AIG at KBW Insurance Conference: Strategic Growth and Innovation

On Wednesday, 03 September 2025, American International Group Inc (NYSE:AIG) presented at the KBW Insurance Conference 2025, showcasing its strategic advancements. The company emphasized its commitment to operational excellence, leveraging artificial intelligence, and maintaining financial robustness. While AIG celebrated a remarkable financial performance, it also acknowledged challenges in the property rate environment.

Key Takeaways

• AIG reported a 56% year-over-year increase in adjusted after-tax income per share in Q2.
• The company is integrating GenAI to enhance underwriting and claims processes.
• AIG returned 4.5 billion dollars to shareholders and achieved double-digit dividend growth.
• CEO Peter Zaffino highlighted the company’s strategic focus on operational excellence and AI-driven growth.
• AIG’s financial strength was validated by recent upgrades from S&P and Moody’s.

Financial Results

• Adjusted after-tax income per share rose by 56% year-over-year in the second quarter.
• Underwriting income saw a 46% increase year-over-year in the same period.
• Core operating return on equity improved to 11.7%.
• The calendar year combined ratio stood at 89.3%.
• AIG’s debt to total capital ratio is at 17.9%, with an 830 million dollar debt reduction in Q2.
• The company has consistently delivered double-digit dividend growth for three years.

Operational Updates

• AIG Next, originally a cost-cutting initiative, has evolved to significantly improve company operations.
• GenAI is being rolled out across various business lines, with commercial applications expected by 2026.
• Submission counts in the E&S business have increased significantly.
• AIG is focused on enhancing data accuracy and underwriting criteria.

Future Outlook

• AIG anticipates accelerated AI implementation in 2026, driven by substantial capital expenditures in technology.
• The company plans for various scenarios based on the property rate environment.
• AIG remains open to mergers and acquisitions, with strict financial and strategic criteria.

Q&A Highlights

• John Neal’s appointment as President is expected to enhance AIG’s underwriting strategy.
• GenAI capabilities will be integrated into Lexington’s property, casualty, and financial lines.
• AIG’s strategy of being over-reinsured was defended as a means of managing volatility.
• The company sees potential in optimizing its asset allocation for better returns.

For further details, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - KBW Insurance Conference 2025:

Mario: Okay. Good afternoon, all, for our final session of the day. We did save the best for last. So I want to introduce Peter Zaffino, CEO of AIG. We’ll start with some introductory comments, and then we’ll jump into Q and A.

Peter Zaffino, CEO, AIG: Thanks, Mario. Good afternoon, everybody. I just wanted to take a few minutes just to make some introductory comments, and then I look forward to spending some time with Mara and some of the questions from the group. It’s great to be back here. We appreciate the opportunity to spend some time and present to you.

In many ways, 2025 has been a real pivotal year for AIG. One of our defining moments, we talk a lot about it, was at Investor Day in March. We set out a few key objectives there, which is really important for this year as we really want to put the past of AIG behind us. Want to spend quite a bit of time providing more details on the company we are today, and I’m sure we’ll talk more about that over the next hour and demonstrate the positive impact, the work our colleagues have done to reposition the company. We highlighted and want to emphasize a few very important things, which were our underwriting culture.

We’ve developed operational excellence, and that’s been from driving end to end process to digitizing workflow to what we’re doing today with GenAI and of course, executing on a very disciplined capital management strategy. All of that has given us a lot of financial and strategic flexibility for today. We also wanted to like introduce not capabilities, but more of what we were doing in terms of Gen AI. And Ashley has received a lot of attention since Investor Day, and I’m sure we’ll talk about it today. We outlined ambitious long term financial targets, and we remain on track to achieve those.

If I could spend a few minutes just highlighting the second quarter. Adjusted after tax income per share increased 56% year over year, and that was driven by underwriting income, which increased 46%. Our core operating ROE increased to 11.7% in the quarter, and our calendar year combined ratio was 89.3%. So we thought that was an outstanding result for the second quarter. For the first half of the year, our EPS growth is tracking slightly above of the three year objective we talked about at 20%, notwithstanding a lot of cat activity, the wildfires in the first quarter.

So we’re really pleased with the progress we’ve made through the first six months. We also returned 4,500,000,000 of capital to shareholders year to date through the second quarter and delivered a third consecutive year of double digit dividend growth. We also reached another significant milestones. S and P and Moody’s upgraded the financial strength of our insurance company subsidiaries. And it’s worth noting, this is the first upgrade that AIG received from Moody’s since 1990.

We had to go back quite a ways. And so that was quite an achievement for us. We retired an additional $830,000,000 of debt in the second quarter, now have a debt to total capital ratio of 17.9%, which is one of the best in the industry. We did talk a lot about on the recent earnings call the rate environment. I’m sure we’ll cover it today.

But generally speaking, property has had headwinds in 2025. Casualty has actually been strong, particularly in excess casualty. And Financial Lines has finally flattened out after a period of rate reduction. Property, I spent a decent amount of time talking about actually what are the components of property pricing and how you actually derive the rate making and how do you drive profitability? What’s the impact of reinsurance?

How do you look at AALs? And wanted to make sure that we emphasize the level of diligence that we do in making sure we have a fully loaded cat cost and all of our property costs are very transparent, and we know how they move depending on market conditions. So we’re well positioned to manage this environment, focus on growth opportunities, but most importantly, underwriting profitability. Before I shift to Q and A, I just do want to share a couple of comments on Gen AI. It’s been a key focus for us.

We want to embed it into our core business and end to end processes supporting underwriting and claims. The early results have been very promising. At Investor Day, I spoke about what were really aspirations. We had some pilots. We had some rollouts.

But quite frankly, getting some of the tech leaders to join us and talk about what they thought was the work that we’re doing. But in many ways, we’ve actually made more progress than what I thought we could do from when I outlined this originally in March just because the rollout, tech advancements have been significant. And so we’ve rolled out a few pilots that was started years ago, but a lot of companies are still testing. We’re actually live now on things. And so I think that was important to mention.

We started to roll out a component part of our financial lines. And within the year, we’ll be rolling out our E and S business, which is Lexington, and then we expect to deploy more of the commercial business in 2026. I do want to leave you with a sense of how fast things are moving. Some of the tech companies and hyperscalers are really driving the pace of innovation at a significant level. Their commitments are substantial in terms of CapEx.

I mean combined, Microsoft, Meta, Alphabet and Amazon announced their intent to spend over $400,000,000,000 in CapEx on AI just this year. So I think in 2026, we ought to see this acceleration in terms of not only what we’re planning, but new horizons as we start to roll all of this out. So those are just some of the highlights. I know coming after a second quarter, maybe not a lot of new information, but I just wanted to emphasize all the progress that we’re making, executing incredibly well, momentum into the second half of the year. So that’s what I just want to say for prepared comments.

And then, Mary, maybe I’ll just transfer over to you for some Q and A.

Mario: Perfect. And yes, and I should point out two things. One, that Peter providing an update every year. And every year, the update is dramatically beyond where it was the prior year. So there’s been a tremendous amount going on there.

Related to that also, I think my question list is going be all over the place because, again, there are so many things going on at AAG that are worth talking about. So let me start with one. We spent a lot of time talking about talent and recruitment. You recently announced that John Neal is joining AIG as President. What does the President of AIG do?

And what should we, on the investment side, expect from John?

Peter Zaffino, CEO, AIG: Well, I was the President, so I’d say we actually did quite a bit. So we’ve got some Well, what’s left? John is one of the top executives in the insurance business. I’ve known him for a very long time. Actually, I was at Guy Carpenter, I used to work with John before he even took over QBE on a lot of the reinsurance that is.

So I’ve known him very well for a long period of time. He’s incredibly capable. He’s had some unbelievable experiences, whether it’s running QBE or most recently running Lloyd’s. I talked to some of the investors earlier today. I think there’s not a lot of companies that are really global and have a broad footprint, but John actually has a lot of global experience.

So he’s going to fit incredibly well within AIG, strong track record of underwriting strategy. He’s kept incredibly relevant with all of the moving trends and has a tremendous following. So he’s going to give us a lot of bandwidth in terms of the path in which we are going to continue our underwriting journey, but he can do so much more than that. He’s really well known. So he’ll be working with a lot of our stakeholders, whether it’s investors, regulators, reinsurers and expect great things from him.

And he’s very additive to a very capable team that we already have. So we’re anxious for him to join us later

Mario: And it’s November?

Peter Zaffino, CEO, AIG: Technically, it’s December.

Mario: I’ll leave it at that. Fair enough. That’s good enough for my perspective. I’m good at getting people to work before they’re on the payroll. When you talk about so AIG next, another success in terms of like getting ahead of plan, both in terms of time and amount.

You talked about not just cost savings, but also increasing internal efficiencies where you could process business faster. And some of this may get back to the Agenetic AI, but can you update us on where those efficiencies are playing out?

Peter Zaffino, CEO, AIG: The original plan for AIG next was actually mostly just cost takeout. We actually had said on some of our earnings calls that it’s not going be like AIG two hundred. We had 10 different operational programs and the baseline for AIG two hundred was to improve the company. This was about getting rid of redundancy, getting a parent company expense structure that fit with the size of the organization that we are. But we had some very terrific observations and insights.

Actually, Mia Tarpe, who’s here today, actually led AIG Next. And we saw halfway through that there’s a lot of things we can do on the operational side that can improve the organization in addition to getting costs out or costs into the business. And that was connecting a lot of the functions, better end to end process, allowing opportunities for better insight on data. And also, what we’re able to do on Gen AI today is based on the end to end connectivity of the organization. And a lot of that was done through AIG next.

So it ended up being a continuation of AIG two hundred, which was terrific because we had originally just planned for cost takeout, but we were able to improve the company significantly during that period of time.

Mario: Okay. And in your introductory comments, you talked about Agentic AI being expanded to other product lines. When you said Lexington, is that every line of business that Lexington writes?

Peter Zaffino, CEO, AIG: Yes. It will be predominantly it may not be every single line, but it’s going be the property and casualty, which is and financial lines, which will be the predominant portion of it.

Mario: What are the data points that you track to demonstrate that it’s working as expected?

Peter Zaffino, CEO, AIG: Well, we focused on and again, I’ll try not to make the answer too long. But when we had embarked on this journey, it was all about how do you take in data structured and unstructured? How do you actually use data sources that you’re not using today? How do you equip an underwriter with more underwriting criteria? And how do you reduce the cycle time substantially to be more efficient and to be able to look at submission flow and workflow to be able to drive growth?

And we didn’t spend a lot of time on this at Investor Day, but we’ve been doing this. It’s evidenced through what we did with Blackstone and Lloyd’s in creating a special purpose vehicle for our own reinsurance is how do you allocate capital and optimize the portfolio. So like how do you connect all of that together? Lexington became a very big opportunity for us because we showed that the submission count and it’s still happening in E and S. Yes, there’s been a rate environment in property that’s coming off.

But quite frankly, it’s been coming off in a lot of property market admitted as well. The submissions are still flowing in through non admitted and through excess and surplus lines. The volume is very hard to handle when you start getting into hundreds of thousands of increases submissions for our own business and whether we were not efficient at the beginning or where we are today. I don’t spend a lot of time thinking about that. What I do know is we have 10 times the amount of submissions as we once did, and you’re not going to bring in 10 times the amount of underwriters.

So and then you look back to what’s the bind sort of submitted ratio, and it was 6%. Like so it’s not as though it’s 20% and it’s like, you want to get it to 25% or 30 that might feel hard. When the volume started to increase, when the business started to get more demand, our buying ratios went to 2%. And so yes, maybe we’re more selective underwriters, but 2% of what you’re seeing seems largely inefficient. And we felt that getting that data and getting things more prioritized and having the underwriting cycle time decrease is going to allow us to grow significantly in that business.

So that became the next evolution in terms of scale, which we should be able to have it done before year end. And as we said, if we can just get back to our old buying ratio, it’s north of $1,000,000,000 of growth. And I think that, that would be a low bar for us, what I think we can do over time.

Mario: Okay. Fantastic. Are there bottlenecks in terms of rolling it out even more broadly to every AIG region, every AIG line?

Peter Zaffino, CEO, AIG: I wouldn’t say bottlenecks, but how much change do you want to go through in an organization? I think we’ll be very aggressive in terms of the rollout in 2026. What you have to realize is that even since March, the companies that I mentioned, not adding Palantir, Anthropic, other companies that are pivotal to our partnerships, they’ve accelerated their capabilities in the last six months. It’s unbelievable. And how they can extract data, where they can extract it from, What we’ve seen is a lot more discussion around agents or individual large language models that can do specific tasks and how do you actually roll that out.

So I’m very optimistic that the rollout does not need to be as linear and that you can do it in multiple parts of the business at once. And that’s what we plan on doing in 2026. You do need look, we’re not having it make decisions for underwriters, but you need the underwriters, if I would say not a bottleneck, but a significant amount of heavy lift work is if an underwriter is looking at 100, 125 pieces of data, what are those? And what are the best sources that you can get in terms of property data or casualty data or financial data? And one of the, I think, significant advancements that the large language models have made is that you can now find out where the source is coming from.

So in other words, you get financial statements that came from a rating agency or it came from something that’s credible versus something that may be scraped that you don’t know where it came from. And that’s where there was more hallucinations. So I think the data accuracy is better. I think the underwriting criteria is better. But the issue, it’s not a problem, it’s an issue to be aware of is that how much of these large language models become intuitive and how much further do they go in an organization than what you’re asking them to do.

If you start to implement a lot of different large language models at once, that ontology gets super complicated. And so we’re working through that as well to make sure that we understand the rollout. Again, it’s not making decisions, but making certain that the organization can catch up to how we want to operate in the future.

Mario: Okay. Fantastic. When you look forward five years, this is maybe not a great question. Can AI make underwriting decisions not today in five years?

Peter Zaffino, CEO, AIG: I think they will be able to. What type of decisions and what you want them doing is really the question. But I like even today, a simple example would be looking at sprinkler systems. Is it water? Or is it suck the oxygen out of the room?

Or is it foam? Or knowing how to train large language models as to what’s a better outcome on some of the subcomponents of underwriting, I think, will be very important and very helpful.

Mario: Okay. So to me, that sounds like maybe the prioritization that you talked about, where the best submissions are at the

Peter Zaffino, CEO, AIG: top, that gets more refined. Submissions at the top and information that could be more binary in terms of how you train an agent, I think, can be very helpful to the underwriting process.

Mario: Okay. Fantastic. You also mentioned the rating agency upgrades. Practically speaking, there’s nothing I don’t see anything wrong with those. What difference will those make?

Peter Zaffino, CEO, AIG: I mean for our business, probably nothing. I mean but from a perspective of this journey of bringing all of our stakeholders along, we had to get an underwriting portfolio that was one of the worst performers to get to a top performer. We had to get limit management. We had to develop operational excellence. We had to bring we were getting no ordinary dividends out of our subsidiaries because the regulatory environment was one where AIG is just disappointed.

So it just it was kind of the last like stakeholder that had not sort of voted for the change and the improvement that we made. And to see that affirmation and then going back and saying, like in 1990, was a trainee at The Hartford. There’s no such thing as cell phones, voicemail. The world was different back then, so that’s a long time. And so it was just more of symbolic of we’ve come a long way.

People are proud of it. And it was just another last sort of vote in terms of, yes, we believe in all the things you’re doing, and we believe in the financial strength of the company. So it was a good moment for the company.

Mario: Yes. No, there’s I didn’t in any

Peter Zaffino, CEO, AIG: way But no, in terms of trading, it won’t matter.

Mario: But we’re going

Peter Zaffino, CEO, AIG: to keep telling everybody, we got upgrades since 1990. I liked it.

Mario: It’s a great line. One okay, so we’re mean, heading to Monte Carlo soon, start talking about reinsurance. AIG buys a lot of property reinsurance. And we’re in a presumably softening part of the property reinsurance cycle. So I know the timing of this question isn’t great.

But is AIG over reinsured? Are there ways of optimizing that? Or do we take advantage of changing not changing, declining pricing to further benefit shareholders, benefit the company?

Peter Zaffino, CEO, AIG: Over reinsured, under reinsured, it is a strategy and a philosophy. Each company has a sort of a different view. If you’re running a business in a global business that is running in the low 80s combined ratio with what would be technically considered a lot of reinsurance. I like that strategy. I like the predictability of volatility containment.

And I don’t like to be at the whim of what happens with the weather or major hurricane or wildfires. We have a risk tolerance, and that’s how we set up the entire company. When the market started to change a lot a couple of years ago, we stuck really hard with lower retardions because, again, it was within that volatility containment. And you either load the cost in for the reinsurance or you don’t. And so my own view is that and I tried to break this down because I get a lot of questions around this in the second quarter, which was how do you actually break out the components of property.

And I have this philosophical argument, I’ll stay away from it, but like why would reinsurance costs be that much more expensive than retaining yourself? I mean you could take there could be a couple of philosophies. One is, well, I’m not going to take a single year view, I’ll take a five year view. Okay, well, that’s been wrong each of the last five years to the like it’s been higher than what would have been predicted. So that doesn’t seem like the right way to play it.

There’s a cost of capital issue. Somebody has too much of a margin, like whatever, that’s in the eye of the beholder. But my view is this should be like fully loaded into the cost. And so if you think about a market that we’re going into, what I try to break out is that a reduction in reinsurance costs benefits us because that is embedded into our product. If you just funded it net, it’s an AAL, you don’t reduce your AAL because the reinsurance market is going down.

That’s your expected losses, and it has to stay the same. So if the rates are coming down and you don’t have anything to offset that, like reinsurance, like that’s not coming down commensurate, then you have to have margin compression and a meaningful amount of margin compression because you still have the same cat net, you still have your same risk net. And if you’re getting total premium coming off the top, well, that has to still fund that. So it goes really into your attritionals. If our sort of cost of goods sold, I call it, is that of reinsurance is coming down at or more than the original pricing, well then really, I’m only focusing on the attritional.

Same thing on the risk is that then it’s much more manageable because that cat cost, which would be self funded with AAL otherwise, is coming down. And so we get the same benefit for lower cost. And so I think like in a market, look, I don’t root for an active cat season or benign one. We manage through the cycle. But if the reinsurance costs are going go down, that benefits us and doesn’t put as much pressure on pricing as it would if you kept substantially large nets.

Right.

Mario: Okay. No, that makes a lot of sense. This is only tenuously related to that concept. But I’ve had this thesis for a while that when we look at lines of business where pricing has gone soft over the last few years, so D and O, cyber, most recently property, there’s been a suddenness to those decreases compared to past cycles. And I know it’s a mistake to assume that cycles would be identical, they’re not.

But how if that premise is true, that cycles manifest themselves faster, how does that impact your ability to plan for the consolidated AIG?

Peter Zaffino, CEO, AIG: You have to look at each line of business on its own merits. And again, the topic right now is property, and you have to look at the cumulative effects of that. And so you have to have a plan there. I mean in other words, with property, like the cumulative rate increases have been north of 100%, Combined ratios have been excellent. You can look at for us, we have so many different points of entry into the property market, whether it’s through admitted in The United States or non admitted through The United States or through Europe or through Asia.

We could hub in Singapore. We see it through Lloyd’s. So there’s so many different places. And you want to take a look at you don’t want to imagine as an index, but there’s opportunities in different parts of the world at different times. And so the planning is really what’s going to happen if the rate environment is going to be down like we’ve seen in property.

Well, okay, what kind of margin do you have? What type of combined ratios do you have? And can we manage through it? I think you also have to take a look at where you are in the market. Are you lead in pricing?

Are you setting the terms? Or are you just capacity following outcomes? That becomes a different outcome. And then you have to have a point of view as to how long you can sustain that. So I think, look, the property market more aggressive in terms of some of the pricing coming off than we would have thought at the end of the year?

Yes, it is. Dramatically, no, but a little bit more. And so we will see how it plays out through the rest of the year. But we have perhaps a different plan in 2026 if the rate environment continues. And financial lines is the same thing, which is we reduced our writings when they started to become cumulative rate increases in commoditized layers, high excess, mid excess, and we just started a nonrenew business.

And there will always be pockets of where there’s opportunities for growth. We’re seeing that in casualty now, non admitted as well as admitted. And I think some of the specialty classes have had some pressure on pricing. But again, the same dynamics as our property book, which has had really strong combined ratios. And then you have to be prepared to grow when there’s opportunities that exist in the marketplace from either dislocations or opportunities in different parts of the world and geographies.

So that’s part of the planning process. And I think we’re in a really good place in terms of understanding what the economics are for each of the lines of business that we trade in. Right.

Mario: Okay, fantastic. I do want to look around the room if there are questions. I want to make sure that you’re getting the information that you need out of this session. So please raise your hand if you do have a question, and we will get the mic to you. In the absence of that, so another large commercial CEO has suggested and who?

Evan. I need to know. And suggested that bigger companies are positioned to grow faster. And the backdrop to this question is we’ve seen huge market share concentration in Personal Lines among the biggest companies, some of whom became bigger because of skill, but that dynamic has played out. We haven’t really seen it in Commercial Lines.

And the suggestion is that because of a number of factors, we should see that basically better growth at bigger companies. Are you seeing that? Do you expect that? How are you addressing that potentiality?

Peter Zaffino, CEO, AIG: I think over time, I think that will happen. I don’t know that we’re seeing it right now because, again, it’s always what you see in this marketplace where either some MGAs or capacity that has come in that needs premium, needs volume until something happens that tempers a little bit of the growth. But I think over time, scale is going to matter significantly, in some ways more than it ever has, whether it’s balance sheets, ability to have diversified growth, quality and expertise in underwriting to be able to scale a business. But and again, I’m trying not to make every answer about Gen AI. But I think in three years, businesses that have invested, the pendulum is going to push those much further faster.

And those who have not been able to ingest and be able to accelerate cycle time will be, I think, very much disadvantaged. And you have to have scale to make those investments. You have to have expertise in order to be able to operationalize it. And I think larger companies with scale are going to benefit from all of that significantly.

Mario: Okay. When you look at your competitor base, and I’m asking this because I don’t get the sense that you compete a lot with smaller regionals writing small standard commercial policies. How do you see your advantages playing out there?

Peter Zaffino, CEO, AIG: The footprint for every large insurance company is a bit different. And so it’s in pockets. I mean, obviously, in London, it’s a big specialty. We’re the one of the world’s largest specialty underwriters. And so like we’re competing with Lloyd’s, we’re competing with other large insurance companies that may have some expertise in specialty classes.

But I think we are the most sort of prominent amongst organizations in terms of size, expertise, I believe that. In The U. S, it’s a little bit more in terms of how we scale. We’ve done an amazing job with Lexington in terms of its relevance to the marketplace and size and scale. So we have some formidable competitors there.

But I do think that there’s a way that you bifurcate that with size, expertise and ability to grow versus more commoditized. It’s not all large players, but there are specialty insurers that compete in that area that really differentiate themselves, and Lexington is one of them. I mentioned property and the many ways in which we can access property from so many different parts of the world. We’re a very different business in Asia. I mean we’re the world’s largest nondomestic insurance company in Japan, where we haven’t fully seen all of the benefits and I think potential of that business with some of our personal insurance, particularly A and H and some of the digital investments we’re making there to fuel growth that will be on the come.

And India, I know it’s not a consolidated business, but it’s a big business and one that we think has one of the biggest growth potentials in terms of value, size, relevance. And also when it gets out of its domestic sort of capacity, meaning it can actually do global business through the network of AIG, that can be very advantageous for us as well. So like we compete with a lot of different companies and a lot of different geographies, but really, I believe, bring expertise and value differentiation in the markets that we trade.

Mario: Okay. That is very helpful. You’ve talked about, in the context of M and A, certainly an openness to M and A with credibly strict hurdles for financial, cultural and strategic upside. So the financial and cultural, I think, would very much depend on a potential acquisition. Can you talk about where there could be strategic advantages to AIG from M and A?

Peter Zaffino, CEO, AIG: Well, I think we’ve demonstrated through a lot of the work that we’ve done in restructuring the company that we would know how to embed an organization, deal with the operational complexities and get that synergies that needed to be realized very quickly, but also embed an organization to be able to make certain that they are more benefited from being part of AIG than not. And that’s dependent on a lot of different things. I talk about like there may be segments we’re not in, in SME, geographies that are additive to our global network, more scale in businesses where we already have size. A and H would be a great example. If we could find something that we thought was high quality that we could bolt on to a big business that’s profitable that we could accelerate, that would be something that’s very additive.

But I think that there’s a lot of I keep mentioning a lot of strategic and financial flexibility. I want to be patient, which doesn’t mean wait forever. But I want to make sure that whatever we do acquire is strategic, is ROE accretive, but also is a better fit for them and for us being together. And I think depending on the market and depending on the challenges of growth that may come earlier or later depending on what happens with market conditions.

Mario: Okay. So if I can just not respond, but a follow-up to that. Should we think about that strategic benefit as making AIG better or AIG making other businesses better consolidated within? Both. Okay.

Peter Zaffino, CEO, AIG: That would be our hope.

Mario: All right. One issue that’s come up a lot, and I like this issue because it gives me the opportunity to talk about something besides pricing. And on the sell side, that’s 95% of my conversations, is speed of processing for smaller applications. And I’m asking this question really in the context of Western World. How does it compare?

And what are its prospects for developing further competitive advantages on speed and accuracy of responsive brokers?

Peter Zaffino, CEO, AIG: So Western World, for those who don’t know, is part of our excess and surplus lines business. It really services the small end of commercial. And it’s done remarkably well, whether it’s been new products, its speed to bind is very impressive and developing a risk appetite, but also an ease of doing business in terms of ingesting data. We know what our risk appetite is in those businesses, and it’s actually penetrating into a market that we really haven’t had much presence. So I think the framework of that business is great.

The strategy is evolving, and our execution has been very good. And so sometimes the submission count there and the flow and growth has been tremendous. But I think in this world that we’re in and that we’re going to be competing within the future, it’s only going get better.

Mario: Okay. Fantastic. And that’s again, you said you don’t want to use AI as the answer to everything, but it’s going to be

Peter Zaffino, CEO, AIG: have AI broad can help decision making there a little bit more just because it’s much more small commercial volatility around decision making is not going to be great. And so hopefully, we’ll be able to advance it. But even today with the technology we have, it does serve our distribution very well because they can bind things in minutes, not and so like getting to seconds doesn’t really matter, but making sure that we can continue to enhance our ability to expand risk appetite when we want to or focus on specific industries and be able to target those submissions better.

Mario: Okay. Fantastic. I do want to scan the room again just to see if there are questions. I don’t want to make sure I’m not overlooking them. Quick question on underwriting and claims talent and maybe other segments that I’m not thinking about also.

But whether we’re talking about the relentless formation of MGAs, whether we’re talking about brokers looking for talent, whether we’re talking about underwriters, there does seem to be an elevated battle for talent right now. And I was hoping you could talk about where AIG participates. What do you do to attract, to retain and from a different perspective to develop talent so that you have superior underwriting and that persists or cleanse handling?

Peter Zaffino, CEO, AIG: Already said. We don’t have the same dynamic as brokers do where teams get lifted out or there’s significant war for talent in terms of groups of people because I think underwriting is different in that maybe business travels with brokers, but it doesn’t travel with underwriters. So think you have a real opportunity to develop the culture that you want in underwriting organization. We’ve done a remarkable job with just terrific leadership that we have within AIG, great practitioners. We had to add a lot of underwriters in twenty eighteen, nineteen, 2020.

We have a tremendous training program. And so getting out of university into our analyst program and then getting individuals working through the overall company has been tremendous. And so we supplement what we bring in from the outside with talent that is developed within AIG. And so we’re always looking for ways in which we can train and advance and enhance the skill sets that we have within the organization. And that means actually training to where the business is going, not where it’s been.

But yes, we’re always like we’re always going to be in the war for talent, retaining, attracting. Look at AIG, I don’t fully understand it, to be honest, is like it gets the headlines for everything. I mean there’s been people that have left them like, who is that? Like I mean and it just gets headlines. And so our attrition has been very low.

Our underwriters are very attractive in the industry just based on the experience that they’ve gotten in a sort of once of a career opportunity to work through a turnaround and we underwrite portfolios, be part of that. But I’ve been incredibly pleased with the quality of what we have, the culture we’ve developed and our ability to attract talent is tremendous.

Mario: Okay. And that attraction flow, if that’s right word, how does that compare not to five years ago when you really needed to rebuild the bench, but like two or three years ago?

Peter Zaffino, CEO, AIG: Have been very selective because it’s really important now that we have there’s different skills needed to re underwrite a portfolio than to grow a portfolio or to be in an underwriting group that’s not going through that level of rapid change. We’re always looking to fill in technical expertise depending on like in London and Lloyd’s, there’s different classes of areas where we want to compete that we’re adding and supplementing talent. But generally speaking, it’s very specific as to knowing positions that we want to develop. I mean, look, AI is a big one right now. It’s bringing in people from different industries.

We just brought in somebody to be the Chief Digital Officer, Scott Hallworth, who is got a lot of banking experience in terms of being a Chief Digital Officer, but he was the Chief Actuary of Travelers. So coming in with a totally different lens of financial services, but being grounded data and how our business operates. That’s been a tremendous and will be addition to the organization. And so finding different capabilities that complement where we are today is a big part of what we’re doing. Okay.

Mario: And no $200,000,000 signing notices? No. Okay. Fair enough. No.

On the MGA side, you guys do have a little bit of delegated underwriting authority. How do you manage that? I know I think there’s investor concern that’s probably a little exaggerated right now, but it does require a slightly different administrative skill. I was hoping you could talk about

Peter Zaffino, CEO, AIG: the AIG approach. Yes. We don’t do a ton of delegated authority. That is not a priority. You’re right, it’s a different requirement in terms of skill set.

They now Glatfelter was a company of a great example where they were writing on behalf of another insurance company at the time, but like they had their own capital. They consider themselves an underwriting company and their track record proved that. But they also had a distribution in terms of voluntary firemen that was and you couldn’t really penetrate it. So do you want that expertise within the organization? So that was an example of an acquisition.

I think we use the same criteria for where we would do MGAs or MGUs, companies with experience, track record, skin in the game, alignment in terms of underwriting outcomes, not looking to drive top line growth at the expense of underwriting profitability. And you’d rather do it with fewer than sort of spreading it out and watching it very carefully, to be honest, because that can and it’s happened to AIG and many other companies in the past where that can go pear shape pretty quickly in a market where you don’t have a real accurate view of what the accident year loss ratios are, the growth and the development of the book of business. So I think there’s been a lot of delegated authority. In my view, it’s going end in tears over time for some of the organizations. But that unfortunately, our business takes a little bit of time.

Mario: Right. I mean that’s I would argue that, that’s true even on the traditional side with maybe slightly misaligned incentives.

Peter Zaffino, CEO, AIG: Yes.

Mario: I want to spend a little bit of time focusing on reserves, really from two perspectives. We did have some older accent you’re strengthening in the second quarter, and I want to get a sense as to your comfort for other legacy mass torts, for lack of a better word. And then one point that I think got under that’s been underappreciated is the fact that when we look at your quarterly results, and this is true even in the second quarter, there’s favorable development, and it’s favorable development besides ADC amortization or ADC GaN amortization. So I want to talk about those two. I know they’re somewhat contradictory, but they are two different realms.

Peter Zaffino, CEO, AIG: We’re very focused on making sure that we continue strengthen the balance sheet. We take a very conservative view on reserves. I wouldn’t read into the back years at all. Nothing emerged. There was nothing that said we have to do something on mass tort.

We decided to do it and have built some conservatism into that. We’ve been very focused, and I’ve said this on the first quarter call, where we’ve built in some margin and some of our accident year loss picks, not from emergence, not from concerns on the accident year loss ratios, but just being conservative in terms of our view of the current environment. There was the ADC amortization, a little bit of release. But again, I think that was all very orderly. We’ve been doing it quarter after quarter.

And Keith is spearheading a little bit of more of getting away from these DVRs and looking at reserves in a more thorough way every quarter. Yes, there’ll be deep dives in certain quarters on lines of business, but just getting a much more balanced view throughout the year instead of waiting for the third quarter or waiting for certain quarters for certain lines of business. We’ve been working hard on that since the end of last year. And I think it’s just patience and making certain that we are watching emergence of each of the accident years. We study Schedule P probably, and I don’t want to compare us to other companies, but what has happened to the industry of whether it’s other liability or other areas where there’s long tail sort of claims activity and watching that emergence and watching our own.

I mean, you know our absolute loss ratios are so much higher because they needed to be based on some of the underwriting that happened in the past. But we are looking at a variety of different metrics to make sure that we’re being conservative and observant of what’s happening in the industry.

Mario: Okay. Fantastic. And again, I want to look around just to make sure that I’m not overlooking anything. One, there’s some new occasional news articles on a shift of longer tail casualty policies to more of a claims made basis because it’s not that much in the short term that the industry can do about social inflation, but you can reduce the tail size, which would limit the compounding risk associated with that. How tenable is that?

How much of AIG’s book could and should be written on a claims made basis that hasn’t been so far?

Peter Zaffino, CEO, AIG: Well, I mean, you pointed out the benefits of doing claims made. I don’t know that in the segments that we trade in that clients are going to be as receptive to claims made as we may like. And certainly, when you’re underwriting an occurrence form that has like a really long tail, that making sure that you have the appropriate pricing for what could be loss cost inflation that may or may not be contemplated today is, of course, a concern with the class. What you do there is you focus on terms and conditions, you focus on attachment points, you focus limit deployment. We have again, not every answer is reinsurance, but we’re only willing to take a certain amount in that depending on the gross limit deployed, which is much smaller than what the historical portfolio would look like.

So some of that emergence became from, yes, maybe it wasn’t great underwriting, but it also was significant net limit retention. That gets you in trouble when you have sort of vertical exposure and hadn’t fully contemplated. So I do think that there are going to be pockets of industry classes that we will push pretty hard for claims made. I don’t think it’s going be a predominant trend within the industry. Some companies are trying to put stuff together.

I don’t know what the take up is. I don’t think it’s significant. But you have to really manage that through underwriting with the terms and conditions and focusing how much limit you’re willing to deploy. And are you following someone we lead, we set the terms, that’s really important.

Mario: Okay. No, that’s And I

Peter Zaffino, CEO, AIG: think with our reinsurance, Julien, too, is not that I sat up here, whatever, five years ago, you’re two to three years into it, you got to play it out. But like we’re like in year eight or nine in terms of taking low nets within casualty. We started sort of in 2018, 2019, but we also did the unearned portion of the book. And so we just don’t have big attachment sorry, big retentions. We have lower attachment points.

And so as each year goes on, you’re going to get more and more confidence in terms of how we think about ultimates, certainly on the back years, but even on some of the more recent years.

Mario: Okay. No, that’s very helpful.

Peter Zaffino, CEO, AIG: I mean, I’m speaking to an actuary, so

Mario: it’s dangerous, but But that’s my yes, no, we’re trying to get the sense, and I think it’s been pointed out that there are a number of periodicals focused on the insurance industry. And sometimes it’s tricky to filter out where they have these stories, is this a real shift or is this a one off? So I think that is Well, very like you got

Peter Zaffino, CEO, AIG: to do the work. Like you look at companies again, you go through Schedule P and see whose loss ratios held up from their original even go out like whatever, go through 2015, start of year two, say everybody got year one wrong, 2015, 2016, like you can see companies that traditionally get it wrong. Like and you see companies that traditionally get it right. Like and so I think that’s important in terms of experience, looking at triangles, understanding, again, limit deployment and potential ultimates. And it’s a complicated lie.

Mario: And not to jump too far afield from what you’re saying, but one of these analyses I’ve been working on, and this is not going to come as a surprise to anyone, is that the best predictor of whether a company will have adverse development on accident year X is if they did the prior year. So for me, it all fits into why I don’t trust book value as a valuation metric. But your point is something that I’m more than happy to say I’ve seen.

Peter Zaffino, CEO, AIG: Yes. Book value is as good as the quality of the reserves, right? Like and so if you have a view of what ultimate looks like, then you’d have a good view of book value.

Mario: Right. Which may not be what companies are saying. Correct. Where are we on Global Personal in terms of the shift to an MGA model, the shift to adequate pricing? And what are the long term prospects?

Peter Zaffino, CEO, AIG: So are we talking high net worth or like just the general and global personal?

Mario: So I was going ask about both, starting off on the Yes.

Peter Zaffino, CEO, AIG: Would say if you start with the sort of bigger one, which is global personal, I would say very good businesses. We’ve divested businesses that we didn’t think were core. We need to grow A and H more. It’s profitable, but it has not grown to the level it needs to grow. We have to have a little bit more profitability improvement in the personal defined as personal auto and homeowners that we do in international, not necessarily in The U.

S. But the big bet is going to be, can we get the high net worth in PCS to profitability, and we will. It’s been slower than I would have liked just in terms of some of the headwinds that have existed, changing a model that I still believe the way we structure this will work out in the long term. But we need other carriers to be working with us in the MGA to be able to underwrite the business alongside AIG. That was the real driver of the quota share, which we’ll see negative growth in 2025.

But that is bringing in strategic partners that are going to learn more about the business that will either provide paper or will come off I mean, we don’t need the quota share for reinsurance ceded or look, it’s a benefit in the short run on profitability because the ceding commission is higher than the expenses. We were able to lower the MGA expenses and get an enhanced ceding commission. Okay, so what? That’s a 400, 500 basis point benefit. That’s not going to be long term business strategy.

But I do think that the opportunity is going to be seen. We’re growing in E and S more than we are in admitted, of course, but not as much as we need We have been off to a slower start than I would have liked. And in the rest of 2025 and as we get into 2026, we’re going to have to accelerate that growth or think about going more into an open market environment where we can see more submission activity. So it’s working. The profitability improvement is there.

It’s happening this year, but the absolute performance of the high net worth business is not where we want to be. But we’re heading in the right direction.

Mario: Okay. Once the profitability has been addressed, what’s the global market potential of high net worth homeowners, high net worth personal lines?

Peter Zaffino, CEO, AIG: We won’t go outside The U. S. I wouldn’t expect to see that strategically in the next three years. I think the opportunity is I’m

Mario: going to give

Peter Zaffino, CEO, AIG: you a number and then you can hold me to it. But I think it’s substantial. I mean I still believe that going into the sort of E and S environment, problem with admitted is if you’re in the ultra high net worth or high net worth, you have to put out large policy limits. The accumulation in cat exposure gets pretty heavy very fast. If you look at areas that have always been problematic, there’s been more TIV in those areas.

Think of Florida, Texas, California, all have different dynamics. I still think the Northeast is the most exposed because of how weak the PMLs are and the TIVs are massive. And also, if a Category III ever found its way up this way, flooding, construction type, we’re not ready for it. So like there could be things that happen that accelerate it. But I think it’s the opportunity over a longer period of time is well within the hundreds of millions, maybe even greater than that.

Mario: Because

Peter Zaffino, CEO, AIG: I just think that there’s not the void isn’t getting filled. You hear antidotes, but they’re real, which is like we’ve seen look, I’m not going to call it a trend yet, but let me get through the full year. But even with what was happening with the wildfires is looking at sort of claims development because you want to be observant on inflation, supply issues. Is there more demand or replacement costs? Like what does it look like?

I mean a lot more of our clients took the check and aren’t rebuilding. And so like forget it, like I’m not doing this because I can’t get insurance, and I’m not going to be in a place where there’s going

Mario: to be

Peter Zaffino, CEO, AIG: more wildfires not protected. And so that’s not really solving a problem. Think and again, we haven’t seen something significant in Florida. I think there’s more limit to be purchased and there’s more demand if we are there to offer the product.

Mario: Okay. Fantastic. I had one. And again, if there are questions in the room, please let me know. But I want to focus on investment income.

You talked in the Investor Day, and again, not abruptly, but taking more risk. Where are we on that process? How should we think about the timing?

Peter Zaffino, CEO, AIG: I didn’t say. I think Keith said that.

Mario: Hi, Keith.

Peter Zaffino, CEO, AIG: What we are alluding to is that when we were fixing the underwriting side, we were also very conscientious of being conservative on the investment side. And so we went from when we were part of AIG was Life Retirement and P and C, the General Insurance, we had $325,000,000,000 of AUM. And then we began to say, okay, is an outsourcing model more advantageous? Well, knowing we’re splitting up, I’m not going spend time talking about Corbridge, but with Blackstone come in, Nippon come in, we outsource a lot of the fixed income to BlackRock, both Corbridge and AIG. But when you’re $100,000,000,000 or thereabouts of AUM, developing a more outsourced model, for the investment strategy, not for the asset allocation, but for the execution we felt was an appropriate model.

And that’s what we did, and I think it’s worked out really well. Now along the way, we started to get out of hedge funds. We started to get out of some of the alternatives. And Keith has working with the head of our investments, Pat Beauvaire, in terms of repositioning the alts or the reinvestment that we’ve had in fixed income. And so I think there is an opportunity for us because we were so conservative in terms of the overall percentage of asset allocation alternatives that there’s ways in which we can get perhaps not chasing it, but just executing better with a more balanced strategy where can get a little bit more return, three point eight years, not the longest duration, not like life, but it’s also not that complex.

Mario: Okay. And then last chance to as I look around the room. And if not, I am going to thank Peter. Please join me in thanking Peter for a very informative session.

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