal will now and we are loss his more pricing, ratios on are sustainable. expectation at trends our Our Peter comment believe Insurance remarks. and in underwriting

we the loss $X.X a can quarter not of a earnings amount other be credits the reduction This operating Turning and operating also assets per sheet fully re-measurement our the foreign new alter expire. credits, These XX%. will net before to does U.S. to tax rate share not The losses. shelter utilize expect of tax that rate fourth taxable losses X, balance taxable of income. of sheltered tax amount our re-measure now deferred larger includes in the GAAP which to impact at net our net by of U.S. they slide tax does the charge billion $X.XX for statutory

should rate our slightly approximately foreign be will XXX of rate tax for by improve rate effective adjusted full and largely to blended our higher is than ROE the earnings. XXXX rate, year that points. basis expect on We The statutory reflecting tax a XX% the XX% approximately higher after-tax

continue believe our long-term intrinsic to value. We positive overall net that reform is from to impact the tax a

and sheet flow balance remained Our free cash strong.

slide X, at liquidity quarter-end As $X.X billion. parent shown on was

well quarter, from billion Investments, we we dividends life companies contracts, of sale from as During including billion which the Legacy disclosed approximately received our $X.X remaining last $X remain P&C the of Life respect sharing settlements from Insurance the payments to acquisition $XXX for as approximately With quarter included Validus, tax $X.X an we billion our to in closing track on for expected mid-XXXX. quarter. Outflows related of during year-to-date our true-up to companies. million

note, account expected for well reduction million tax our net and reduced $XXX U.S. Validus that acquisition, approximately of additional the $XXX companies. to high-single-digit life as into value. takes statutory U.S. transactions earlier, group cash our RBC expense rate synergies our This for as on XX shows returns our usage on tax range, capital points franchise We the of losses. would As mentioned XX the and each as value our I view about assets the our of by and operating based which a to of outlook committed about non-life we I for to in reduced for points. economic the see ratios accretion million companies returns existing by evaluate result we the deferred

Our ratios did and to reform of not subsidiaries. our remained capital insurance to strong tax us capital any regulatory require downstream

activity dividends any subject approvals. billion our of expect sharing billion legacy-related $X and in is to and subsidiaries customary that XXXX, insurance before potential from $X We our approximately tax in payments

have strategy. to We on successfully continued legacy our execute

insurance DSA or noted DSA combining and in well-capitalized be licensed billion lines backed reserves and achieve Re diversification Bermuda-domiciled will approximately legacy strong By our we DSA and expertise. into extensive Legacy were will entity, a of legal or Limited As by assets. Brian these assets total runoff lines. non-life and non-core we $XX Company of managed over billion single be synergies re-insure formed life XX% operating invested $XX runoff to legal with entity, team be managed with approximately a will earlier, remains Investments. a named by legacy Re, Reinsurance able by a to re-insurer runoff AIG

Our of flexibility. The obligations remains with our allow to policy legacy and to AIG's and maximize objective financial entity these our honor respect objectives. to efficiently accelerate Re manage DSA liabilities, us service formation this will

Additionally, securities year as from earnings the had for quarter fair and of shown another supplement, full-year on full strong of XX.X%. Earnings on page over and for of return quarter the assets billion million financial in value. we carried totaled $XXX the at X these a full $X.X year

to for X%. more X% that returns range historical we closely are in the is estimate expectation returns these resemble to of long-term Our

investment we and on $XX billion. will these we returns. variable execute strategic portfolios balance total our which further for businesses the remains to up, demonstrated improve be our to to flexibility for plans approximately on options. to our estimate a to greatest and us Life Assuming sheet value sum and Kevin cash comment continue net XXXX To market gives flow We've insurance The the strong our returns, free core impacts execute expect maintaining legacy results. projected Retirement. income of insurance profile, on

I'd Now, over call like to to Peter. turn the

Peter Zaffino

risk manage to the and This quarter. fourth General good discuss on team, new our results, business quarter volatility, efforts improve organizational and which underwriting Thank everyone. last Insurance full morning, you, I leadership core morning, will and and our of year the structure I had performance and our actions to Sid, commented

Turning heard, XX, losses you've impacted our to performance. CAT significantly as slide XXXX

the However, CAT and our severity more forward, to through frequency reinsurance can exposure expect and strategy manage gross going us thoughtfully our of exposures. of management you

X.X improved to accident quarter, prior-year adjusted points fourth ratio Turning the the quarter. combined the year over

while financial portions of mentioned, efforts. our year, to has Sid overall as premiums of results performance. As as changes across not improvement part a improve our remained FX. current respect underperforming continued for reduce expenses, are remainder for With to full-year In model, we've remediation of the X% we've making net expense remediation drive Insurance. XX% to talent General declined and flat satisfied Divestitures XXXX, better our of decentralized to while opportunities further while reflects but Total portfolio, XX% seen written transition to we've the for more accident X with identified invest points as expenses efficiency the additional we're decline, accounted lines. within our for quarter the in necessary and we ratio our year declined we year, a excluding the premiums primarily

forward, to relatively reinsurance manage to strategy our in of we with XXXX light levels. the premium XXXX volume actions Going expect portfolio, and overall be flat

XX to Slides loss be and Commercial, America saw loss impact and Last from accident year provide Insurance remediation greatest where across efforts our General underlying we North International additional America the North that Commercial into year, XXXX you the insights year XX the ratios have ratio still the Lines. year-over-year, done improving. in accident began needs improved While results. work

addition, claim which trends expectations. to was aggregate, growth volumes net Personal offset reflected premiums been In America in our America travel Insurance Commercial divestitures fourth favorable by new have North lower strategic in warranty. business, and North and quarter written relative

is European risk Our discussed. the adjustments fourth catch-up and in seen was but in required trend, accident important strengthening, by adverse an selection XXXX year certain in loss impacted Sid the and rate has these emergence still business which in We quarter, improvement actions reserve portfolios. underwriting early took late-XXXX and Commercial

of based work and improvement. and quarter increases geography multiple is continue book. greatest rate quarter Property Brian conditions, said, across our exposure, rate our we remediating and market for are The the business as seasonally We varied to to events. U.S. Property the on recent of getting U.S. showing Transitioning have lowest impact lines fourth the on is

be strengthening first digits high-single the and we each appears However, quarter, sustaining which the saw during quarter. rate to month the in averaged in

Our are clients. new partner primary and our at our offer with to renewal for objectives provide clients, alternatives solutions

retention a As result, has recent improved year-over-year.

to in mid-single Moving business, rate depending increases of on parts point digits, wide Casualty, which had U.S. portfolio, range experience. the in the observed a of line other we attachment and

view a be cost maintaining loss trends to are taking We on observations. to and responsive our rate

a partners main long-term relationships slide to quarter, last to approach is Turning more reinsurance, one volatility. strategic our XX, priorities we future to that stated manage building take our to of with

to smaller be and buyers take lines net property reinsurance is reduce casualty, Our philosophy in volatility consistent and of reinsurance.

reducing reinsurance During by new risk began cover international our our on obtaining to per property renewals, the January we also exposures X CAT. execute on to for and catastrophe frequency CAT retention and severity American a North net strategy and

X-in-XXX the to arise. our prior of pursue other when basis for than We lower as down be will of may pro reduce remainder expect XX% we these our positioning include year, and they Year-over-year, will forma a for enhancements the opportunities the of and acquisition risk on our PMLs the approximately changes Validus, year substantially future volatility. the PMLs anticipated us are X-in-XXX the events XX% and

acquisition many another example XXXX. speaks CAT, The a announced expertise to the years to Validus E&S businesses Validus acquisition for allows Lloyd's complementary expand brings for track leadership us strong underwriting a recently I've and and our capabilities treaty to team commercial insurer. known Our valuable surplus throughout ILS business of in market the crop of is reinsurance, a including a their platform, the access record and start and itself.

announced I the our organizational run that opportunities leadership able problems. I and believe Given AIG's intend seek growth additions Last and to be Validus. improving said unique our our for for to quarter, to We design profitable will strength, that foundation capital results. with provide diversity recently to financial I we'll business

and is distinct end-to-end structure accountability that composed new of efficiencies. businesses Our transparency, support process

and early us implement Chief and joins model Our Underwriting new March drive across led decision-making core us recently businesses our he Baugh Chris and be underwriting Townsend Bolt will and guidelines Chris increased Kevin. International bringing local Personal capabilities. turn we've our role as made advancing our quality play our the accountability. operational will in in Garg with our analytical by to call International North improve will joined for our to assisting I Officer operating Gaurav Tom Insurance. will for modifications In to January America, critical and to and businesses in for strategic, Lex team, us over consistency structure, talented that, coupled performance. With and a enable in leadership to and the underwriting closing, will process us financial

Kevin T. Hogan

and good you, everyone. Peter, Thank morning,

$XXX income results products ongoing slide refinements. our the adjustments, and see can Retirement Life in within with variable million $XX primarily actuarial solid Group and for Retirement of and pre-tax million approximately you fixed due related modernization in on and As Individual quarter XX, model systems to adjusted for despite produced annuity

Our with pre-tax It alternative income XX.X%. our base enhancement our for however, year. Total yield ROE continued adjusted in increases to the income from be in spread-based results yields is for over and for the note, environment. strong significant products and year was benefited yields reinvestment of that to adjusted compressed $X.X billion to due important the

of partially markets, driven low on the to our rate equity the Additionally, impact results. asset growth, by help strong environment continued mitigate

well portfolio is emphasized businesses, We annuity especially and greatest year sales Institutional breadth in One Retirement, reported Group continued in by which of product industry with Life consistent Retirement sales our many our Insurance and maintain Results part to results business. sales of Life and peers. for is now Markets and which a as Institutional our steady strength the in market. of for Markets are individual Retirement's us across of Life marked growth the our challenges, particularly served

market we capitalize opportunities, our available well business Institutional Our the growth but emphasizes Markets targeted positioned returns. focused on remain is breadth on diversified presence. product This in and achieving of further economic portfolio position to

I for Now, discuss our briefly the will fourth quarter. results

affect to our negatively sales, Turning and XX, variable have particularly regulatory significantly Individual impacting annuity uncertainties on disruption to slide industry Retirement continued distributors, products.

Although our at flows increased for Annuities negative. Annuity positive Index assets resulted net quarter, equity increased at flows, sales and and performance fee Fixed were by in historical under highs Individual Retirement's Retirement overall quarter-end, net remained of Index the Individual which driven administration market income.

practice compression, management, saw expected, our active we spread continued continued of conditions. but reflecting reinvestment current as We

Annuities. spreads Annuities base quarter, in Index accretion net Fixed and investment This from income growth benefited unexpected for

investments continued off. to Turning our pay participant page sponsor Retirement to the experience XX, Group and on plan transform VALIC in to

acquisitions year, base increased. year. the sales for New increased individual Retirement significantly strong declined assets surrenders flows Despite Retirement, group to disciplined expected record yields compression. for the rate Group experienced management achieved as net and Individual despite administration under Similar

This of update benefited funds. base cost cumulative spread investment unexpected net income quarter, to accretion from a and

While we spreads in tight levels. increases have seen historically to rates, continued be at risk-free recent

our Looking by base forward, and changes to continue point environment, across spreads Group X overall Retirement, X basis to will net Individual rate the basis expect significant per points absent in we decline approximately also quarter. not And noting yields, to as Sid value alternatives fair spreads. more carried total and impacts but nor at this mentioned, base we moderate to yields historical returns levels, expect in securities would

are Let's administrative continued distribution our to efforts simplification our U.S., make narrowed slide focus new now Insurance and platform, modern business progress. on In move growth. to topline Insurance strong XX, Life product supporting Life the

the deposits increased strong and and quarter year. premiums the insurance both had universal and sales for growth life in we Our a and term

year, pricing within elevated the the the for experience better was expectations. for and was prior mortality year quarter, it While than

slide XX, of Markets opportunistic Institutional benefited from product including to number lines, transactions transfers. in Turning risk a pension its

net pricing Overall to market. and us over transfer reflect the us well focus business Markets growth income. under last in our as well year business, higher Our growing Institutional on the in disciplined participate strong resulting in results in sales and the well believe our diversification increased investment assets pension strong position selectively capabilities sheet our we balance as To strong writing profitable risk which has future. close, management, for this positions

it Q&A. turn up to Brian back to open to like would to I Now,

Brian Duperreault

Operator, Kevin. go you, Thank questions. let's to

Operator

Jay Thank take question you. ahead. from Please Gelb from Barclays. first We'll go our

Jay Gelb

do referenced to you first you loss much the My on the achieve returns? ratio would your that accident is needed target Insurance slides. year in be question How Thanks. feel more General improvement

Brian Duperreault

want do Should Peter? I this? You do to that,

Peter Zaffino

got more you you've push it's loss you and ratio probably to in to your expense think bit I that things, work mix it expense Well, of accident going to I got got the casualty, our is levels up too. year because that mix you ratio property, be goes want that loss think to got property, you've add issue got portfolio, you've together, mentioned I different a ratios, down and more we've a the on combination combined a continue cash maybe earlier,

it to and just returns. a get to So, it's that can still the in terms yet. of get isn't our and loss that. mix bit be level And not going to mean an is that's helping tailwind, I But we a of of loss want to expense in we ways combination. to to ratio improve going to us we're business going which And us It's I go. there clearly a we that have effort. think got we've be

can that we that little a us tells Hope answers there question. So, the faster. get

Jay Gelb

my us Thank there any for you same you. in quarter And fourth took on With $X announced. wasn't but can quarter, where that perspective additional dividend does. the billion follow-up I account your Validus in potentially on is plus XXXX, coming into cash noticed update management. capital the deployable being it buybacks? backs It in buy also on the then probably and was

views So, can will that'd there, you. be Thank update you your on helpful. us if

Brian Duperreault

I'd how Yeah. we white me, rather it the buybacks of portfolio Well, to does. have a are and when that fact like deploy We're capital have there kind we in that I've said that, to blessed is it. management with having it's tool of are capital our the that in, capital management there. appropriate, that but and think you deal would I built-out fill those use space what thing one the management key we'll earlier tool, with we pieces

priority. my be would that So,

the kind and large steady do of nature, make more wouldn't process That right? think would with you'd consistent be your dividend that business scale long-term should in Our approach. move, I dividend changes be a we in

to So, opportunities that's in find a it And a we can't, really can improving? way the I gets tool. and stock capital have buyback accretive if structurally I down the to as use

Jay Gelb

Thank you.

Brian Duperreault

yeah. question? you, Thank we go Can Okay. next to

Operator

question next comes Brian UBS. Our from from Meredith

Brian Meredith

Yes. Thanks. Two here quickly.

we I just where the got Peter, mean kind the the one, we business, process? First kind in where upgrading of the you Commercial, curious, senior in as out are underwriting next of I'm kind down as are level building of in leadership Insurance place and just, but far General your teams and talent?

Peter Zaffino

I Tom Chris will arrived be and Well, March. joining early us that recently mentioned in

foundation Ken us We we actually prominent that next America core to North very underwriting been recently Tim leadership. the So, just taken have run joined who a layer the for below. our within have North joined and has position talent significant at America. us, actually some Riegler, our layer DeSett hiring field.

the some And the talents structure, influence been talent have positions drive organization really the but the ratios we've in strong to org XXXX. we layer, very next we've and so, improve that been also we people in XXXX they continuing and on now at year announced in where can have accident start strong to loss add that putting

to-date. of very to made So, by interest we've the the have progress people I'm join that really that and shown encouraged pleased really and number with I'm want

Brian Duperreault

Brian? follow-up, a got You

Brian Meredith

that Yeah, changes yeah. going we should And think guys AALs into program, the any with in just change the XXXX? have the providing, reinsurance about that I'm curious been you

Peter Zaffino

a AALs. in take AALs the I think with should don't the be guidance you look rest have going at periods I parts with get PMLs the have of structure pleased really gone we'll commensurate the And we give exposures coupled and Well, return of think in gross we're XXXX. in I where our said, see to the America as XXXX to we're on reducing benefit and more North – decrease world. we from also different taking it'll and into some new we as reinsurance to that think all and a at PMLs look in we're hard the

Brian Meredith

for Thanks Great. the answers.

Brian Duperreault

Good.

question? Next

Operator

comes from Bank. Our Josh next from question Shanker Deutsche

Josh D. Shanker

tax want one big you Thank numbers new to DTA This Yes. the on you. a different per the use know and sheet change related balance calculating book U.S. issue, explain write-down difference to billion on guys that between There's those took understand. $X Can $X for law, but you two per isn't the DTA to the I share. there's you of calculation a sheet the I share. both, a that billion and little value different but on the in book a value bit change two? balance better the

Brian Duperreault

Yeah. Sid?

Siddhartha Sankaran

Liz FTCs, the NOLs will line, foreign respect happy credit, off through to got all and you've the my Well, Josh, walk details to but you referred with the the the I be tax to that script. so items

in with can of obviously detail, straightforward but So, we relatively the more it's follow up terms calculations.

Brian Duperreault

follow-up? Got a

Josh D. Shanker

a this as that be do those sometimes year? feel sometimes said, to you stand for have terms confidence we're redundant, by in prior years. Yes. we're going And do you And picks better a do take on in deficient, terms of offset well? very years the predecessor end your going of book, – you there's to a your tax large little bit be Where of in – of reserve loss recent the deficiency on we results

Brian Duperreault

but I issues start my said Well, country-by-country. what predecessor me, I can't are we on line-by-line, that comment a point. where handle is on XXXX, to good a have I confident said, feel the

and structure poised yeah, now I understanding. and the got think we're so, the got we've And we've

to just got Now, we execute.

Okay.

question? Next

Operator

Our next question Morgan from from Pan comes Stanley. Kai

Kai Pan

soon Commercial? about kind of North seen figure Could give turnaround International in you're as America. me timeline good question to the out efforts to what's detail America My what try the you Just remediation what more and on Commercial. taking the is see Thank morning. of first and the we we you North have that relative

Brian Duperreault

start. Well, me let

portfolio, like the It's single a I would issues one Peter more at but maybe color, the we around There suspects. in and the usual net combination you And gross Peter? and exacerbated what I a on you combination think portfolio, of selection a limits the you look issues a limits usually that and pop things round deterioration think was if things. going It give up of portfolio. is, do think I any our lot question forward some but line. can particular wasn't up

Peter Zaffino

Yes.

hard As comments, we opening bit a Sid took fourth more little mentioned his Europe. the look of really in within at International focus a in with quarter a

of – Special need thorough take at some development, you Property, to Risks, to back trends the so, would it, some get full And Lines, ask we don't but I again, Financial I the a but had look year. the

full accident at year the you If the loss year, overall ratio more performance. the of look that's reflecting

full continue as take will years, if to large the out and But, improvement, not and of the but within at to year we accident volatility net America, International portfolio. we at look North we lines our loss on in focus America that North and delta still look improving to try overall, think well. accident as the gross I take we ratios know XXXX, need we our you have between

Kai Pan

My quota losses reinsurance update your follow-up you share the and CAT were we on is give net repeat, renewals? Okay. Commercial also on XXXX new see could programs, if and what's loss

Brian Duperreault

Peter. yours, like Looks it's

Peter Zaffino

reinsurance Okay. Well, more CAT include restructured we've to the cover. aggregate

occurrence. a point attachment that's to corridor versus $X.X deductible, $XXX aggregate an but So, dropped billion from the million an with

exact in it'd out And in the would but we give want so XX% reoccur take the to I the a you events less same to have – if around frequency lot in CATs had XXXX range XXXX. number, don't of of specific for and a we be XX%

protected the loss of volatility we at also that large single that out a in frequency, are but vertical the different return periods. we've event lot a of a have have So, cover taken we

full-year so Brian X/X. look terms our mentioned, at reinsurance with begun the property mentioned, taking we're of quota In all of and I a placements we've share, at

going we terms of of continue to at going to in in with North America. variety as a to quota as casualty not U.S. different are We're the We structure our reinsurance share portfolio alternatives in look well how in want in International

So, placements as updates we'll continue all of year. revisit throughout to the you give reinsurance our we

Brian Duperreault

Okay.

Kai Pan

very you much. Thank

Brian Duperreault

Next question, please?

Peter Zaffino

You are welcome.

Brian Duperreault

question? Next

Operator

Greenspan from Fargo. from question Wells Elyse next Our comes

Elyse B. Greenspan

we or there off of within the the Lines that starting good about the in as pointed point – model loss Commercial for America? year Lines guys anything in a we in Hi North good good as of morning. kind is had My for first base think that full that book, International the question, the results improvement to XXXX North use the number pretty to America XXXX. you in Commercial one-off kind quarter. as I should pretty underlying a ratio you of something Was know

Brian Duperreault

always there's Look, I'd say, it baseline. a there, but as one-off in use a

Elyse B. Greenspan

Okay, that, up great. DSA you this for free thoughts capital just up set Re could potentially thoughts if more question, second around Is guys that you you there And any around could share that. some guys, vehicle. my

Brian Duperreault

Sid?

Siddhartha Sankaran

transaction, the with a pleased strong to manage we're said, our is we think we portfolios better as single to risk. here because going to optionality Obviously, us having manage entity runoff Sure. the a give

our going we'll entities, is you plans business And what better it but to targets some major financial manage go all like us to the risk. going say evaluate evaluate I'd to and think capital forward that our we're so, we forward, all and options gives we flexibility as do

Brian Duperreault

Okay.

please? question, Next

Operator

Autonomous Research. from comes question next from Bass Erik Our

Erik Bass

the systems have Hi. Thank in to in several process refinements leading refinements. Life you. where investment we more future? are you and and now us In systems you charges Can reserve if to related should update you anticipate enhancements Retirement, the

Brian Duperreault

Kevin?

Kevin T. Hogan

movements Erik. We're some modern better an upgrade And the to one models systems thanks, platform. modernizing time-to-time, in actuarial in two very platform life we moving also detail of of in as our there from the even We've the the retirement last able to the the the business reserves. three Yes, to process essentially are and business are been from years.

this balance while quarter, adjustments. the to up relatively shows so, are And size modest the relative sheet, earnings of fourth in the these in

is of business these sophisticated I attractiveness are our or platforms. very to this think is, that outlook and in profitability important the no change there's what's

said, we're years to three two in. like So, I

two have to this work We management to else We're year and that suggest at go. And point to improve process. or another can't of business. to through come. this there's We're anything time, constantly trying we in modeling our continuing the

Erik Bass

you. Thank

Brian Duperreault

Erik? else, Anything

Erik Bass

there in negative. investments Retirement are the hurdles platform to you've new I of VALIC positive are a I seeing in acquisitions, Yeah. the flows number the but what back that group on to flows pick-up and getting business? guess remain a In specifically, Group you mean remaining see made

Kevin T. Hogan

things. So, there's that I think two

plan made we both you was new time not have of out, off sponsor And the that recall have plan experience. really we acquisitions We've engaging pointed were where You investments, there reengaged paying three, improving a plan some period four as participant significant in which aggressive acquisition. in to the starting digital and years are ago. and

to expand I grow. continuing So, advisor improvement where we are think year-on-year. that our now, We're of to expect that at continuing see the and force acquisitions levels to we're plan

little will for make before ways We go for acquiring that weren't the we plans while. a to we fact up have

still is business. remain for our and So, the outlook yield compression profitable We're the margins very strong. this business managing

Erik Bass

Thank you.

Brian Duperreault

Okay.

welcome. You're

question? Next

Operator

comes Newsome O'Neill. question of next Our from Sandler Paul

Jon Paul Newsome

Good morning.

mentioned compare of Validus. calculated? does you high-single-digit cash that to You cost capital How your as returns for

Siddhartha Sankaran

always we capital tell look methods capital. it's cost above be in all weighted do terms have all investors cost debate the of my I say, would Well, I me can a math generally at I'd it XX%. when equity want, I to cost can guess, of calculate we our of average of on fancy capital, but it, the

So, here return our and those certainly, we capital. cautious. said, as it's been a we assumptions, we reasonable we've cash And for surplus think think

overall so, people be than be we that, think something better if terms which will in targeting, pleased any going to we we're with that do very of return. it's And certainly

Jon Paul Newsome

a we've in think perspective from had regulatory clearly, a strategy your Retirement perspective to on I changes. marketing that or just or have net moderate that the ask you your particular business issues that the do it like about want lot and to it. you Is have question a of flows, particularly a will the in the all adjustments I'd Individual regulatory – that with view

Brian Duperreault

Kevin?

Kevin T. Hogan

sure. Yeah,

where the of were point, So, And period very work sort the the was fourth was markets time, quarter relatively a earlier fourth we embracing still with improving let's distribution – strong. distribution a stages but U.S. At suffered were remember the equity independent of environment the DOL. across bit. quarter the low rates that. the from within quarter third still And the

And so, now something environment. is the is distribution is VAs our new of that introduced really right that the income were product under or pressure. were for targeted We're actually with sales last pleased benefits, which VAs a daily with that new quarter half almost we the

with continuing reduction feel in a about the the new where see we're business we whilst VA we product good to branch. So, are positioned there,

to product. We of with been an the our played have We're the role introduced as I of focused what's Annuities products. seeing rate we've relative environment advisers' unbridled investment these care Fixed and platform. suitability also Index And the as between in of have environment. advisory the and Variable distribution is, and improvements and we're standard fiduciary important attractive partners that we kind Annuities, evolve what relative a most improves investors' versus working We mean in investments may standard taken on equity closely a predict outlook is future where is think that some to markets products Annuities. that particular, and that. relative common And Index place will to insurance

environment, importantly, their we in regulatory stabilizing distribution to is so, And investors respond that and believe to that environment future that the will practices. the relative will most direction and move that

Brian Duperreault

Okay.

Next question, please?

Operator

Greenberg next from comes question Janney. Larry Our from

Larry Greenberg

be or said for assumption Good a to XXXX. of I between Would flat morning should for is domestic and International thank differentiate and you. expect good General that both pretty think Insurance that premium volume you those? we you Peter,

Peter Zaffino

that Larry, from is the I across say assume quarter. more International. I that look North would differentiate flat fourth to as remaining first The between North I only thing rate that America will globe in quarter would the from be and wouldn't pivoting getting and I the we're much just America to

So, seems the to be rate sustaining.

the we have, those of zone up. coming Some peak renewals are that

in going little So, with could type rate third of see again, of the and quarter. bit you more some a if in I improve to in But really rate happen those have what's America. to we and quarters can't property forecast second increases, continues North our bigger

Larry Greenberg

And of multi-year we Great. to ratios getting your expense or that year be that or something is the in Thank top achieved then, could that a quartile, is you. expect terms so Brian, in next should process?

Brian Duperreault

process been multi-year far. a it's Well, so

Larry Greenberg

Right.

Brian Duperreault

And And – I give this I've credit. got all mostly got you've before arrived. is credit. I give to give mean say happened to him

position and it going front taken we'll is more of when and steps structure a But you go to nut a it in have and get way, think putting General intelligent I Life in in more probably can't then I'm to and as separate I with earlier we the and our in one think done you structural from We've a heard more year. now do. process, which you we to think being there. you go the will I about a it's multi-year harder in structural tell

Larry Greenberg

you. Thank

Brian Duperreault

Okay.

question? Next

Operator

of William Blair. next Klauber Our Adam from question comes

Adam Klauber

Thanks. Good morning.

this is You the momentum that ago said in you was do rate some in good think today environment year a getting into also, better the you're Did year? than casualty book. continue the And it U.S.? property rate

Brian Duperreault

Peter?

Peter Zaffino

have with mentioned For pattern. every the U.S. January. Don't within January beyond in quarter. very comments Property, had sequentially much got what too month looks guidance consistent better my to that be I the fourth

are to continuing see we So, increase. rate

and a required stay basis. vary. constant we're does of increase are the that to to I lines, really seeing make primary like casualty It most certainly the loss just on casualty be driving a would the within But excess casualty want increase We just the because rate most across lot one lines. through for rate mean that time spending loss is trends increases. lines cost thinking increases with sure cost auto

we but loss in seeing what happen end that's So, we with of casualty I the indications early increase. increase saw seeing consistent to want rate at rate sure make conscientious year. we're quarter, And, to why on the of that we again, increases, are are very has the first that the cost for book.

Adam Klauber

side? is pick-up in environment you to have follow-up say, or three, a Okay, casualty four thanks. it one a today than was ago, seen the the And in it that, tougher legal particularly legal years

Brian Duperreault

mean, worse. And that if a describe I I'm sure. not look that actions no. there different think that, perhaps, we've seen I other We're at you like, said having any each some way, might worse, looking think I that you don't – it's place. taken say it little to but with it's have can't that really I D&O,

Adam Klauber

lot. a Thanks Okay.

Brian Duperreault

good. Very

Operator

Tom comes Evercore. of Gallagher Our from next question

Thomas Gallagher

quarter? we and XXXX? XQ for review that reserves see releasing expect so, And volatility function more terms of or a of Commercial in XQ saw of in XXXX less Good P&C, you'd challenged being we American still reviewed more Brian, than volatility the some lines North you lines Hey, as morning. we of could in less take challenged this should do

Brian Duperreault

mean look yeah, if way, look Well, we forward. mean pull all I I reserves, detailed We it's of we see at the we at scheduled a a review mean really, – we in of everything. I have it the – not problem,

me, in look good I were So, to wouldn't these before starting I the said I earlier, in I point. business. all. characterize and I look the at We feel at that confident reserve a way XXXX, this said the process ones. is as think easy we the

not So, to and you about, confident of year. understanding never what we can is going in portfolio do issues I I'm predict what what's happen next that, to but are our this all feel where to going address. need the

Thomas Gallagher

you're you're any reserves, process consultants just going whether joined, think we Is about it want there do outside when follow-up. to anything internally, using you'd review then, if to implement a different about process the And you it Got presumably it. different first to XXXX? the you dive all process or terms deeper about doing exactly think as the in is anything and same a of about

Brian Duperreault

interesting – good question. another That's

actuarial or firms. consultants outside use do we So,

Reserves things I So, think volatility, their reducing money. early, and how the Make addressing easier. I within reserves everybody, of are we've you improve? even a the that, the issues premium I business bud, going And And portfolio, our to that always gotten exposures. you so to a nip a that them you when in tolerances the money. think Make lot kind comfort, we us. out-of-line tell it standard I so are ours to attention that lot above make just if mean easier bit, maybe money. addressing we the regard to think for have a to ranges. are so and a don't you – And several we've that have you particularly and it that's looks little It's gives at process – closer of lot in or

it goes So, wrong, if it can exacerbate.

technique guess, but changes in a So, those there's It's I portfolio at been things. some management. there, And are regard, reserves. of actually in not yeah, that the the looking the

Thomas Gallagher

Thanks. Okay.

Brian Duperreault

welcome. You're

Operator

from next Meyer Bruyette Woods. comes Shields from & Our Keefe, question

Meyer Shields

Good percentage and much what you morning. XXXX guess, of reinsurance share, high like a loss more the the underlying in quota going of Thanks. in purchase us of property conceptually the it walk seems between Can XXXX. much is level, ratio? premiums higher that on On earned a it casualty I non-renewal represent through casualty implies to than for did the

Brian Duperreault

piece. didn't last the statement, that at last sentence? last I cut last that You hear repeat off question. just that Could you

Meyer Shields

what anticipated that to the trying just the I'm underlying, loss ratio? mix accident shift understand year for ex-CAT implies

Brian Duperreault

Well, let me start.

I lot think to respect of Peter with different reinsurance. can we're a things I at mean looking reinsurance, to add we it. When look at

doing or – reasons? providing casualty we the both? property. so, – little benefits we have it around the cetera? volatility. capital Are are be whether tend looked between it volatility at portfolio reasons? doing all analysis, -- is the loss the Are reinsurer, of business, for So, less our it's casualty we and et for our to is to us one, where lines And Obviously, they those decisions truly are but because around entire for and doing we it ratios are a issues it of Some is relationship we it higher,

of Europe But to book we We changing kind in profitability we we change have do change. on casualty basis to doesn't two. that doesn't casualty the has approach do property that And have to deal improvement. the got more just more so, question to – to that with of well. it. between or producing portfolio a going The naturally going the you're in our as itself, address returns? and not a issues, So, that If the is, feel have those property to the the we're loss change, we've had where important mix whether ratio in it's and we're know and gross do particularly

are. business question, of portfolio it's we we are the a the attacking intelligently? is And that mix think So, but underlying I all

Meyer Shields

helpful. that's Okay,

but overall on? sense that can sense, embedded it in your the know you that loss question, an a varies tremendously, reserves I of casualty Second you're trends give are us

Brian Duperreault

Sense of I well, loss trends, Peter. guess, that's

Peter Zaffino

Well, pricing When pricing. can before on then I primary of looking you the at we we're trends in mentioned some loss look that cost terms excess. had of that I and the at tell again, how the we in the contemplate

to of and being the one the again, on it trends, upper-end. up that business lines on auto the auto from lines of to within primary, other at XX% go or being fall there's ranges again basis, the that. And so, looking cost X% can at loss upper-end, an same X% almost at business, from it but up excess And the X%

looking and we And of we're as in historical so, throughout we going experience, sure XXXX. terms of contemplate that we're all of at that how to position at to make looking some our portfolio pricing the looking

As I say, we're and ready we're getting looking loss cost at trends.

see on So, our anything observations. I based don't dramatically changing

Meyer Shields

you Thank Great. much. very

Brian Duperreault

Okay.

Next and question? last

Operator

Our last Cohen. Jay comes from question

Brian Duperreault

guy, guess, I our Jay, you're last fire away. so

Jay A. Cohen

(XX:XX) for best last, right? say saving the just Let's

Brian Duperreault

Absolutely.

Jay A. Cohen

at leverage, this actually. for to Sid Question action take or the need point on some side? you you do you be Financial want to are debt near where

Siddhartha Sankaran

that comfortable balance through I you keep balance a but capital if look roughly from if strong we look we're the in standpoint. extremely at with evaluating as and No, leverage at the profile, go sheet, where year, our think think to obviously you flow cash We're we financial are sheet, I liquidity leverage. our going it's

Jay A. Cohen

Thanks, other great. Thanks. No question.

Brian Duperreault

everybody dialing got thanks great for And Thank us. year Well, you great all. of and work. in ahead to Jay. we right, a for colleagues thanks my All

Operator

your This concludes participation. today's call. Thank you for

You disconnect. may now

American International (AIG) 9 Feb 182017 Q4 Earnings call transcript