American International Group, Inc. 2026 Q2 Earnings Call

Please go ahead. Thanks very much, Michelle, and good morning.

Today's remarks may include forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations. AIG's filings with the SEC provide details on important factors that could cause actual results or events to differ materially. Except as required by applicable securities laws, AIG is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks may also refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, our financial supplement and earnings presentation, all of which are available on our website at aig.com. Finally, today's remarks related to net premiums written growth are presented on a constant dollar basis.

Please refer to page 26 of the earnings presentation for reconciliations of such metrics. With that, I'd now like to turn the call over to our President and CEO, Eric Andersen.

Good morning, everyone. Thank you for joining us today. I'm pleased to share our strong second quarter results and the meaningful progress we are making across AIG. Our team is executing well on delivering the financial commitments we outlined at our 2025 Investor Day, which we remain on track to achieve. On the call today, I will review our second quarter financial highlights, provide perspective on the current market environment, and discuss our strategic priorities that will guide our continued progress and growth. Following my remarks, Keith Walsh will provide more detail on our financial performance, and Jon Hancock will join us for Q&A. Now let me review a few financial highlights. In a dynamic environment, we delivered another strong quarter, which contributed to an exceptional first half of the year.

Our performance reflects the benefits of our diversified portfolio, continued momentum from organic growth in our strategic transactions, and disciplined execution by our talented team. Adjusted after-tax income per diluted share was $2, a 10% increase year-over-year, and adjusted after-tax income was $1.1 billion. Core operating ROE was 11.1% in the second quarter and 11.6% for the first half of 2026. Underwriting income was $686 million, a 10% increase year-over-year. The accident year combined ratio, as adjusted, was 88.1%, an improvement of 30 basis points from the prior year quarter. The calendar year combined ratio was 89%, also an improvement of 30 basis points over the prior year quarter. Net premiums written increased 9%, or 11% excluding North American property, reflecting organic growth in select high-performing segments of our global commercial portfolio.

Growth in global personal, driven by our Accident & Health and high net worth businesses, and contributions from our recent strategic transactions, which are providing meaningful growth in line with our expectations. Global commercial insurance net premiums written increased 9% year-over-year. North America Commercial net premiums written increased 9% year-over-year. We saw growth in retail casualty and across various segments of our financial lines portfolio, partially offset by declines in Lexington, driven by property, where we are continuing to take disciplined actions to effectively manage the competitive environment, which I will discuss in more detail. International Commercial net premiums written increased 10%, driven by growth in property and marine, partially offset by financial lines, where we continue to be targeted and disciplined in our underwriting.

In global commercial, retention was 88%, and new business, including our strategic transactions, was $1.9 billion, a year-over-year increase of 37%. Our team made outstanding progress improving the performance of our Global Personal Insurance business. Net premiums written increased 8% in the quarter, driven by momentum and Accident & Health, reflecting our team's ongoing focus on building a robust pipeline that has resulted in several notable new client wins, as well as continued organic growth in our high net worth business. Finally, we returned $904 million in capital to our shareholders in the second quarter, inclusive of $641 million in share repurchases and $263 million in dividends. Let me share some observations on the current market environment. There's a lot of conversation about where we are in the cycle.

I would characterize the market as transitioning from an extended phase of broad positive pricing into a more selective environment, where profitability and growth are increasingly dependent on line-specific dynamics. Over the last several quarters, capacity has increased significantly across the market, including through E&S carriers, MGAs and MGUs, delegated authority structures, ILS, and sidecars. This influx of capacity has created competitive pricing pressure in certain lines like property, we believe it has also created opportunities. Our experience shows that in this type of environment, clients tend to become more discerning about the origination of capacity. They distinguish among providers that are simply pass-throughs for third-party paper or focus solely on excess coverage from those that offer holistic solutions, along with underwriting excellence, client service, and responsive claims handling. This is where AIG is strongly positioned.

We are seeing this play out in property, where our expertise and the diversity of our global property portfolio are important advantages. Last quarter, we detailed the challenging dynamics in the North American property market, particularly in E&S, where pricing has continued to be under pressure, fueled by excess capacity and competition. Given the ongoing rate pressure, we have intentionally continued to contract our Lexington property portfolio in targeted areas while selectively growing the parts of the property portfolio we believe will deliver the best risk-adjusted returns. Where we see pricing that is not adequate, we are offering terms that reflect our view of the risks. As a result, we are retaining business where we can achieve acceptable terms while walking away from business that does not meet our underwriting standards.

This has resulted in a meaningful nine percentage point reduction in premium retention at Lexington property in the second quarter. The pricing environment, combined with our deliberate actions, have reduced overall growth in North America by over three percentage points. Our North America retail property portfolio has a different composition than our Lexington property portfolio. While the environment remains competitive, we continue to find targeted opportunities for growth, including through our Everest renewal rights transaction. In international property, rates are declining at a more moderate pace than in North America. This remains an attractive portfolio with opportunities in many countries for sustained profitable growth, supported by lower peak catastrophe exposure. Turning to casualty, our underwriting discipline and technical claims expertise have positioned us well across our portfolio. In North America retail casualty, pricing is up double digits and remains above loss cost trends.

While rate increases have moderated from the elevated levels we saw at the peak of the market cycle, we are focusing on maintaining rate adequacy and strong risk-adjusted returns. In North America excess casualty, we are achieving mid-teen pricing increases, and we have been disciplined on attachment points, terms and conditions, limits, and risk selection. In international casualty, we have a broad geographic portfolio with a significant portion of our business in markets with lower litigation environments. While there is increasing competition and pricing is beginning to become more competitive in some areas, we continue to see select opportunities for profitable growth, supported by our underwriting and claims expertise, as well as our differentiated multinational capabilities.

In global specialty, we are closely watching the energy and aviation markets, where we are seeing pricing that we believe does not fully reflect heightened exposure in the Middle East conflict and recent large industry losses. In contrast, political violence and terrorism rates increased in the second quarter, driven by the elevated risk exposure associated with the broader conflict. For example, our political violence pricing increased 9% in the second quarter compared to a decrease of 8% in the first quarter. We are also seeing broader demand for these products as clients sharpen their focus on risk mitigation and protection. In summary, across our global and diverse portfolio, we continue to deploy capital selectively where pricing, margin, and risk quality are within our appetite and deliver targeted risk-adjusted returns.

I'd like to expand on AIG's unique competitive advantages and how we intend to convert these strengths into sustained earnings growth and long-term value creation. AIG has an enviable global platform, deep underwriting expertise, a broad set of products and risk solutions, robust claims capabilities, and a team of outstanding colleagues. We also have one of the most recognized brands in the industry, which helps us compete in markets around the world. Together, these strengths make AIG a leading global underwriting company. Our durable foundation enables us to expand the ways in which we access business, deploy capital, and provide value to clients and distribution partners to become even more relevant in the market.