American International Group Inc (AIG) Q4 2024 Earnings Call Highlights: Strong Premium Growth ...

GuruFocus.com
13 Feb
  • Net Premiums Written: $6.1 billion in Q4, a 7% increase year-over-year.
  • Net Premiums Earned: $6 billion in Q4, a 6% increase year-over-year.
  • Adjusted After-Tax Income Per Share: $1.30 in Q4, a 5% increase year-over-year.
  • Calendar Year Combined Ratio: 92.5% in Q4.
  • Accident Year Combined Ratio (Excluding Catastrophes): 88.6% in Q4.
  • Full Year Adjusted After-Tax Income: $3.3 billion, or $4.95 per diluted share, a 28% increase year-over-year.
  • Full Year Net Premiums Written: $23.9 billion, a 6% increase year-over-year.
  • Full Year Net Premiums Earned: $23.5 billion, a 7% increase year-over-year.
  • Full Year Accident Year Combined Ratio (As Adjusted): 88.2%.
  • Full Year General Insurance Combined Ratio: 91.8%.
  • Full Year Underwriting Income: $1.9 billion.
  • Global Commercial Net Premiums Written: $16.8 billion, a 7% increase year-over-year.
  • North America Commercial Net Premiums Written: 9% increase year-over-year.
  • International Commercial Net Premiums Written: 4% increase year-over-year.
  • Global Personal Net Premiums Written: 3% increase year-over-year.
  • Capital Returned to Shareholders: $8.1 billion in 2024.
  • Parent Liquidity: $7.7 billion at year-end.
  • Debt to Total Capital Ratio: Reduced to 17%.
  • Net Investment Income (APTI Basis): $3.5 billion for full year 2024, up 13% from 2023.
  • Book Value Per Share: $70.16 at year-end, up 8% from December 31, 2023.
  • Adjusted Book Value Per Share: $73.79, down 6% from year-end 2023.
  • Core Operating ROE: 9.1% for the quarter and full year.
  • Warning! GuruFocus has detected 9 Warning Signs with RGS.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • American International Group Inc (NYSE:AIG) reported strong net premiums written of $6.1 billion in the fourth quarter, a 7% increase year-over-year, driven by 8% growth in global commercial lines.
  • The company achieved a 5% year-over-year growth in adjusted after-tax income per share, reaching $1.30 per share.
  • AIG successfully executed significant strategic and operational initiatives in 2024, including the deconsolidation of Corebridge Financial and the sale of non-core businesses.
  • The company achieved $450 million in run rate savings through the AIG Next program, with further benefits expected in 2025.
  • AIG returned $8.1 billion of capital to shareholders in 2024, reducing shares outstanding by 12% and increasing the quarterly dividend per share by 11%.

Negative Points

  • AIG faced higher catastrophe losses in the fourth quarter, which impacted general insurance underwriting income, resulting in a $156 million decrease from the prior year quarter.
  • The sale of the global personal travel and assistance business is expected to have a negative impact on the global personal segment in 2025, removing approximately $720 million of net premiums written.
  • The expense ratio has been running higher than expected, despite improvements in the loss ratio.
  • AIG's adjusted book value per share decreased by 6% from year-end 2023, primarily due to the impact of Corebridge deconsolidation.
  • The company anticipates continued pressure on its private equity portfolio due to the current macro environment, which may affect investment income.

Q & A Highlights

Q: Can you confirm if the core ROE guidance includes the impact of the recent wildfires, and what factors are contributing to the better-than-expected performance? A: Yes, the 10%-plus ROE guidance includes the $500 million impact from the wildfires. We've structured our global portfolio and reinsurance effectively, maintaining net retentions within expectations. Our commercial portfolio's performance and capital management strategies are key contributors to this positive momentum. - Peter Zaffino, CEO

Q: What are the targeted areas for organic growth, and how do you view price adequacy in property and casualty markets? A: We're focusing on risk-adjusted returns and have seen strong client retention and new business growth. In international markets, we've achieved significant new business in global specialty and commercial property. In North America, Lexington and other channels have shown robust growth. We remain disciplined in underwriting and capital deployment. - Peter Zaffino, CEO; Jon Hancock, EVP; Don Bailey, EVP

Q: How is artificial intelligence impacting underwriting, and what are the expected benefits? A: AI is enhancing data ingestion and providing underwriters with more qualified data quickly. This allows for better decision-making and portfolio improvement. For example, Lexington's submission volume has increased significantly, and AI helps manage this complexity efficiently. We expect AI to drive top-line growth by improving underwriting capabilities. - Peter Zaffino, CEO

Q: What is the timeline for achieving profitable growth in the high net worth personal lines business? A: We've been improving the combined and loss ratios in our high net worth business. With a balanced growth strategy and strong partner support, we expect continued improvement in 2025. We've renegotiated ceding commissions and have a 30% quota share with six participants, which will enhance profitability. - Peter Zaffino, CEO

Q: Are there any new business areas AIG is considering entering, and is the divestiture of non-core businesses complete? A: We are largely done with divestitures and are satisfied with our current portfolio. For M&A, we remain disciplined, focusing on complementary geographies or products that add value. We have the scale to grow organically, but we are open to compelling opportunities that align with our strategic goals. - Peter Zaffino, CEO

Q: How should we think about the regulatory environment, particularly in California? A: The regulatory environment is complex, especially in peak zones like California. We work closely with regulators to address changes in catastrophe climate and modeling. We aim to have more flexibility in the future by collaborating with regulators on technical capabilities. - Peter Zaffino, CEO

Q: Can you provide guidance on the expense ratio and its future trajectory? A: We've maintained discipline in managing expenses, absorbing costs from other operations into the business. Despite these changes, we expect opportunities for further expense reduction and improvement in ratios throughout 2025. - Peter Zaffino, CEO

Q: Are you seeing any acceleration in casualty pricing, and is this an area for potential growth? A: Yes, the casualty market is strong, with Lexington Casualty and retail excess casualty seeing significant rate increases. We are cautious but see opportunities to lead in this market, supported by strong underwriting and reinsurance strategies. - Peter Zaffino, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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