Yahoo Finance American International Group Inc (AIG) (Q1 2024) Earnings Call Transcript Highlights: Strong ...
Adjusted After-Tax Income: $1.2 billion, with $1.77 per diluted common share.
Net Investment Income: $3.5 billion, up 13% year-over-year.
General Insurance Underwriting Income: $596 million, up 19% year-over-year.
Accident Year Combined Ratio: 88.4%, improved by 30 basis points from previous year.
Life and Retirement Premiums and Deposits: $10.7 billion, highest in a decade.
Shareholder Returns: Over $2.4 billion through stock repurchases and dividends.
Debt Repayment: $459 million, reducing total debt to $9.8 billion.
Dividend Increase: 11% to $0.40 per share.
Share Repurchase Authorization: Increased to $10 billion.
Parent Liquidity: Ended the quarter with $5.1 billion.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted after-tax income increased to $1.2 billion, representing a 9% increase in earnings per share year-over-year.
Consolidated net investment income on an adjusted pretax income basis rose to $3.5 billion, a 13% increase year-over-year.
General Insurance underwriting income grew to $596 million, a 19% increase year-over-year, reflecting improved accident year results and lower catastrophe-related losses.
Life and Retirement segment reported strong results with premiums and deposits of $10.7 billion, marking the highest quarterly result in the last decade.
AIG returned over $2.4 billion to shareholders through stock repurchases and dividends, and increased the quarterly common stock dividend by 11%.
Negative Points
Net premiums written in General Insurance were impacted negatively by the dispositions of Validus Re and Crop Risk Services.
North America Commercial Lines underwriting income was down $95 million from the prior year quarter as reported.
International Commercial net premiums written were flat for the quarter, with declines in Global Specialty business due to top line weakness in energy.
The competitive environment in Financial Lines remains challenging with continued headwinds on rate.
The accident year combined ratio in North America Personal, including catastrophe, showed an 870 basis point improvement year-over-year, indicating ongoing challenges in achieving underwriting profitability.
Q & A Highlights
Q: Looking over your prepared remarks, Peter, you used the term inorganic opportunities should they exist in reviewing reinsurance. So you also talked about the capital management expectations. Should we be thinking about the repurchase program as kind of a base case, but should there be other opportunities you might look to do something organic? Or just was there anything kind of new in that wording that we should think about? A: Thanks, Mike. It's a very good question. We are going to stay very committed to the capital management structure we outlined, which is why I gave guidance on not only '24 but '25 in terms of share repurchases. I think we've been consistent, and I added in when we're more comprehensive in our description in terms of capital management, that should inorganic opportunities exist, and they're compelling, which just means does it add product, does it add geography? Not scale and size, but just something that does help us strategically reposition ourselves. I wouldn't want to rule that out, but it's not a priority in the short term. And so that's really the context of what I provide in my prepared remarks.
Q: Peter, my first question, last quarter, you had implied that a Corebridge deconsolidation would come by the end of the second quarter. Does that time frame remain intact? A: There's not a whole lot more I can offer in terms of the prepared remarks. Every sell-down has been important, but this one is particularly important just because we would likely become a seller of shares that will deconsolidate Corebridge. So we continue to focus on making certain we're looking at every option available. And considering all of those variables, Corebridge has done a significant amount of work working with AIG and independently to position itself to be a separate public company. It's done an exceptional job. We're completed, most of our transition service agreements, which just means they're more operationally prepared to go. And so again, subject to market conditions, I think my guidance I gave last quarter stands. We would expect to try and do something before the end of the second quarter.
Q: Just a follow-up, I guess, on that last question, Peter. Just, I guess, the messaging on the $10 billion share repurchase authorization. Are you trying to say that the intention is to do kind of no more than $10 billion until the end of '25? Or is that -- should we just take this as an update of what you think you can do based on what you're seeing today? A: I would take it as just an update. We would have gone past our current Board authorization with the 2025 guidance and worked very closely with the AIG Board of Directors to talk about what we expected the capital management strategy to be in the next 6 quarters. And that's really how we derive the $10 billion. But I wouldn't think about it anything more than that.
Q: First question on underwriting leverage. If I take comments on capital at the insurance companies with opportunities in Property post the sale of Validus, it seems like AIG could meaningfully increase underwriting leverage here, which could obviously contribute to the 10%-plus ROCE. Could you provide any additional color on how you're thinking about underwriting leverage here, and maybe some metrics you'd point us to? A: Sure. I'll ask Sabra to comment on some of the leverage within the insurance company subsidiaries. We see great opportunities for us to grow within -- across the world. And you've mentioned Property and specifics. We have significantly reduced PMLs, which means we have aggregate to grow. And we have the capital to grow. And the interesting part of AIG is that when we look at Property, we have so many different points of entry depending on the risk-adjusted returns that exist. If I start in the United States, and this is not all inclusive, but just as a few examples, we have Lexington E&S property, we have Retail Property, we have the high net worth business, and that can be done on an admitted or non-admitted basis. We have Retail Property. In International, we have Japan Property that's specific to Japan. We have Talbot. And we have Global Specialty. So there's so many different points of entry. Depending on the risk-adjusted returns, we can scale up or scale down, but believe that there's going to be great opportunities for us in the future. Yes. I mean, the first quarter tempered on Property. But look, we're not in the cat season yet, and our industry is famous of just framing out the market at a point in time. We got a long ways to go this year in terms of where the opportunities exist, but we absolutely have the leverage to grow if we like the risk-adjusted returns. Sabra, do you want to comment on that?
Q: I'm a little bit curious just on the potential sell-down of Corebridge. How do you weigh the options between doing several smaller chunks of sell-down from here versus maybe the potential for doing a sell-down of the remaining stake? And then another thing on the other side, right, we sort of think about this $500 million a month buyback. Is there the option to potentially do an ASR post sell-down? A: I wish I could provide a little bit more detail on the first part of the question. We're looking at all alternatives, all size. I mean, so much is market-dependent. You have certain windows. And we want to make sure -- we have multiple stakeholders, I mean, within Corebridge shareholders, AIG shareholders, so sort of balancing that is really important for us. But as I said in my answer and prepared remarks, we're ready to go. Everybody is anxious to move forward, but we're going to make sure we do it in a very methodical way to where we don't do anything that's not in the best interest of all that we've done so far and our stakeholders. So we will consider multiple options and keep everybody updated. On the ASR, I mean, I think we've largely thought about this, and Sabra, if you want to comment to close out. We've done share repurchase in a methodical way. We always consider different ways in which we can do it. But maybe you can just comment, and then I'll close it out.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
