AIG - Earnings call transcript Q3 2018 | American International Group, Inc.

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Operator

Good day and welcome to the AIG’s Third Quarter 2018 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, ma’am.

Liz Werner

April. you, Thank

the uncertainty Form started described any Conditions that Risk get are statements, and third forward-looking future I’d to most Factors guarantees subject to like on forward-looking circumstances. Before are statements as this cause that presentation and this which Discussion performance Analysis differ to not update may you Today’s not to are on figures a obligation is is whether Management’s contain such information, otherwise. and new in and result today’s of current first, which may disclaims changes our materially are presentation contain in Operations remind in and measures events management’s for any financial or measures. of and XX-Q factors Factors. both Any second we comparable website. of of future of GAAP expectations morning, our and obligation AIG financial forward-looking reconciliation supplement, based slides and The or XXXX today’s events the Form performance Actual from XXXX possibly available non-GAAP under quarter Financial could any include under included may and events. XX-K such of expressly our Results statements. our the forward-looking under presentation and statements,

Zaffino; Hogan. Mark and Sid time, the senior like At Duperreault; to will queue, our with morning’s over have CEO Sankaran; this ask As of management GI’s a if team hear GI, questions. CFO, Brian to question Kevin Brian. reminder, like Peter back Lyons; to morning’s CEO, you’ll this from for call turn would additional one I’d this call, L&R, CEO session follow-up. Q&A you Please our one Actuary, call, get Chief into including On of

Brian Duperreault

and good morning, Thank you, Liz, everyone.

typhoons. to quarter third Japan global the particularly results Our XX catastrophes, reflected volatility due

of remarks. the in our and our will we key of third more reinsurance see taking which review improve strategy, we’re in profitability to actions a and on execute benefits one detail taking quarter his cover I Other to some initiatives, results. in capabilities are started also our resulting hold, and continue We our underwriting to which will Peter

We to for Insurance an profit including underwriting continue to as General expect exit deliver AAL XXXX. we

made course the in have executing Over renewal the And and our approach X January work team significant we reinsurance on last Peter will continue his season. of year, this as strategy. the progress

from $X.X our cover. far we’ve year, billion point per occurrence CAT an of million additional attachment $XXX So this to of lowered an cover a added aggregate international North American and

As share you in remarks, hear most X%, average. impacted, and it’s his the the market Peter national from AIG’s in area is on in Japan XX% will

its two exposure XXXX basis. in have working our maintaining and to was reinsurance January on separate While personal in program diligently renewed for structure year frequency severity Japan reduce this included the get for XXXX structure a towers place a business, commercial been to throughout single we and our both which net historical insurance

approach point was which Validus exit and loss CAT estimated takes as track on that business neutral accident quarter approximately to line improvement ratio contribute balance and underwriting brings we mix. of a remains $XXX contributions the peers. to with was pleased The with the million, net that evident are results to this and most Validus XXXX. disciplined in risk X in quarter quarter to year combined our approximately We our this was Validus

next transaction one with respected portfolio week. acquisition of the closing the of of businesses. Glatfelter to the of our Insurance will balance announcement pending is addition most space in this The programs position to provide General of expected of this the in to occur further recent by firms our market Our improving

our discuss additions flat. notwithstanding his has Mark Peter in in that General solid detail color reserves, his and team the continued the comparisons Sid Kevin is this over year-over-year net ground and savings, and in to to was million will Mark and the will of growth which Individual work Year-to-date, income, the our performed you the the in in and and L&R Net results performance remarks. to well-positioned reviews. assumption relating has actuarial last quarter quarter another third years General give need joining actuarial call lifetime on Retirement most ROE are the reserves on of and on elaborate the Insurance to double he important work Mark challenging reserve for approximately the needs, reflect of of provide strong team XX% development particular. delivered additional the bear life we the serves processes quarter, will sources book. $XXX and And the protection. beginning investments most businesses of -- will Turning prepared review particular reviewing annual in business, digits, procedures. an some reserves. world’s Lyons, on our fruit the Underlying Insurance welcome in reflect impact running this of summer, he hit more few of done with in the third

management growth. will on allocate value. our The shareholder capital long-term exposures is reduce discipline the formerly Group capital a of focus and imminent as to of book DSA up our to as capital as on Legacy more to known and Re, Carlyle Fortitude Re, efficiently and for free provide sale underscore well steps Our potential XX.X% platform

quarter. warrants and year, million $XXX this through Lastly, third including we have of billion the in shares the quarter totaling $X third purchased

long continue that $X.X capital the for authorization. goal been. a deploy positioning management uses better term. that making billion it will remaining has making repurchase of ever we our we to are In remains tool addition of other towards in will We our to to in Share have contribute than conclusion, AIG AIG progress capital

core improve and for businesses including to we as sense physician and reduce Insurance profit, with underwriting for work underwriting and General an a volatility, long-term deliver continue We deliberately AAL success. each urgency our XXXX thoughtfully of capabilities, of exit our to

over it to turn more results. provide third our detail on quarter financial I’ll who’ll Now, Sid,

Sid Sankaran

you, and quarter our I’ll and provide Thank morning, update Fortitude third good and position, Validus. comment This results, on an liquidity Re financial capital on Brian, everyone. and our morning,

will DTA, book is Turning share, million to quarter-end. slide per four. an associated tax deferred in provided share. after time. $XX.XX loss over earnings reported full-year Note and excludes We the guidance excluding which book value income per operations an increase beginning book year-to-date, that into AOCI with and gain net quarter share, that value $X.XX approximately $X.X adjusted billion from portfolios was of value at of of investment the reduction in line the at per adjusted Legacy $XX.XX; billion the cover, year. value insurance Book development in adverse the amortize was our is which in or the billion and $XXX the including was back insurance we which $XX $X.X AOCI, Overall, on our with

second most We make were continue expenses to operating comparable in basis. in restructuring from quarter, X% initiatives ex-Validus general declined progress the on an quarter the notably on Insurance General our third

million enter XXXX on all page billion impacted $XXX results items $X.X I quarter, $XXX driven continue the Retirement, referenced between initial And losses We General We listed various remain Trami operating full we in multiple quarter rate this Typhoons million. $XXX of and results. Insurance, achieve which by noteworthy by our last XXXX. to for significantly, and fourth catastrophe were events, We annual & five. and in losses in million expense comfortable of Jebi as to expect are its most Japan. report will with run included Michael, pre-tax estimate be Life savings, pre-tax Legacy Hurricane our

attaching events speak our of our severe third associated the sever this Japan. the approximately on program catastrophe losses Peter runoff us to CAT close volatility policies in cover, his remarks. property quarter our American with losses aggregate North catastrophe further fourth and about program in Legacy aggregate incurred Note and reinsurance million of reduces place will that in $XX quarter. risk loss Given losses XOL attach these that

completed As inclusive was or annual a million to Retirement charge ROE while quarter’s and expectations. additional and flat solid adverse roughly quarter the an adjusted Lyons insight with review was quarter will in associated was segment. the X% with forward operating this Mark long-term development core assessment below of a pre-tax had net million actions written a Note, $XX adjusted XX.X% taken. of result, Legacy’s X% $XXX by Life ROE to interest refinements reserve our Individual of was comment with withdrawal quarter and of portfolio. these to third reserves due Retirement did detailed the in our the additional impact variable profitability adjustments valuation review. business policies not refinements year to We life driven This assumptions, annuity Insurance or in and prior new year-to-date on further largely universal crediting by adjustments income. profitability into related assumptions reserve Life going to reviews, older

quarter third adjusted reflects on this pre-tax the loss. XX%, tax was impact beneficial the tax roughly quarter effective Our which rate discrete items of

on projections, full-year approximately the catastrophic related our the income XX%. U.S. is our quarter impact net combined adjusted to to We primarily This events third around Reform full-year the Tax expect XXXX slightly operations. of our on assumptions our rate tax effective current with increase to increase impact of the

flow and Our cash sheet balance free remain strong.

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

between $X payments level of holding from tax billion the the insurance $XXX $X proceeds billion. liquidity and to subsidiaries be continue in We our target and billion of the approximately included million. to at quarter company view of dividends $X.X Cash sharing

tax payments potential see billion, we non-recurring for Our $X annual our although remains dividends base insurance upside approximately subs case and for from flows.

ratios our are quarter target Life levels above and and after GI Legacy Retirement Our third even for target the are comfortably capital companies our catastrophes. at companies and levels

sheet flexibility. strong should ongoing us Our balance to financial provide continue

leaving our authorization quarter, approximately October. Slide common billion. the in the we approximately ratings. approximately and structure remaining Validus purchase We deployed totaling shares an the $X.X towards of million $XX.XX, capital $XXX seven of depicts shares our average redeemed preferred million $XXX During price at at

ratio loss to and deeming subordinated points. debt capital leverage by While Validus the of Validus’ the quarter the in are increased X.X debt junior for period, the will fourth legal through the ratio net XX.X%, quarter entity reflecting this in financial we inclusion excess reduce our leverage which financial the

will begin sale share. complete income the fourth the statement, Fortitude XX.X% which the AIG’s will to to Re minority non-controlling report earnings time, share at Legacy’s to of per we of in on Carlyle reduce interests Group this the which to contribution in quarter expect We

reported of indefinite million the of other and and intangibles; lived acquired as acquired other or was The the the Finally, reducing goodwill amount balance accounting. pre-tax net per operating VOBA pre-tax was adjusted the attributed maintaining long-term or attributed network being be the in purchase related $XXX with make completed and was over written excess deferred income. to profile. of sheet was VOBA, the consistent segment. million we years is with and costs Of quarter. Insurance income respect approximately volatility VODA; the ratios will progress and which part distribution intangibles. continue business of of in approximated will two Validus’ years cash operating and million year XX to tangible we assets, were accounting cash up, with value or $XXX attributed adjusted in of strong the billion Validus, of in of paid be consideration roughly during billion towards To value is segment to policy General VOBA $X DAC operations off amortized one-off VODA of established, acquisition delivering the underwriting that amortized flow million $XXX purchase included existing to a to sum $X pattern free our the $XX profitability,

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

Peter Zaffino

the Insurance’s will XXXX Thank success; update key morning. our third of long-term underwriting quarter the financial announced Today, on you, to our current business and improve Sid, and Glatfelter good performance position observations and conditions. transaction, priorities progress recently General market results against I for provide an

fundamental underwriting Insurance’s structure have strengthen to with During support have CEO model we’re I We’ve strategy changes Validus’ underwriting a globe. Tom underwriters CUO performance the implement Mike to to will Lixin and making Under quarter, guidelines. the progress Tom we profitability. Price in recently Zeng, development and work welcomed role we with General achieve Bolt, initiatives AlphaCat, the to as pleased our of our who am our Deputy Underwriting execute core on continued built to of Officer best and bring the expanded closely practice AIG. across Chief to

million respect limits reviewed, and measures instituted and $XXX risk underwriting have reissued shared from our to We’ve property similar billion that in $XXX $X.X way, gross of reduced with scorecard the $XXX global million $XXX XXX% As million. gross we’ve strategy gross million our appetite to the to to its underwriting limits a has past, revised we governance, net and and new limits reduction underwriting property’s and from from to profitability align reduced prioritized net of casualty. in limits casualty’s In million. authorities we’ve performance metrics. With other against and underwriter a key $XXX validated

are prudently and gross our protecting profitable managing using sheet. As reinsurance net support growth, we portfolio, sustained exposures while we AIG’s reposition and balance to

to treaty As a expanded aligns primary exposures that casually $XX a international casualty global of appetite. and clear $XX of retention lines, excess excess we’ve program into example, overall our now existing net loss our recently million across million risk includes excess the U.S. which

to we’ve the the has continued particularly strengthening underwriting better Business. in as of renewal our they value share already will focus some benefits us Lexington of positions in as during have of named X hire the capabilities. joined to recognize from new organization Head casualty clients, more share of U.S. as we of they Peter who David We agile XXXX. call, a world best improving I’m the the which talent, Peter are Organizationally, our we Specialty focus and Bilsby and additional CEO quarter’s primary have Global the existing industry’s and enhance currently brokers, preparing across to covers Talbot, changes as positive very on produced are our partner. and our in a to the on we’ve January place pleased portfolio. implementing and underwriting some demonstrated David season, our the expect AIG bring Both reinsurers, that leaders business yield to McElroy Since and leadership feedback marketplace last our quota with

general and remain quarter, capacity work We for continue actuarial excluding invest operating in and we operating claims. free-up to sequentially Insurance’s to Validus, track to plan General reduce our achieve diligently expenses X% and expenses underwriting, third general to declined XXXX. on

to underwriting Finally, reputation strategically U.S. our process the are a forward General currently reposition manager leadership capabilities highly well current pending next line a Insurance’s rounding selective out addition team. of closing efforts week. where our Insurance core an has with our talented programs on look Glatfelter Glatfelter profitability, technology, record have of and as excellent track XX% AIG of the underwriting business as as accelerate world-class The repositioning program of to programs, over we we to a non-renewing Glatfelter Group of or primary underwriting with Insurance, acquisition existing in the performance. objective of will General in our of improving in-house

performance Turning third to profitability details our metrics. and Slide Insurance’s results. overall nine quarter General

third premiums growth excluding in net North quarter, North Third quarter X%, the top Validus to $XXX by year international Validus were to million line and included net written quarter by net profitability, The on catastrophe in modeled with breakdown were and losses. the related Japan, approximately over combined billion XX. in which net losses half provided our slide within ratio line With to of $X.X is peers. these was a prior both declined written revised FX premiums execution and contributed offset strategies driven largely Validus’ Insurance. to $XXX that in Commercial, partially America catastrophe of result results. America compared of expectation in respect Personal underwriting the our million, North America losses

is experienced third quarter remaining location eight context Fuji is and in region, catastrophe property the losses North of from catastrophes. emanating core X%; Kansai To arising from in and $XXX Our businesses majority million excluding and and events, commercial Legacy third America, our emanating personal Validus our AIG’s quarter national Marine of average. by on Fire net in insurance events impacted losses prior on share Japan, market to and million the Japan, the principally home provide $XXX with events XX% five approximately from share business the to further attributable events, market in quarter

foreign-based result, XX footprint one frequency seasons the our AIG’s in country. worst and for insurer losses of years in severity the the of the catastrophe largest As both and as unique a Japan reflect

AIG’s improve Xst during and late towers for the As Japan businesses. renewal. Brian reinsurance noted, insurance XXXX, attachment personal began towers separate working the points and program for In program structured XXXX two commercial to reduced the successfully our was in we CAT both January

increased XXXX the severity claims America include XXXX. North quarter insurers, we the the America, North catastrophe basis. For California both into sizable accident terrific and first the and was territory teams impacted Insurance’s our million improve frequency loss a of that a consolidate upcoming AIG’s losses, occurred done third job have renewal, year global plan and the mudslides. represented claims Florence wildfires in to storms XXXX program the working Hurricane and $XXX results net quarter its inspecting from soon further mudslides a regional to allow. effectiveness excluding XXXX The on as tower and single recovering Personal Validus. event, which as paying our industry In exposure estimates before our made the a have began for conditions of is landfall with often reduce

the the XXXX. year of XX.X% of our quarter was portfolio and year prior The points accident adjusted with XX.X% the moderate been We responded commercial a to of Shifting and and improvements representing in the clients expectations. adjusted teams underlying Hurricane claims, The our where which damages year physical combined access largely to impacted personal claims are majority has the severe more sites inspections that over management profitability. level and U.S., second accident region. basis have Japan, insurance nature of loss the losses for by to in XXX% In XXX permitted. have of reflects severe Florence, of completed in accident given XX,XXX ratio line year compared quarter of ratio

expense quarter second third ratio loss not and line results was will in ratio does our evident yet North as business enter Personal shift The America Insurance. and towards in higher quarter be to reduction expense actions and begin lower The which mentioned commission GOE with earlier, quarter XXXX. fourth I the ratio the in the reflect we

Moving to Validus.

in While losses, in the expectations. with third quarter our largely of terms line performed was the business catastrophe challenging

catastrophe lines, the results As important of closing quarter assess four teams is by a North on most it year working closely driven to had been XX.X%, writer the exposed basis. a Since Personal the a solid Validus’ across loss ratio loss brings adjusted and of an rate business to reflects have our the financial heavy acquisition, in North quarter third America risk and grow selection. we’re losses Validus confident specialty of remain mix, Commercial activity shifts its to North Slide ratio making provide showed we attritional International and results. and lower acquisition value XX and XX severe accident strong quarter European Insurance lower International’s In with the in improvement to America’s strategic contribution offset business. loss partially Commercial, drive and UK businesses. America by ratio AIG. were business,

growing one address January look combined we XX.X%. the of of season. renewal particularly to that with the expect attritional strategy an Insurance as accident-year underwriting adjusted We losses, momentum demonstrate continued to our will International Personal profitability ratio

mid improved in on rates business, the and America North experience few the factors. average, improvement conditions, in North point, property depending pricing low with relatively increased the property overall casualty to changes single loss E&S the mid-single-digit in experienced admitted third range. on quarters. in rate past quarter the have other line rates range, to our approximately current been of Commercial’s digits rates Moving market history attachment low-double-digit America over We X%. the while increased line

and the at market Looking XXXX renewals. reinsurance upcoming January the

expenses underwriting loss Glatfelter improve determined in on accounts. take in see property average accounts to including loss closing, rates expect as on line we and from will place April cost non-loss with a majority Xst. Actions manage the continue to reduce where In tighten to contributions to strategies lines. and XXXX. be expect In and CAT entered growth terms to with in will trends. retrocessional affected the be flat to strategic Japan, the on our basis Rates conditions enable to implementation and on continue our we of of We casualty, change affected expect case-by-case for renewals rate us performance and net Validus underwriting we reinsurance that relatively

actions its first over we as organization is of targeted Mark Insurance to I’m are stakeholders. to deliberate And delivering months success of the that very long-term nine positioning all on underwriting a committed proud of what Our that, accomplished and call year. transform the General turn I’ll for into we’ve the commitments our With to high-quality for

Mark Lyons

some like firstly, provide summer; morning, all. and Thank joining make I like AIG so my some since to-date. some thirdly, I’d that you, to reserving comments clarity focused about this on I’d loss quarter; portfolio comments to to Peter, about underwriting have earlier get the around morning general I’ll and good secondly, reserves observations this for far the have the been like I’d numbers views lastly, provide implemented more changes themselves;

third of actuarial a a my third has hardworking me XX% group fingerprints hand. about evaluating understand host quarter months, talented executives analyses approximately earlier and four composition. the for This methods meet understand challenge review, opportunity this helped P&L year. They’ve last group who here positioning and job. suitable employed professionals results, to with assumption It’s strategies, that the their and on an the properly best also understanding analyzing many strategy analyzed. are done business the of task had on being found conditions the review then, the reserves, got with like. and information profitability, Overall spawn XX% market through reserves associated that all under the reserves always of to and accomplish I’ve data me Insurance operated is that the General owners, portfolio loss after the and care competitive Over in underlying are are understand and towards the I’ve charged of data their appropriate budgets, for during analyzing the mix to and Company. quarter. the Actuaries conclude of mountains I helped historical portfolio AIG the them critical I’ve of

the for remaining basis focus the the areas quarter, quarter, Lines, before than access reviews completed, At buffer XX% of Financial this of personalized be reviewed when As the UK be material casualty me lines Europe and reviewed, flags I detailed policies, reserves were will workers’ fourth U.S. compensation fourth and see the time, international are which reserves no other and preliminary concern. this give exposures. a for on undue to these red quarter will

still to point. Of be see it course the this work has done, but that’s at how I

Lastly, third views. I’ve independent gain their with discussed and the as reviewed lines quarter outside actuaries well their to our through the insights

in Now, construction claims moving excess on felt and through reserve of excess increased those has The area on area severity. an CD AIG defect exposures portfolio. that frequency focus. project only as was the to the the I was was quarter associated centered strengthening as of More division practice, the years, well specifically, material increased casualty predominantly last through as third other strengthening wrap necessary The where specifically casualty policies than as well experienced construction. several target the

nature up as be will their and anticipate the was the to from We at fewer coverage that claim. commercial approximately zero to as The exacerbated California. such rather most per XX% CD towers shrunk but We in And patterns, as emergence late of states XXXX be emanate as course Beginning proportionately exposures of known away between claim the these higher exposure of well number than recorded make commercial as favor reporting the more from average unreported of from commercial in AIG measured matter that book. residential exposure also away historically. characteristics be it our premium level risk construction project most heaviest who purchased that risk. as book of by as that as began and higher by will commercial well in residential higher simultaneously XXXX understand by exposures exposure around nature of cost CD AIG’s Given average necessary experience. claims historical CD XXXX, a will claims complex of insurers a of yet recent our reduce

Additionally, experience highlighted There some these beneficial adjustments that the on earnings three and already referenced. ADC Furthermore, Both the runs per exposed and his among an team, business lines of Insurance the development were Anthony excess adverse with minuses, Commercial reserve Auto development are and in quarter. from financial policies. close Sid other since of provided Vidovich Taking this page exhaustive consideration quarter Line. whereas the AIG in favorable limits worldwide of was analysis, competed Hathaway. $XXX in Claims as other adverse Brian charge of aspects, other and the cover on supplement. notably audit internal XX for claims into million this Berkshire who capacity and reserve more in were into partially claims insured the gross this quarter collaboration outside residential all most AIG U.S. resulted experienced given with This billion General figures net history strengthening adverse the figure patterns. page release casualty resulted to a net valuable or factors development of of and with million, ceded ADC, $XXX is have insight development these $X.XX ADC case pluses Overall,

forward I that to I a moment into past. Now, issue charges revised want these carry the and from under existed written take the being a as view that policies underwriting clear do in today not make reserve these underwriting strategy. result policies

changes. I reserve you these For to walk the of some through of additional clarity, progression want

discuss XX, this. reference can as You I slide

can charge not The discussed. also million financial in page casualty of AIG amortization million. $XXX supplement back reserve from gross million $XXX of reduced adverse. by General be The by ADC net the adding of million. This charge amortization by $X.XX lives excess Adding of for million. $XXX of the the business development covered of was adverse a of charge on ADC $XX in for of been XX development $XXX unfavorable total quarterly ADC developments unfavorable development the we across $XX for charge ADC billion this stated, of As net the million ADC the ADC and covered gross was of Insurance the ADC and lives all seen basis on the just which implies adverse results the by adverse million, $XXX has lines already

that’s limits $X.X $X.X has hopefully, session the level; and ADC as The X/XX/XXXX available XXX% confusing to remaining of you more. the at AIG. given at billion you remaining of XX% So, billion helped of nearly of still instead

America, operating $XX minor net on adverse Shifting Legacy Wildfires, mostly the million the California from the from bit. gears a a units, this development from international personal development million and another $XXX from million $X of of saw portfolio. Lastly, emanate perspective $XXX development North of quarter million favorable from line

As property, part a involved energy team, reductions, reduction of gross reduction in the just of million, million net my changes have the massive, already units $XXX on in that When of already has view. those and casualty on view $XX in of the have vertical the editorially as in $XXX property million a construction I I’ll strategies detailed net and implemented. international qualify and have business. add. And the casualty on and side say the I just been limits on leadership underwriting massive roughly I operating fairly Peter Peter’s the various and of commented been massive

excess again appetites have as As excess higher changes the Peter rules exist of between Officer now XX significantly reinsurance implemented, clear for Heightened with result the underwriting AIG a underwriter that these altered XX in successful binding definitive and/or excess pricing global accountability of we the market other to portfolio clear submission and happening mill accounts implemented, and this dovetails excess our strategy casualty has deductibles the also monitoring in revised towards support casualty revised broad will clearly entities underwriting in shift loss and casualty points same are improved been established. Clarity particular. mid-excess risk respect portfolio been gross the referred ventilation around occurred Chief as speak, governance. proportion developed on a attachment smaller with of Underwriting tools has strategy. quality is to has proportional to with increase targeted the which the higher and have shows and been underwriting treaty, market excess -- authority, mill to appetites bound, distribution limits especially the continues being Thinner well. a area, been

a Lastly, casualty for underwriting considered am me market. however I My years me, a lead of know those XX skeptic changes. improved when it these comes property, of that any reported are changes and substantive of generally tell you cynic benefits ratios in experience will who to and loss to

this at all really with time is exciting going AIG. Now, be to on, an this

call So, now, Kevin. like turn over to I’d the to

Kevin Hogan

and Mark, morning, everyone. you, Thank good

for see As XX, Retirement you delivered slide & quarter. Life solid can on results the

assumption update annual pre-tax of the with from line expectations, XX%. Sid discussed, Excluding our of that million was income along the adjusted adjusted in $XXX with approximately adjustments ROE an

product and We to leveraging strategy. broad channel deploy opportunities, continue our attractive portfolio to capital

growth, platforms conditions economic our index this conditions Insurance recognizing will variable. targeted improved, As annuity Higher If while and lines, strengthen at market returns, as we premiums and our fixed, incur well sales, continue and well-positioned investments premiums above or growth. We we deploy more as deposits business in increased our business Life we deposits grew Retirement. and Group market across new enhance new additional operating reflect our improve, International Life with to expenses and our digital in our to especially capital business general increased to expenses are associated capabilities.

each discuss businesses. I Now, of will briefly our results for

slide fixed particularly strong with deposits to Premiums grew indexed XX% and in XX. by Turning and Individual growth over Retirement annuities. on

achieved small under comparatively With for management retail Individual in quarter, face assets funds funds. a a and Retail these strong. for of we and to of time. to period mutual our remain net income net strong fee the headwinds be continue levels, flows business, Retirement sales challenged positive basis quarter is for Total flows mutual which may excluding the continued

items, spread spread portfolio but Base We below practice these for investment income. that from higher products compression active from for fixed as we and expectations. spread are other continued management, yielding decreased our annuities net expected, indexed of overall reinvested of assets our at the annuity in After with saw continued portfolio for due these being rolloff benefited accretion yields. the to and line investment variable rates adjusting higher our

We to solid deposits in growth on sales. Turning product Group Retirement increased and periodic deposits premiums individual and slide with XX.

year. of of planned this are next group the these Our acquisitions early shift timing for although year to may strong, confirmed conversions new some

large in on reducing factors. and activity mentioned M&A plan previous have other earnings competitive due market I number continue of some in to will As sponsors we the providers healthcare calls, their groups attrition to of see plans, the

Our surrenders were impacted large may plans quarters. plans and this two quarter impact future in by the attrition loss of the natural surrenders of

a net combines not-for-profit the leader Individual We us Retirement, strong under and quarter. well market. the other high-touch for to management year spread defined from high-tech assets prior spreads. to contribution continue that positions Retirement Adjusting model, these to Similar and believe continue income. in growing items, benefited remained manage we as which service, differentiated our accretion line spread was and Group with in for investment Base investment actively

While rising competitiveness and pressure. our quarter, more rate to below still need in-force in spreads we we on will forward the remain than optimistic under portfolio crediting business. environment, last maintain conditions yields are market rate for Also, a are our rates

changes and As is significant by zero Group we net decline the quarter. our per expectation rate in Individual environment, look to Retirement, base absent will points overall forward current X our basis that spreads approximately across

to move Insurance slide now on Life XX. Let’s

our particularly and from We grow our the in operating in separating strong our Total continue the us models Re business focus deposits progress continue to new business, premiums and Fortitude with life increased make UK in on the business allow and to further new U.S. and will growth UK. platform. sales to we

year favorable was prior experience quarter. assumptions mortality overall to pricing our the Lastly, in

Institutional Markets continues to our to The transfer to pension next market XX to risk slide the transactions Markets on during We over Institutional transactions be for Turning XX pipeline did capitalize the business quarter. well-positioned be notable XX. To focused to our available close, well. to product which believe distribution achieving to most the us position our broad and ongoing growth the while our to we economic targeted leverage returns. deploy expertise strength opportunities, remaining on our continues capital results attractive on to robust. months quarter execute continues Overall, reflect for not opportunistic strategy

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

Brian Duperreault

Kevin. Thanks,

go to Let’s Q&A.

Operator

first question [Operator take Sachs. Instructions] from we’ll ahead. Yaron from Goldman Kinar go Please And our

Yaron Kinar

CAT morning, losses. everybody. the is My question Hi. Good around first

losses to AAL. guess, year. day, of was with well the seem And were weighting Japan and just a were understand is, I’m at into be get that in known known quarter the the after above CAT thing the have and preannouncement in losses items struggling better feel still the well AAL I that tracking or the the one I Japan at year-to-date So, least of maybe the market thought were would are I very these this significant. exposures the or end why But,

to the any additional color you maybe on a think to is offer your still here, X% So, AAL number can thoughts X.X% about? on reasonable is

Brian Duperreault

is. give Yes, But, bit can I sure. think little I a color. it Peter you Yaron, more think

Peter Zaffino

Brian. And question. the thank you Thanks, for

start me just CATs. the $X.X had the quarter. a billion in Let with We said

million If to you take you out Validus about the Legacy, down are then the mudslides, and year $XXX adjustments billion. for $X.X in

so, of loss, Jebi Japan $XXX the years, being million, is XX years And the again, one worst. CAT it’s worst in the

where in periods, the basis return a it’s actually exactly of we so, thought. And current terms on had

with AAL and And reinsurance, at so, there -- expectations. it was is

past. more had have the quarter than we Now, frequency seen the they in in

a that also taking second, I’ll at America. and had a therefore, XXX the on so comment in AALs, And about North we in look

and an that had look we within at at aggregate quarter on the those two basis, you when frequency So, within you it’s the look modeled expectations.

look XXX or and CAT the the bit doing on gross AALs, around experience. And lighter little basis years, are a commented points what actual we last than XX our thereabouts, property Mark on So, have if over limits. you been

it’s within line. So,

are that said insured to different we’ll PMLs be his at at revise relooking We looking looking values, prepared and total reinsurance Brian in structures. comments at looking Japan.

recalibrate look in take AALs, as we’re longer frequency they running the enter time. are a And XXXX. a expectations less but much of have our to at line we’ll So, with and very we over severity and the period models

Operator

ahead. we’ll take next go Please question Elyse our And Greenspan Fargo. from from Wells

Elyse Greenspan

So, my reaffirmed end target. underwriting profitability the the Brian first question is goal year. just of on the the for

inflation, plus guys expectation Is AAL because in just -- and then, first have XXXX? I just your year-end you kind embedded Insurance clarification just to you what a a underlying I And of target. know So, General think in getting about a that as quarter of that’s that target. talk sub-XXX will that plant to can sub-XXX the there, that you

Brian Duperreault

the let I XXXX. entering first. do piece by Well, me Yes. meant into what That’s last

So, to we expect be underwriting first quarter profit. an the

to we’ve Mark inflation, got So, with here. respect

I think, question. Mark’s probably the best to answer that

Mark Lyons

Elyse. And you. Thank hello, Brain. Great,

We we this to respect -- view that weighted we as gaining. X% Peter mentioned, have the As are increase. on pricing average

business, varies of are expansion. It So, line by know. we as having Averages be deceiving. you can margin a

and a are areas we lines margin like EPLI, we’re about example, frequency a our where for X in but the rate Our primary, might of areas, we’re as overall improving could that to flat, challenge comp some loss severity as be north -- fairly of actually from areas it’s a losing expansion is getting. high some we business. point, cost margin on. the around D&O some see than this the being X% range in in lines which getting getting is there. bit to lines Auto, of think is combination, at Where of little we’re trends, expansion materially area; close casualty, that are line. excess, some little rates, more other a zero about losing and that’s other be we feeling lines, changes given more well, we’re those flat, we marginally Most

Operator

And ahead. we’ll with Josh move go from question Deutsche Bank. next on to our Shanker Please

Josh Shanker

bit California there? a Can we talk That’s a of a later? little $XXX lot on Wildfire What’s lot year million or of businesses? of about a losses houses going

Brian Duperreault

think to this answer great. I -- This question. Mark is Mark wanted

Mark Lyons

in mudslides, the wildfires really XXXX. you of are the Well, which get some same effects, Josh. whether early Hey, it’s or

areas You a are that reach. of high-value have very-hard lot to

sides And regulatory them on abilities Some in even are the get even mountains. of them. inspect and of

you some that of delay. have So,

the services, of just contractor not equipment, lot of well. a demand up cost for rates the everything hour as else moving and per but have You the is

it. say for of that would lot I overall a So, accounts

additional You are also worth that living individuals, using they are to there high those some have mostly and net would accrue, is expenses -- say liberally. I because tend

Peter Zaffino

a out, is there were one a we insureds. lot able as at which to the was year, I thing is points It -- being that of just wasn’t there of assessing of in something And one current accident was when different, demand inspect, Mark the wasn’t the elements physically, just to would and first amount mudslides, it’s of look huge loss, then, surge. that assess not the then some of at the add quarter. components just within the it, in of you looking all the all get able add different in other

we throughout the So, we progressed much got as better year. look a

Brian Duperreault

are and record. Yes. I’d the our abilities properly, I them understand price what to looked track say CATs pretty when that a at got good we’ve

think this a with regard insureds. the this and anomaly, just situation and loss think a an particular bit to it’s unique is of I I

Next question?

Operator

go question from move to ahead. next Morgan Please Stanley. Kai our on from Pan We’ll

Kai Pan

question first is My on capital management.

trading of your Given XX% capital? the just attractive deployments of back stock buying is to value, do more versus stock your at book find you it other

Brian Duperreault

bought million price we stock earlier, previous was around $XXX mentioned I the quarter; Well, in XX. of

So, I’d it that say, put let’s this compelling, price is pretty way.

Operator

go Please We’ll ahead. move Gallagher Evercore. to on Tom with

Tom Gallagher

had And true-up much the can it. current year much did this pick in -- strengthening? I think on that How affect on accident some XQ? you was? Can you And also, comment comment XXXX how excess you rate negatively in reserve loss you do How that and XXXX casualty on line now? much need XQ think

Mark Lyons

which at that There them already wraps, a that losses that, Yes. has relates have I the year emerge. couple was area or to the CD work been focus, of was work look and factors mean, because by you policy of done. on the one of and really on poor the to

occurring So, ‘XX, accidents we anticipate years of in those in some those ‘XX, policy in from ‘XX.

book up, ‘XX, for and some ‘XX that. with in ‘XX expect a causative more more that’s drift on ‘XX, the in of you’d and and shrinking so which So

Excess also fairly volatile in more of of them include with piece cycle. will call line a where we a balance, made associated cycle cycle. are casualty adjustments, the it. underwriting I’ll And on on business some, market that’s we ‘XX, the is which the extreme So, underwriting think and we’ve

some would key exposure, set has underwriting we more and materially. a on that. ‘XX and been auto coming small one moving ‘XX say, attachment I lead of we’re the some made this though. of There is have of respect. And So, auto that some and is exposure would adjustments in strategies that points That lastly, reflecting policies in umbrella

Brian Duperreault

Yes.

with I think reducing And we mentioned actually very that I think, Peter to excess the to in amount. earlier mentioned are a our at limited that, margin the in we construction, point, in mentioned getting respect that general. we’re increases believe just this he appetite -- Mark business

Operator

move Please our question We’ll Meredith to Brian from next on from UBS. ahead. go

Brian Meredith

into the insurance then, underlying are to going a Yes, and all loss we any ratio been a current reinsurance to in expense in I year, discussion the there. the in there discussion that? the the was improve of the follow-up to loss next Because, that, such Mark, are quick we been going things. a I has so improving has of guys’ operations? ratio. lot on basically see third just not the changing think year Brian, profiles And going pick assume going follow-up the general When development or much your loss lot loss in ratios quarter forward. limits a

Brian Duperreault

we Mark do I’ll Let see one is bit and margin talk a quarter. have loss which think ratios the the third improvements. Well, When I seen about let me in that it? about other is answer first, Mark talking the we piece, little already.

That’s in these it. same that the I’ve out an are may the no would but we’re changes said more play start Mark is want to expense, to we underwriting numbers. this into about believe I A taking it place, is, think And going get actual see that next we to position. year. before And profit So, of that lot I and mentioned question immediate. support

don’t this going doing -- took think optimistic right were to long-term mean we don’t that going adjusting way, show But, we ratios go that to approach not we’re as taking to So, back start results see upward to to we take That’s improvement too early. place. that the because want sure and place a improvement loss not more down adjust some we’re to actual themselves. have little to we’re is a make we the cautious we reserves, that there the

understand that’s and we’re to there how not it But, So, just underwriting out. that about see to coming great have quarter? do an be Mark, you expect position, great profit. one. from but play we’ll to in we we a want talk do XXXX the profit third to move a a going And to one, you going

Mark Lyons

third from Sure. your Thank total just with the one factors emanating at XX which ratio XX level then, XX look direct loss year first quarter. all But, you. I the line. accident causative the basis the current pieces. basis if answer you the you is of through the the year GI There by points have product two for Brian, points; of I it true-up quarter, of in catch-up, think in question will, the there more in was mentioned, accident accident points was quarters two to a to impact basis was

XX total. So, and plus XX; so, XX it’s in

Operator

from Bank question next our Jay Please take from of We’ll Cohen America ahead. Merrill Lynch. go

Jay Cohen

answered. of Most Yes. were my questions

one. off earnings the Just Legacy have? you that one give the some impact last that can will of us of Selling business, part sense

Brian Duperreault

that that? But, we’ve do arithmetic XX% X% think it’s to of going you I Well, want take about a to given that around do to more ROE than fairly X%. an the question. And off. simple Sid, you is of we’re arithmetic the idea

Sid Sankaran

Yes.

in we’ve an that for you range. see think, full-year that the I are going to had ROE

interest. the it adjustment about is think the XX% the non-controlling income of for as off So, obviously

Jay Cohen

Thank Great. you.

Brian Duperreault

there because taking quarter, third that in and CAT everything [Indiscernible] we this had out.

arithmetic. I a it’s think pretty simple

next question? Okay,

Operator

from Research. on from Erik Bass ahead. our go We’ll Autonomous Please move question to next

Erik Bass

I had Kevin. a for question

Life mentioned with were a the quarter market was expectations ROE your benefits tailwind normalized trend, mortality. and in despite line was business that of with the earnings this and the in they the quarter good the well from You recent and in Retirement for equity level where favorable second below

to were third in run should the wondering, quarter, about how business? So other pieces for the the think there just rate power earnings and consider moving any we

Kevin Hogan

in mean, were quarter. other no I there third No. the unusual pieces moving

quarter some which the time, especially than we’ve to which digits our I third seen be of double much the actuarial low level the current mid for past the expectations, suggested. conditions within to returns impact, rate and that in looking the we within are current think range deposits, have run range and enjoying the I review is and premiums higher consider the in are at we really of previously pretty

Operator

next ahead. Barclays. question Gelb our Please take Jay from we’ll go from And

Jay Gelb

questions. two had I

Am The equity property, in of on near-term then, the thinking is, kind do that coming more second XXXX capable that? seeing I based a around first seem start Sid, XX% is on quarter right on beyond? XXXX achieving, AIG question level tax to what improvement overall is rate about you of am the through, a would you effective of tax rate think once fourth casualty And XXXX, XX%. I return for and imply

Brian Duperreault

one that get that you not I you. to right. last. get And, think Let’s are No, Sid will

the Well, core I got So, X% have it, that say would average the that’s return X% X% range. to to into range. be got equity. to you maybe think on that in on and a weighted we the so, -- X% the I gets we equity of -- recognize return would But rest plus got legacy and

want course, part that’s goes. to still you Legacy the Of think where tax about talk this do rate? depends it family, assuming I it’s on But, number. Sid, the of

Sid Sankaran

No. Thank you, Yes. Brian.

remember at, XX%, is at XX% the to for XX% think looking full-year as look excluding intended suggested we’re I previously simply be we to we’ve discrete. tax that

income XX%, net forecasted we be given the quarter. fourth expect catastrophes, for higher year, as for which there expectation the would lower And the is taxed so, at a

concluded quarter. we this catch-up on so, And our

XX% So, is it at be expectation. would level that approximate our

Operator

our ahead. go Newsome from question Paul take last from We’ll Sandler O’Neill. Please

Paul Newsome

on most Insurance recent or volatility, -- financial both on this equity con? volatility Life thoughts the month Any earnings pro and businesses, market

Kevin Hogan

hedge within you have and else? to we’ve As previously, has expectations. performed reported our anything Sid, program if continues perform

Sid Sankaran

No.

hedge know, equity fully we markets. think, for I as you

recent haven’t And so, hedging around market in seen the expectation we program. annuity anything our variable

of Life course terms to side Just the equity side, the and sensitivity. investment equity reminder we fair business in do and year full need value market private the that the for are Insurance plays that obviously, how hedge out options funds there there. of a see have on investment securities But,

Brian Duperreault

attention. we the think Q&A. I I for had really do lot appreciate shorter that. cut you indulgence to we going Q&A content, Listen, we’re your the all a a of than so end your on Okay. And normal. Thank little

our catastrophes. provided call, customers the employees tireless work the want our the I and end recognize affected around neighbors I Before by support to and the to have global numerous hard that world

those Our who’ve hearts been impacted. of out go to all

very So, that, with you thank much.

Operator

This for your concludes today’s presentation. participation. We thank you

disconnect. now You may

American International (AIG) 1 Nov 182018 Q3 Earnings call transcript