Q1 2020 Earnings Call

Okay.

[music].

Ladies and gentlemen, good thing and welcome to E. G first quarter 2020 financial results Conference call.

Today's conference is being recorded.

At this time I would like turn the conference over to newspaper.

Head of Investor Relations. Please go ahead.

Thank you good morning, and thank you all for joining US today, our call today will cover Energy's first quarter 2020 financial results announced yesterday afternoon. The news release financial results presentation, and financial supplement where posted on our website at www Dot AI Jie dot com and the 10-Q will be filed.

Later today.

Our speakers today, our Brian Duper of CEO, Peter Zaffino, President and COO of AI, Jie, and CEO General insurance, Kevin Hogan CEO life, and retirement and Mark Lyons Chief Financial Officer, We will have time for Q and a after their remarks.

Today's call May contain forward looking statements relating to company performance strategic priorities business mix and market conditions, including the effects was covered 19 on AI Jie. These statements are not guarantees of future performance or events and are based on management's current expectations.

Actual performance on events may differ materially.

Factors that could cause results to differ include those described that are 2019, Android port on form 10-K, and other recent filings made with the FCC inclusive of the effects of cobot 19 on AI, jie, which cannot be fully determined at this time.

AIG is not under any obligation.

And expressly disclaims any obligation to update any forward looking statement, whether as a result of new information future events or otherwise.

Additionally, some remarks, we'll refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is provided in a news release and other financial results materials, all of which are available on our website I'll now turn the call over to Brian.

Good morning, everyone. It's been an extraordinary few months since we last spoke.

Before we start I want to say that I hope you on your families are healthy.

You've been able to adjust to the new normal to cope with Nike, that's creating for all of those.

It was quite whose husband heartbreaking to witness as it unfolds across the globe.

It's uptime for everyone.

The uncertainty about how long it will last and what life will be like afterwards.

Makes this time even harder.

I witnessed a lot in my 40, plus year career in the insurance industry.

That's helpful Humanitarian crisis, which quickly became a threat to the world economy is like nothing any of us has experience.

We believe cope with my feet will be the single largest cat loss industry has ever seen and we'll continue to add significant global economic ramifications for the foreseeable future.

Having said that.

It's been a heart warming to see the compaction and amphitheaters emerge.

The strength of the first responders health care providers.

In other a central workers on the front lines risking their lives to help others.

And the people all over the globe sharing resources and helping each other but some examples of how weve come together to fight a common enemy.

In many ways as crises is showing us that we had more uncommon and we do differences.

Hey, I T is not immune to the self threat.

We've been fortunate to have a relatively small number of colleagues we tested positive for code at night piece.

Our Hearts go after them up particularly to the families of a few who sadly passed away.

Insurance companies play an important role during times of stress by helping companies and individuals manage risk and reassess risk appetite.

Industry leadership. They got she has demonstrated over the last couple of years continues.

We will take a leading role in helping clients another industry partners managed through this unprecedented side.

Turning to the topic of this call I want to thank you for joining Oh.

Our team is working remotely so we are in different locations. This morning.

In addition to my remarks, you'll hear from Peter cabin and Mark.

The shield.

Keith investment officer will be available for Q1 day.

We will length in today's call because we want to make sure. There is sufficient time to cover our usual topics. In addition to cope with 19 and we want to answer your question.

I wouldn't be very clear at the outset today I'd see wasn't a strong financial position before this places began remain and remains really strong financial position today.

You had been and we'll continue to be laser focused on actions with further strengthen our liquidity and capital.

A focus on fundamentals in the foundational work we've done some blade 27, he should be risque I Gi and prudently protect our balance sheet has served us well as we navigate this crises.

Because of this ongoing work I believe they got GE will emerge from covert 19 stronger and more unified with greater perspective, wisdom and gratitude.

Right sees reveals character and our leaders across say Gee have shown incredible strength of character.

They help colleagues adjust to be working conditions.

That's what we need to do to keep a g. operating seamlessly and focus on what we do best which is helping our clients manage their most complex with.

Especially through difficult times.

Our executive leadership team in particular does navigated through many catastrophes and they are applying their knowledge and experience as we work hard to protect our colleague.

Sure of our clients.

An open lines with communications with our global regulators and policymakers and generally be a good global citizens.

Our global workforce as shown tremendous resiliency over the last few months.

Upping our colleagues, it's been top of mind for our executive team.

In mid March we issued a 500 dollar grant to each colleague globally, which equates to $30 million in the aggregate to help with on 'cause it I'm anticipated cost.

We're also focused on helping communities, where we live and work.

Today, we have contributed masks ground loves and other much needed personal protective equipment.

We move to remove working we donated unused produce perishables and dairy products from our cafeterias and pantries, the local shelters and other charitable organizations.

We recently reinstate reinstated the I'd see foundation will be making and inaugural 5 million dollar contribution the foundation primary focus for the foreseeable future would be on cobot like the relief efforts across the globe.

Turning to our first quarter results, we reported net income of $1.98 per common share and adjusted after tax operating income of 11 cents per common share.

Although our operating results were negatively impacted like over 19 are not net income positively benefited from successful hedging strategies in our investment portfolio.

It's important to note that our core business delivered strong results.

We were taking decisive actions to ensure that we do not lose significant momentum we had as we moved into 2020, which continue through the first quarter of this year.

Well I'm not easy we took a very prudent robust approach the analyzing cope with 19 impacts across AI jie.

This is a very unique catastrophe and we will continue to be thoughtful and thorough as we move through each quarter. While this ongoing event evolve.

Forecasting the impact of coal Coke at 19 future quarters, it's difficult in light of this week and the continued uncertainty across the global economy. We are withdrawing the guidance we provided on our last earnings call, including our adjusted return on common equity outflows.

Having said that in general insurance, we do expect to see continued improvement in the combined ratio ex cats for 2020, and I believe that our global capabilities and expertise coupled with our strong capital position will be an even greater demand when covert 19 begins to stabilize.

In life and retirement, while there will continue to be short term effect, a volatile market, we do not believe but the impact of covert 19 will result in any material reduction of our long term return profile.

With respect to our investment portfolio. It is well matched to our liabilities and is diversified by asset class and industry sector, making it resilient through a credit downturns.

Furthermore, spreads tightened through the end of April, resulting in a 70% or 6.5 billion dollar recapture of the mark to market loss reflected on our March 31 balance sheet for fixed income available for sale securities.

Looking ahead, the ongoing work, we're doing particularly as part of they I see 200 will result in AI jie not only emerging from this crises has a stronger better company.

But also as a global sure choice with significant capital and financial flexibility I.

I'm very confident AI Jie will successfully move forward on its journey to become a top performing company and a leading insurance franchise.

With that I will turn it over to theater.

Thank you, Brian Good morning, everyone and thanks for joining us.

Today I plan to review the follow on topics a brief overview of the potential near and longer term impact of cobot 19 on the insurance and reinsurance markets generally how we analyze the impact of cold and 19 on G.I. through March 31st.

First quarter results for general insurance excluded cobot 19, including Validus read our recently announced launch of Syndicate 19 2019 and.

Hey, I teach you wonder and the progress that we've made since our last earnings call.

As Brian said, the near and long term impact of cold in 19 on the global economy insurance and reinsurance just churns industries remains unclear.

In contrast to other catastrophes like wildfires hurricanes or earthquakes.

That is not too far into any specific geographic region.

Had already impacted over 200 countries and territories. In addition, just duration is not limited as is typically the case traditional cash.

While the insurance industry managers risk of all kinds, it's fair to say that the profound impact and global nature of Cobot 19, It's something we've never encountered there's no play book and as a result, we're called upon to make thoughtful and prudent decisions in a climate of unprecedented uncertainty.

Before cold is the largest catastrophes on record were Hurricane Katrina was 65 billion losses. Then that's a whole go earthquake was 35 billion and lost hurricane or amounts with 30 billion losses, and Superstorm Sandy also with approximately 30 million losses.

With respect to covert 19, we're starting to see or league industry estimates, but they have significant ranges.

While it's too early to gauge the ultimate sizable loss. We believe cobot 19 will result in the largest individual cat loss the insurance industry as ever see.

Going forward cold weather related losses will impact all aspects of underwriting insurance from absolute limits available.

Limits deployed to certain lines of business terms and conditions co insurance and structure of coverage just to name a few.

With respect to the reinsurance market. Unlike traditional name peril catastrophes covenant was not model and therefore.

It'll be a headwind for future capacity, we believe the retro market will contract.

Then the iOS market, there will be trapped capital, which will lock up collateral therefore restricting capacity on a go forward basis, and we're already seeing this.

Gee the body work in general insurance, which started in late 2017 has significantly improved our companys financial position and has allowed us to take a leadership position in the market.

Our strategic decisions and disciplined focus on areas such as underwriting excellence the rebalancing of our portfolio improved the rate adequacy and the strengthening of our leadership in underwriting capabilities coupled with the addition about its been a comprehensive and revamped reinsurance program has served us very well and then.

Well, thus to preserve capital and provide more predictable outcome aligned with our risk tolerance.

Hey, I'd is well positioned to be the ensure that clients turns you for advice on the risk and risk management issues in our partnerships with distribution have continued to strengthen as we problem solve risk issues through this challenging times.

Turning to general insurance [noise] before your revealing our first quarter results I'd like to address the loss estimate we booked for coal the 19th.

As Brian noted, we spent a considerable amount of time analyzing our potential exposure across multiple lines of business and geographies.

Given that cobot 19, initially emerge from outside the U.S.

We saw claims formation the UK in Continental Europe, and later in the first quarter from the United States in each case predominately in travel and contingency.

As you saw in our earnings release, our estimated total cobot 19, net cat loss in the first quarter was $272 million, which includes significant IDR.

Reached an estimate notwithstanding that there is uncertainty as to how this ongoing event will evolve and ultimately intact. Our insurers. It is far from clear at this stage the extension, which those impacts will even resulting covered losses.

Having said that we'd be thinking was incumbent upon us to come up with a loss estimate for the first quarter, let me take into the process, we undertook to arrive at this estimate.

Over the past several weeks, we pulled together a multi disciplinary team of professionals Gee with significant industry expertise and experience an underwriting claims finance actuarial in reinsurance. This team did a top down and bottom up policy level review of every account with activity.

The first quarter as well as they review more generally across our portfolio.

Due to the significant claim activity, we saw in travel unrelated accident and health losses, I want to provide more detail on this aspect of our estimate on a global basis. After applying expected reinsurance recoveries, our estimate was $86 million.

An important point to know is that we have a sliding scale commission structure and travel, which will result in acquisition expenses being reduced by approximately $50 million. During 2020 based on our first quarter loss estimates. Therefore, you should think of our $86 million first quarter net loss estimate.

Travel unrelated accident health as closer to $36 million.

The remaining 186 million or the estimate relates to contingency commercial property trade credit workers' compensation and Validus re.

This estimate also encompasses potential losses arising from business interruption coverage in our commercial property policies.

As to those policies I want to emphasize the overwhelming majority contain exclusions for losses related to viruses and otherwise require a showing that the virus caused direct physical loss or damage that was the cause of the business interruption. We are confident these exclusions and related terms and conditions will be upheld.

Would it be challenge.

In the small fraction of commercial property policies, where we have provided affirmative coverage for infectious disease. We've done so under strict underwriting guidelines offering small sub limits with terms and conditions limiting coverage in many instances only to certain specified diseases, and regardless only where can be shown but the design.

[laughter] physically present and led to a governmental suspension of the business operations.

Additionally, our reinsurance program will help protect our portfolio from Cowen 19 losses, and depending on the line of business geography inside the loss, our net exposure will be significantly limited.

Lastly, I want to know Theres been a fair amount of attention to various U.S. legislative efforts from retroactively imposed coverage for cobot 19 related business interruption lost Walton notwithstanding the clear terms and conditions in commercial property insurance policies. We are confident that these efforts will not be brought.

The successful or survive constitutional scrutiny.

Turning to the rest of the first quarter as I said earlier, we had a very good result in our general cord General insurance business with continuing momentum in profitability improvement.

The adjusted accident year, combined ratio improved 60 basis points and 95.5% year over year, primarily due to a 100 basis point improvement in the loss ratio.

Our expense ratio increased marginally in the function of lower net premiums earned although on a year over year basis, we reduced general operating expenses by approximately 8%, reflecting our continued focus and discipline on expenses.

North Americas adjusted accident year combined ratio for the first quarter improved 180 basis points year over year, reflecting the improved quality of our north American portfolio.

Highlights in the quarter included lower Attritional and severe losses, and you watch retail property and lessons in property and PCG experienced lower attritional losses, reflecting improvements in this portfolio.

We have strong new business in the quarter highlighted by admitted and not a minute property and lead Midmarket casualty in addition.

North America leadership team remains focused on expenses and reduced general operating expenses by 10% year over year, while continuing to invest in talent.

International's adjusted accident year combined ratio was flat year over year.

The loss ratio decreased due to improved rate and portfolio optimization actions, we have strong performance in Japan Asia Pacific commercial and the UK.

The portfolio actions, we took led to reduced net premiums. So the expense ratio was higher although in dollar terms general operating expenses decreased 6%.

Throughout the first quarter, we saw meaningful acceleration.

In the rate year over year across the portfolio.

These rate increases are in addition to those we saw beginning with the first quarter 2019 and continue to strengthen throughout last year.

Overall rate improvement, excluding validus in Gladfelter was low double digits with North America, having the strongest rate strengthening with low double digit rate increases.

In North America areas that we focused on for improved financial performance include an excess casualty, which achieved over 30% rate increases financial lines overall, and do you know, specifically, which achieved over 20, and 40%, respectively, and wholesale casualty and property, which achieved 30% rate increases.

Rate increases in international were also strong with high single digit increases Europe, the UK and the middle East achieved the strongest rate increases in our international portfolio.

And UK financial lines, we saw rate increases of over 15% Dino lives over 20% on our UK and middle Eastern Africa specialty portfolio. The G, 20% rate increases and in Europe. Overall, we were able to achieve high single digit rate increases led by our specialty and motor portfolio.

Yeah.

Net written premium was down approximately 1.5% year over year after adjusting for foreign exchange impact, which was inline with our expectations.

Cobot 19 had a limited impact on our net premiums written in the first quarter.

With the exception of a falloff in travel and M&A during the month of March which were the first areas to be impacted by the pandemic net premiums earned were 6.1 billion in the first quarter compared to 6.7 billion in the first quarter of 2019.

This decline was due to the impact of our casualty in energy quota shares earning through in improving the overall mix of business as well as reflecting the impact of lower gross underwriting and discontinued business.

Turning to about a three gross premiums written were up 15% as our team continued to execute with disciplined underwriting and a focus on areas with rate improvement and better terms and conditions.

With respect to April one renewals, our Japan portfolio achieved strong risk adjusted rate improvements rate increases of 35% to 55% on Japan when business occurred for non long impacted business and loss impacted layers were up between 75 and 100%.

Validus re increased premiums written while de risking its portfolio and lower layer business, specifically, Japan premium increased 13% year over year, while Japan, when PML decreased by approximately 15% at the wondering 100 year return period, the risk adjusted rate increase at April one.

For international property was 15%.

Moving to our PCG business yesterday, we announced the official launch of our strategic partnership Lloyds called Silicon 2019.

She is now accepting new and renewal business Syndicate 2019 is managed by Talbot and is dedicated to supporting our us high and ultra high net worth business.

Innovative business model is another example of actions we have been taking to de risk and reposition our portfolio reduce volatility preserve capital and strategically pursue profitable growth.

Syndicate 2019 is an important step forward for PCG and allows us to reposition the portfolio and reduced peak zone and concentration risks, which are inherent challenges with a portfolio of this nature.

We were pleased with the support Syndicate 2019 generated from highly regarded third party investors in capacity providers, many of whom have partnered with us and supported the broader general insurance turnaround since late 2017.

In addition, syndicate 2019 provides us with an alternative solution to traditional reinsurance, thereby reducing overall reinsurance costs for PCG and for the core program for AMG.

Our PCG businesses are recognized market leader and the new management team that we put in place and 29 team is making significant an excellent progress in improving the financial and operating performance.

We continue to execute on a disciplined underwriting strategy in the first quarter with PCG, achieving meaningful rate increases across the portfolio, which we expect to continue through 2020.

Turning to add G 200, despite for all hands on debt crisis management work related to our Cobot 19 response, our team continued to make significant foundational progress on the operational programs I outlined in our last earnings call add G 200 remains a top priority for us even more so now as we.

We discussed on our last call after a robust bottom up exercise we identified 10 operational programs designed to achieve transformational change by focusing on for core objectives underwriting excellence modernizing our operating infrastructure enhancing user and customer experience and become.

Even more unified company.

Since that call the world changed dramatically the Atg 200 leadership team together with other leaders across AI Jie did a truly incredible job in the early days of coal the 19th.

The speed at which we were able to move validated that we have the right people in the right roles to take our transformational programs for the next level.

As we reposition our global car lease to a work from home environment literally within days, we learned a tremendous amount about our systems and processes.

While our overall targets of achieving $1 billion in run rate savings by the end of 2022 for the cost to achieve a 1.3 billion have not changed we are adjusting the timing and sequencing of certain operational programs based on recent learnings for example.

We are accelerating work related to AI Jie operations, which includes our shared services platforms. We now have significantly more data about our ability to connect our various platforms and confirmed that we can operate a more virtual and agile model in a post Colbert world. We believe this will allow us to achieve greater efficiencies.

In the near term.

And to more flexibly source requisite skills needed to enable us to operate in a more effective manner.

With respect to IP transformation, we completed the design of a simple more efficient IP organization and also finalized our plans to modernize and simplify our application portfolio.

The last few months confirmed that our plan digital virtual target state is appropriate for businesses and will give us the opportunity to enhance efficiencies and effectiveness.

Turning to our standard commercial underwriting platform, we moved into the testing phase and we'll be launching an end to end model office, where we can further test our new digital underwriting technology and prepare to scale I T across our commercial business.

While still in the early stages of executing on a edgy to wonder why even more committed to this critical strategic effort that will position AI jie for long term sustainable and profitable growth.

Lastly, I want to thank our colleagues during times of crisis.

Gee purpose is clear and our colleagues have gone above and beyond to help each other and to support our clients and other stakeholders I'm proud and grateful for all that they're doing their professionalism and collaboration and for their dedication to our mission with that I'll turn the call over to Kevin.

Thank you Peter and good morning, everyone.

Today, I will discuss overall life and retirement results for the first quarter and our current outlook changes in our operating environment due to covert 19, and then briefly comment on the results for each of our businesses.

Life and retirement recorded adjusted pretax income of 574 million for the quarter and delivered adjusted return on attributed common equity and 8.4%.

Adjusted pretax income decreased by 350 million year over year, primarily due to significant market steps in March compared with the strong market recovery, we saw in the first quarter of 2019.

The main driver of the decrease was lower equity market returns, which primarily resulted in higher variable annuity reserves of 161 million and higher deferred acquisition cost amortization back of 138 million.

Also widening credit spreads generated lower returns from fair value option bonds of 116 million and the low interest rate environment resulted in continued spread compression across our individual and group retirement product lines.

Lastly, I am pleased to report that our hedge program performed as expected in response to the market stress experience in March generating games exceeding the movement than our economic view of the liability and related cash collateral.

Recognizing the limits insensitivity, especially in the context, the first quarters market volatility our sensitivity is provided on our last earnings call generally held up.

Based on the environment, we see today, we continue to expect based spread compression across the whole portfolio of approximately eight to 16 basis points annually.

However, wider risk adjusted credit spreads should generate opportunities to attract new business that profitable margins and the reinvestment of assets rolling off the portfolio should benefit from higher credit spreads.

We have updated our estimates of market sensitivities to reflect our balance sheet as at the end of the first quarter.

We would expect a plus or minus 1% change in equity market returns to respectively increase or decrease.

Approximately 25 million to 35 million annually.

Okay.

Quite movement in 10 year treasury rates to respectively increased or decreased earnings by approximately.

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10 million.

And sensitivities assume.

Yeah.

Okay and fair value.

Yes.

It is important to note that these market Center city.

Zack more linear.

Earnings are also impacted by the timing degree improvement.

Sure.

Market can you just began to improve in April and one can expect that shipped conditions continue to improve there may be immediate benefits in Reeves.

Okay.

Okay.

In the second quarter, although these benefits are likely to be offset slightly by lower private equity returns that are reported on a one quarter lag.

Despite the challenging environment covert 19 created our balance sheet is strong and we currently estimate our fleet risk based capital ratio for the first quarter to be between 405, and 415%, including both the impacts of variable annuity reserve and capital reform as well as our hedging program.

Our risk based capital ratio will be sensitive to the impact from coated 19 as they flow through our balance sheet throughout the year.

Market stress in the first quarter due to covert 19, while severe in nature did not reach our modeled stress testing scenarios. Although we recognize there is uncertainty in front of us.

Although we expect lower levels of overall industry sales for the foreseeable future due to impacts them covert 19, our leadership position continues to provide us with unique competitive advantage.

I have a broad position across variable index and fixed annuities term and permanent life insurance not for profit retirement plan markets and institutional markets.

We are not dependent on any one product type or distribution channel, which allows us to maintain our longstanding disciplined approach with respect to product pricing and feature development, regardless of the economic environment.

Over many years, we have proven our ability to redirect our marketing efforts from one product type to another as market needs and pricing conditions change.

Also have a large and diverse enforced portfolio that does not have the significant risks associated with pre 2010 living benefits or long term care.

Our very small block of remaining long term care business has been reinsured supporter too.

Our strong capital levels, and broad market presence position us well to deploy capital as potential attractive opportunities arise and as widening spread environment.

Now I'd like to touch on our operations over the last few months as Peter noted, we transitioned quickly to a remote working model with the support of our regulators were meeting we successfully adapted our E signature policies procedures and controls to support the needs of our plan sponsors distribution partner firms and indeed.

Well customers.

Also investments we have made to enhance our digital capability and served us well as many more customers are taking advantage of our enhanced self service tool.

We've also been very responsive in adopting changes to address the financial hardship faced by some of our customers such as extending the grace period for premium payments and meeting the requirements of the cares.

Our sales and relationship management professionals quickly shifted from face to face to virtual meeting and have conducted thousands of such meetings and educational webinars with our producers and customers.

Turning to our first quarter financial results as mentioned the primary drivers of the decline in life and retirement total adjusted pretax income were short term impacts to our individual and group retirement businesses.

Significant market movements.

As to the topline results for individual retirement premiums and deposits decreased primarily due to significantly lower fixed annuity sales as we maintained our pricing discipline as treasury rates dropped throughout the quarter.

With credit spreads only beginning to why the late in the period.

Our index annuity sales remain strong we again grew variable annuity sales.

Lower sales of fixed annuities resulted in negative net flows and total individual annuities.

Our group retirement premiums and deposits decreased due to lower new group acquisition as well as reduced individual product sales driven by the uncertain environment.

Net flows improved year over year, primarily due to lower group surrenders.

In this period of uncertainty, we expect fewer plan sponsors to change providers, which may reduce new group acquisitions, but would support plan retention.

For our life insurance business total premiums and deposits increased due to higher international premium.

Our mortality trends continued to be favorable overall pricing assumptions and the first quarter included a modest IB and our reserve strengthening to reflect the fluidity of cobot 19th.

Although we may experience some acceleration, we're not expecting large incremental impacts the mortality rate and expect any incremental impacts to be manageable in the context of our overall balance sheet.

For institutional markets, we have continued to grow our asset base and earnings in this business continues to be well position.

We remain focused on new opportunity and has the capacity to participate as activity arises in the pension risk transfer and other institutional businesses.

To close despite these challenging times, we remain available to serve our customers plan sponsors and distribution partners.

We are committed to further mobilizing our broad product expertise and distribution footprint to serve our stakeholders and new way as their needs evolve.

We will continue to deploy capital to the most attractive opportunities and focus on meeting ever growing needs for protection retirement savings and lifetime income solutions.

Now I'll turn it over to Mark.

Thank you Kevin.

Before providing summary comments about the first quarter I'd like to give a corporate 19 perspective on where I said.

First this health crisis, which quickly evolved into an associated financial crisis is unprecedented in scope uncertainty as length and depth of economic impact. Additionally, this ongoing event has simultaneously impacted both sides of the balance sheet, thereby nullifying most underlying assumptions that investment assets.

Insurance liabilities are marginally carlin.

As a result is extremely difficult to forecast one quarter in advance, but lower full year longer.

However, as Brian also noted I want to reiterate that AI Jie was strongly financially position entering the crisis, both from a parent and subsidiary liquidity and capital perspective, and is well positioned today.

Leading our investment portfolio.

Evolving situation causes us to view liquidity and capital strength as an imperative when the crisis suddenly took hold on capital markets in mid March and not knowing what could come next we thought it was prudent to augment our already strong parent liquidity with a $1.3 billion partial drawdown of our revolving period.

City.

This is solely as a precautionary measure given the significant uncertainty at that time about the near term impacts of coded 19 I.

I will provide an update on our capital management blends and liquidity position later in these remarks after I review, our first quarter results.

Turning to the first quarter edgy reported adjusted after tax operating earnings of 11 cents per diluted share compared to $1.58 per share in the first quarter 40 19.

Teams within this result is the continued improvement in general insurance with a 95.5% accident year Twentytwenty X cat combined ratio as Peter note.

First quarter results reflect direct and indirect impacts related to cobot 19, including the market impact on net investment income and book value with a lesser impact on core operation safety.

Peter discussed the general insurance Cobot Reserve reflects our best estimate the losses occurring through March 31.

For the first quarter adjusted book value per share increased 2.8% and adjusted tangible book value per share increased 3.2% both since year end.

It's also notable at AIG is adjusted tangible book value per share increased nearly 11%. This march 31st one year ago.

Which we believe is a better measurement of the improvement in they are these core operating performance over the last year.

Book value and tangible book value per share both of which include changes in AOCI I and the DTA for virtually flat year over year, even with the significant AOCI I changed we saw in the first quarter this year.

In the first quarter on an adjusted pre tax income basis, net investment income or Eni was 2.7 billion down approximately 1 billion from the first quarter 2018.

Call that the first quarter of 20 Nike included significant gains following the downturn that occurred in the fourth quarter 2018 at this year's first quarter experienced significant losses due to the Carbonite game volatility in March resulting in a distorted quarter over quarter comparison.

I want to spend some time on a global investment portfolio because in the current environment I think it's important to understand competition.

Several reports have been published that use incorrect assumption and information about our portfolio in many cases, our consolidated global portfolio has been compare to us life or PMC peers or the industry generally without taking into account our unique position as a global composite or multi line ensure in it.

Addition, some believe our portfolio has above average inherent risk, which is simply not the case.

We believe our portfolio is below average in terms of breast and we'll get into some of that.

Addition, certain accounting elections, AI Jie talk in prior years relating to specific security.

Created above the line accounting volatility, which has led to some confusion, but this volatility does not impact Agios is total return basis.

To address these complexity and the many questions and comments. We have received we provided much more disclosure regarding our portfolio, including the general insurance life and retirement and legacy portfolio composition on page 46 through 65 in our financial supplement there you will find a significant expansion of our.

Disclosure beyond segment and into credit quality distribution and asset or industry characteristic.

As Brian mentioned that the shale, our chief investment officer could help address follow up questions during Q and eight but I'll give some high level comment now.

At March 30, Onest AI Jie Han a 332 billion dollar investable asset portfolio.

This portfolio is about 73% fixed income available for sale security.

Which represent 75% of general insurance this portfolio and 74% of like the retirement. In addition, roughly 14% of the portfolio is invested in mortgage and other loans six percentage short term investment, 2.5% and real estate investment less than 2% in private equity approximately 1.5%.

That is it fair value options fixed income securities or FPL security.

And is about as to your 0.7% his intention.

It's important to recognize though that roughly 80% of the FPL fixed income portfolio, which historically has had higher volatility that are available for sale maturity security is held in legacy.

Notably the NPL portfolio makes up only 1.4% of general insurances portfolio, and Giro 0.3% of life and retirement.

Our historical FPL accounting elections, mostly on legacy non agency RMBS that were previously credit impaired cannot be changed or modified.

Move mark to market volatility above the line into our income statement within net investment income.

For available for sale security such volatility would be below the line in AOCI.

As a result, this SPL accounting treatment, what's more volatility into our income statement by anti with less relative volatility in AOCI, which is where one would ordinarily expect to see the volatility.

The portfolio material reductions in hedge fund like several than C.E.O.'s and F.B.U.S. security building, approximately 32 billion, which is a 60% drop in these asset classes into your rent 2050.

Additionally, H. east portfolio has only a very small direct equity exposure, representing just 0.2% of the portfolio.

Volatility equity market has a minimal impact our investment income and even that is below the line.

On page 63, the financial supplement you'll also see a significant $9 billion plus credit quality difference in the low investment grade securities between the rating agency view and they any ice the designation do.

Most of this is non ages D.R.M.D.S. on an F.B.O. basis, we have had evaluated and rated and they I see one by the security valuation offices.

This is the highest rating category, which is important because these assets strengthens subsidiary RBC levels, and kissed and can sustain or B.C. level, even if they fall one notch because they still will be investment grade.

However rating agencies have not related to these securities with current information from their perspective, the security still retains <unk> the low investment grade snow.

When examining or 144 billion of corporate debt, which is summarized on page 56, the financial stuff on it and expanded beginning up page 59 knows that nearly 130 million is investment grade and up. This total 15% is rated double a. or triple A., 34% is a rated.

As 51% is triple be read.

And to the overall investment grade market, we have a superior distribution of such assets by rate.

Similarly, when viewing the entire corporate portfolio, 10% is below investment grade, which is much lower than the market average 48%.

What is the point this out because given the magnitude Jesus best with portfolio. Some may assume that our portfolio mirrors the industry average, which is not the case.

Respect to see so credited impacts in the first quarter, which are included in real life gains and losses, and not and I, we recognize approximately 236 million credit losses.

Comes from about 198 million and fixed income securities and $38 million and vote.

No turning to the operating segments.

Peter and Kevin's discuss their financial results in detail I will just add a few remarks to augment their comments.

General insurance I pointed out that the 419 million total cat reserved for the quarter represent 6.9 wash ratio boy with 272 million or 4.5 loss ratio Floyd attributed to covert 19, and 147 million or 2.4 loss ratio employed related to other kind of that the largest.

Which was it took tornado storm system it Nashville in early March.

Excluding Covitz 19 general insurance generated 185 million of underwriting income, which includes the Noncovered catalog.

Already or development was minimal in the first quarter with $60 million of net favorable development. The t. 3 million of which <unk> from the amortization of V.A.D.C. divert game.

<unk> 80, he basis, there was a net $1 million as painful development, representing 30 million of unfavorable in North America, mostly from shorter sales line, largely offset by favorable 31 million from international across many product line.

Actually as Peter discussed.

20, nineties will favorably alter A.I.T.'s risk profile concentration risk is distributed across an innovative structure instead of capital providers.

Anticipate that in a second quarter and for the balance of 2020 year <unk> increased over original expectation and therefore net premiums won't correspondingly reduce.

The project that second quarter net written premium in high network will be down approximately 650 million from the original expectation that never premiums, but it's 40 20 year, where where it goes by approximately 675 million as a result.

They're getting a 2021, however, catastrophe cover costs will decrease for a gee that's the high net worth exposure subject to the cat program will be a fraction of what it is today.

2020 underwriting income for the high network unit, we anticipate approximately the same underwriting result, pre and post 2019, and then to become a creative thereafter.

Turning to life in retirement I would just add an institutional markets benefited from approximately 700 million pension wrist transfer premium into quarter I'll be it down a bit from correspond a quarter of last year.

Legacy 368 million dollar adjusted pre pass laws in the first quarter was due to a reduction and I are driven by the capital markets bottles guilty when it's all in March which have made it as mentioned in April.

As a reminder, we signed a definitive agreements to sell fortitude last year with the economic sense as of December 31st 2018, which means that all net income subsequent to your rent 2018 up from closing will be included in the gain or sale.

Lost on sale, we recognize a button the closing of the transaction.

Can you on course towards a mid year closing subjective regulatory approval.

And it is noteworthy afforded to also has benefited from strategic hedging transaction I performed as expected and it's bad helped capital ratios remain virtually unchanged since early 2019.

Next moving to other operations and it was I discussed on last quarter's Ernie call you will see on pages 37, 39 of financial supplement it revised and simplified presentations that helps identify key drivers a V.P.T.I.

Our previous disclosure something to segment could be difficult to understand and volatile in part due to the gross up of income an expense for internal item.

<unk> investment services, which increase other income N.G. a week, we simplified that and also provided eight B.T.I. by activity, which should help.

As for magnitude this quarter's 280 million of other operations Geo. We included the Cove at 19 employee grants totaling 30 million to Brian reference and remote access Nike cost of 3 million excluding that other operations Geo we would have only been 247 billion.

Things that tax we had a core 23% tax rate on adjusted pretax income for the first quarter higher than recent prior quarters do two additional items dominated by 37 million dollar impact reflect the sharebased compensation differences like Red date burst delivery date of value.

Some stock price declines during the first core.

Turning to liquidity and capital resources.

Either that liquidity and operating system, he already capital straight or <unk> priorities in this uncertain economic environment.

At your rent 2019, and she had 7.5 billion of liquidity at the parent and the R.B.C. fleet ratios for General insurance is U.S. pool finished 2019 at 490 per cent and for life and retirement at 402%.

In the first quarter, we repurchase $500 million of our stock and call 350 million, though for most about.

Share repurchases help to off the chair count solution stemming from equity compensation and the <unk> aided aren't that leverage ratio.

March 31st they got she had a similar seven and a half a million dollars at currently where did he including the 1 billion 1.3 billion dollar for all about revolver and I referenced earlier in my remarks, as well as strong liquidity and both general insurance and life in retirement.

Before turning to H.G. 200, there were two below the line items in the first quarter, but I would like to highlight.

First the success of our hatching program and the second would be blackboard.

Printing first of all our hedging program.

3.6 billion, a variable annuity fair value benefit to wear reflected during the first quarter within the realized gains line as a direct result, a successful interest rate in equity <unk> catching we didn't the length and retirement and legacy segments and clearly preserve book value.

It should be noted, though that ought a gaffe basis is game was aided by D.N.P.A., we're not performance adjustment impact, which is highly volatile and reversible depending upon raid spreads and equity market.

Secondly at the end of March Yeah can you made a strategic decision to discontinue blackboard or internal ensure at start up in light of current market conditions.

Sports G., a way, which was 16 million in the corridor. That's been historically recorded another operations, but that will see starting with the second quarter of this year associated with it with this decision we recorded in approximately 165 million after tax charge not included in E.D.T.I.

Does it need to A.I.G. 200, as Peter noted, we continue to refine our operational plant in response to come in 19.

<unk> three year transformation will result in 1.3 billion in cost to achieve an annualized 1 billion Runrate Gee, we savings by your rent 14 22.

Let me first just provide a quick review and then I'll give you the A.I.T. 203 or walk as well as its impact on the first quarter of 2020.

Although reporting perspective, all costs to achieve aside from 400 million pre tax spending that will be capitalized will be recorded below the line not an A.B.T.I. as restructuring another costs, which will make it straight forward to track.

Below the line charges, mostly at Bob employee related costs dedicated internal resources and associated professional services.

Capitalize costs 400 million before attack represent mostly investments insistence development interfaces data conversion and associated integrated worthwhile process.

Which have an impact on cash but are not expense immediately income state.

That each investment will be capitalized and then amortized rucci a week based on it's useful life. According to accounting principles and spot. Your rent 2022, we would expect that the amortization portion of the 400 million will be included in our annual expense Runrate, where our goal is a total annual run.

Savings of $1 billion, including the amortization of these capitalized invest.

But let's turn towards what this means for the next three years acknowledging that in this in certain world timing of plans can can somewhat change.

<unk> Peter's leadership weird governing A.I.G. 200 structure checkpoints and pull gay control cost confirms scope and reconfirmed scope and drive t. milestone new treatments overall, we expect they total quote unquote cash costs at the holding company 1.3 billion shown on page.

<unk> the financial results line.

150 million. The this is expected in 2020, although still being reviewed due to cope with 19 impact.

100 million is 2021.

It's 450 million at 2022.

Of these amount approximately 100 million in 2020 will be capitalized with Laker <unk> amateurization into G. a week.

A combination of these two resulted below the line project they charge of July hundred and 50 million before it back.

Then in 2021 about 200 million will be capitalized with a below like charge roughly 300 million and finally about 100 million would be capitalized 2022 below the line charges.

Yeah.

Based on our current useful my schedule for the appreciation as assumptions about when we expect to 400 million incapsula capitalized assets to be placed into service.

You hear depreciation included in G., we should be zero and 2020 as the project will still be in development.

Thing and 2021 to be between 10 to 15 million before tax and 25 to 30 million in 2042.

Based on projected completion by your rent 2022, yeah, <unk> amortize balanced up about 350 million will be advertised that about a seven year average life 50 million per year, and 20 twenties, Greek or 27, and then trailing off a bit from there.

Finally in the first quarter of 2020, we had in 90 million dollar restructuring charge below the line, which about 23 million related to A.I.G. 200, and the battles from other action.

Forward restructuring charges will primarily reflect A.I.G. 200 costs.

Oh, it's too expensive savings this quarter had 10 million of G., a week savings, which will translate to $60 million hounded analyze runrate page, which is part of the 300 million planned runrate benefit by your rent Twentytwenty.

Yeah shifting to capital management and looking ahead.

And like just a significant uncertainty on many fronts stupid covert 19, we do not planned to do additional share repurchases war debt reduction actions for the foreseeable future, but we we'll reassess this as cope with 19 impacts stabilize however, given improved stability in an access to capital market.

Since March we are reevaluating our get in capital plan.

While reducing debt leverage to 25% or below is a minimum term goal in the near term our priority his maintaining strong operating capitalization financial flexibility and liquidity as a result, we are considering options to generate additional near term liquidity in light of ongoing economic volatility as well as.

<unk> majorities 2020, and then the medium term.

Although spreads have widened since you're end all in coupons are attractive given the significant uncertainty around a duration. That's the global recession created by cold at night game as well as taking into account our global operating footprint and different regulatory capital regime. We think it is prudent to evaluate that capital market opportunities and then here.

Rather than waiting until later in the year, which was our original plan prior to cope with Nike.

Lastly, and reflecting back the first quarter benefited in the first two months from strong momentum G.I. pricing.

Not return and operating initiatives March Kobe's, 19 spread incredibly fast and dramatically changed everyone's everyday world.

G entered this crisis from a position that string wild and he's had certainly impacted or and costs us the recalibrate some of our plan.

Gee is more resilient than it's ever been strong leadership and greater portfolio and risk management across the organization. We are confident in our ability to weather the storm and look forward to being able to engage with you again is person hopefully in the near term with that I will turn is back to Brian.

Thanks to Mark Abby I think we're ready for the <unk>. So please.

Please go to so I didn't let us move.

<unk>.

If you would like to ask the question.

By pressing style one on your telephone keypad. If you are using a speaker phone. Please make sure your immune function is turned off.

<unk>.

It just as far one makes you would like to ask a question.

And we will take our first question.

Greenspan with South Park, though.

I think well morning My plan, Okay now yeah.

Right in that Oh, well <unk> yeah.

He calls me coverage.

Hmm Hmm Hmm mall supplement we decide to get a sense, yeah, well Hmm Hmm Hmm Hmm.

<unk>.

I'd have to design mm mm Oh.

<unk>.

Huh.

Okay. I think that's a question for a theater period would you take that we've.

Yeah sure Brian Elite, let me just getting a little bit more detail, yes, we did go through and very thoroughly in the first quarter like outline our process that we didn't bottom up and top down but when you look at the size of scroll bar global portfolio. The nature of our clients in terms of the segmentation we do of course.

Property policy that have some manuscript wording.

As I said my opening remarks, the overwhelming majority of the standard of commercial property policies.

Contain clearer solutions for viruses Miss fairly standard in the industry.

Also required of theirs direct physical loss or damage that impact the insurance business operations <unk> <unk>. So that that's 0.1, there are limited instances, where we do right affirmative coverage for communicable diseases, but even in those cases, it's only on a supplement.

Basis and personally when we had very strict on the riding guidelines that awful awful. The result in you know coverage for only specified and diseases and and I've been back.

<unk> also be a government closure, calling five physical presence over this either fell so again, it's it's fairly clear and just to give you. Some contacts in terms of what I'm talking about is that 100 per cent of our sublimit aggregate too well less than 1% of our total limits in our commercial property policy. So the berries.

Small portion I'll be overall property exposure and I would just know that I mentioned in my prepare tomorrow.

Comprehensive reinsurance, whether it's on a property burris basis, we have low wouldn't maximum points on a per occurrence basis that regional and we also have global after it's been attached to follow it will be on a frequency to have already made some so far out along the answer but I think it's important to get into the detail yeah.

Thank you Peter next question.

<unk>.

We will take our next action from Gallacher whatever.

<unk>.

Good morning March March you mention your plan on running with higher dad for the time being which I think that makes sense given the current environment have you gotten any sense from the rating agencies I'm their reaction to the higher library, which for now and then just a a follow up.

Question on the investment portfolio, a appreciate all the disclosure there.

The 18 billion of other invested assets it looks like 6.7 billion of that as his legacy would you expect most of that.

To be transferred with the Fortitude retail.

And and and then sorry for the string here, but then just one related question that eight and a half billion of real estate alternative investment.

Should we expect there to be any kind of impairment on that into queue or is there some buffer with historical cost accounting now thanks.

Okay.

<unk> Mark you wanted to talk about the debt and then I'm going to ask pick over on the investment portfolio questions. So.

If you go first.

Thank you, Brian and I I will do that as well with regard to that yes, we spoke into the rating agencies. In fact, we were in in conversation with them on the revolver draw them as a matter of fact, and I had very good strong and support them.

Conversations for them as anything.

In future, we may contemplate of course, we'd be involved.

Wow.

With that I will turned it over to Doug system ask talk about this too investment quest.

Thank you must then the morning, well I I would refer you to page 49 of the natural supplement which basically goes.

Legacy segmenting the assets that are held in that segment.

Oh Buskey now <unk> those approximately $40 billion left after which we also disclosed enough for themselves what you're going to be sorry, let's see I'll related for the two.

What questions that will be retaining will be some real estate investments that will be retaining that are part of like to see there will also be some some fair value option bond that will be retained legacy that was part of the old financial products direct investment book. So those will not be part of the cell phones action, but material.

The amount of the assets will be at you know over $40000 will be separating as part of but the sailor fortitude with respect to the real estate you know, it's <unk> <unk> <unk> as you know.

You only experience rapidly acceleration once a month of marked with respect to the developing it emerges with the Kobe situation. So we're still in the most analyze.

<unk>.

<unk> no determine what's the impact will be on out real estate portfolio, but she'd be noted that are real estate portfolio is burst.

It includes both domestic and international exposures, so that'd be the impact will learn more things go on I think we'll or learning to boast about our real estate, obviously on the most mothers loan side. So that's what we're getting some real insight, what's going on real estate market and most.

Commercial mortgage loan theme park, very very closely with the real estate equity team Oh.

Oh, those investment dramatic reckless great level of upside of <unk> more than sites about what's going on in that market, but it's still grill out.

Good. Thanks. Thanks, Thanks, though so why don't we go to the next question then.

Well, we'll take our next question.

<unk>.

Oh, good morning, everybody.

Helpful Open problem [noise].

Well, but with local.

Mm 21.

You can guide them.

What it.

Does not mean.

Does it from your perspective that you could but cold.

<unk> or <unk> well.

Ah well, let me, let me pick that.

We who knows I mean, you don't know what were you know whether cove it will.

Will reemerge if it does.

You know go down to an impact to 2020.

It's really a question of you know how much predictability as their quarterly earnings and it's difficult to predict.

Quarter. So if you can't predict a quarter I don't want to try to predict a year or several years.

I think it's important to note, though that the underlying power. The company remain you know, we're we're very very strong and the geometry, guys continued to show improvement.

You know, but good work that has been done over the last three years. What good is empty theater theme of continued on so you know to the returns that we were talking about I believe if you certainly see fit to cope with it out for a second.

Are going to continue to improve and so that to get could we were honest. We're still on now you have over the event.

I think the code would've been thirdly would in fact, Illinois, and a short term basis, but again, we think that long term empower the company is there so.

You know could itself. It's it's it'll be large I go through that I believe it will be the largest.

You know event in in the insurance industry, but it is a you know with an inflection point and.

That that effect that were that we'll see you know we've already been in a market on the T.I. sides handling true. Besides you know that was or who was currently you know with improving and the rates in terms of conditions, where we're we're improving for for the risk taker.

<unk> is going to prove to be an inflection points. So you know companies withdrawn balance sheet. We have one company from strong management. We have one companies that have you know been well risk managers and we've done that now.

They're going to be you know on the right side of that and and so we you know we you know we we believe we can handle nice thing that comes with coded and we still very strong, but predicting quarter to quarter is different possible. So I hope that ill.

It could go next.

<unk>.

My fault culture norm that says.

When you talk about the <unk> the largest catastrophe <unk> history.

<unk>.

Yeah.

Yeah.

Large small yeah, and maybe also do the proportion of lawful then you'd come home or.

Maybe not directly related.

Well market.

Well I I, you know I'm going to have okay to talk about.

What we see you know in the you can see side and then I'll listen to talk about Illinois computer do you want to talk about that for.

Sure. Thank you Brian.

We mentioned you know quite a few lines when we were referring to the first quarter when the travel.

A thing and age.

Bottom line to think about.

Activities workers compensation.

We don't know about you know liability, we you I've been watching embarrassing carefully and making certain that you know we're looking at any line that we think could have an impact but I've been in what I can tell you that Brian's comments before is that.

We have a very thorough process will be consistent all the way through you know we know the cat is still ongoing which is you know very rare. So as things immersion develop you know we will adapt to that and we're looking at this across you know every global geography, one would think does impact and multiple lines of business.

Because the you know the cat is still going we've been up two months left in the quarter. It's hard to see what you know made a trend bar in the future, but so we have a great process and you know, we'll we'll keep everybody updated on you don't want the business as they emerge.

Right.

Okay.

Yeah.

I'll I'll address it really in three pieces mortality the markets and then maybe just to remind round by saying Ah. So are recorded more coffee in the first quarter was blown pricing, which continues the trend that we've had for the last three plus years, but later in the period, what we did notice it isn't that there were some delays and reporting.

Generally related to the.

<unk> certain documentation so we put up a modest side. The N.R. really for just have made running reporting I think look at hand, we do expect that there will be additional mortality in the second and third quarter, depending upon how circumstances and behaviors involved.

Does that to me, but we expect some adverse mortality overall for 2020, Oh, we don't expect to see significant impacts and a balance sheets based on what we know and and there could be some offsetting factors in terms of the market effects.

Thanks, I mean, when equity markets move, particularly when they go down that ultimately reduces our future expected see income, particularly in the annuities portfolio, which we have to reflect immediately and back.

The reality is is that he reduce reserve overall actually emerges as additional profits in the future and also serves to increase our so P.O. pretty one reserve.

Changes in credit spreads, we see the immediate impact on therapy value options. So those too short term market affects our reversible not least to the third thing, which is pricing and how do we feel about current price thing and certainly you know treasury rates are at all time low spot our ability to price product is to paste is is based not only on where.

Base rates are but also where credit sprayed saw where credit spreads are what is the shape of the yield curve and where investor expectations and appetites are and so based on the car environment, We're still able to price the long term expectations that we have certainly there's disruptions in the sales environment.

But you know it's difficult to anticipate what the future and bad is going to be and how it.

It's about three perspectives I have on the long term.

Earnings potential.

Like.

One thing I'd, just like to add their yard that you know Peters comments about certain lines of business you measured worker's comp I think it's important to remember that A.I.G. as the risk that workers compensation business significantly probably over the last seven eight years and where as she finds itself now is mostly in los sensitive related.

Programs.

Which have an average deductibles north of a million dollars. So when you think about deaths in the work comp area that statutory they determined by state that's going to be under agree to.

Double.

Standard medical and temporary all that falls away. It has to be a major affirmative partial to really penetrated. So I think the book is well position given what we're talking about here.

Yeah, and just one of those people in the cockpit and Peter mentioned this earlier, but.

We get there are a covert claims come again, but I think you have to recognize that too in a decline.

And the number of of claims coming in otherwise and so it remains the P.C.

What the net effect.

Of covert has gone to work with God, that's a that's something to keep keep in mind.

But with that Abby, let's go to the next question.

We will take on the question from Michael Phillips with Morgan Stanley.

Thank you the money.

Plus one comments on expected continued underlying core profitability in general.

Maybe how you think about the near term impact of exposing drops given the economy and for them but.

The profitable didn't didn't plan.

<unk>.

Okay, Michael well that's theaters computer went out to do then.

Okay. Thank you the question.

We certainly are paying very close attention to lines of business that wouldn't be affected by the economic kind of ones that are generated from cold, but 19, you know I mentioned some of them in a in the car question in areas, where we're watching for lost but I would think that there's going to be a meaningful fall off of travel on the second quarter.

<unk>.

They could be some fall off an aerospace marine and energy and we mentioned workers compensation.

Having said all that is that you got to remember the segmentation and demographic of our portfolio I mean over you know 75% of our businesses on some form of I'll be the deductible S.I.R. affronted captive and so we don't have a direct correlation even though his rated off holiday pay roll sales.

No it's done on an excess basis and therefore, we do not think we will have as much headwind in terms of premium reduction there will be some but it'll be more modest because it's not a direct.

<unk> exposure that generates the premium we have you know different factors in terms of how we adjust access printing. So we just don't think it's gonna be ads pronounced by mentioned on no workers compensation. The decrease in frequency, it's not a trend yet, but it's an observation that no law cold losses are increasing we're seeing come up.

<unk> and you know where our clients are retaining wall since that those are are dropping so glad we look at.

<unk>, our portfolio, where we attach on an access basis and the commensurate premium as I said, there's going to be some lines of business that little effect, but we think there's opportunities for other areas of grow as we have reconditioned a portfolio, we'd like where we are and things that the leadership position that A.I.G. can demonstrate in the market.

Will give us a also some select opportunities for growth.

Excluded Michael anything else.

Oh, that's that that could be there for sure. Okay. Thanks, Michael I I figured I'd question.

Okay kind of question from some with hyper sampler.

Good morning, Thanks for calling one.

A little concerned that mm.

<unk>.

Mm mm mm mm mm mm mm.

You talk about how.

True.

<unk>.

Yeah well.

Mm mm mm.

Oh my.

Hmm.

Right.

Mmm.

<unk>.

Okay. So support you want to you want us to talk about in a covert versus a reinsurance program.

Yeah, It's it's coded was reliability <unk>.

Yeah, Okay well.

Peter I guess that Q. again.

Thanks, Brian and Paul.

So I I outlined you know our property program and said that we had you know reduced volatility significantly.

Oh, no liability sign I think we've done actually even more you know we used to retain significant you know limits within A.I.G.M. towards the building a program overtime best significantly reduce the net limits that we put out a as well as the gross limits and also you know we did it on axis philosophy.

Also on a quarter share so on a general liability policy has an example, we would have you know less than probably depending on the limit we have only 50 per cent plus four to share on our first when the retention, we've 100% reinsurance above 25 million. So we have.

You know.

If you issue maybe policy.

A significant side policy. The most you'd have met his between 10 and 12 million. So we actually have significant protection on the phone to share as well you got this loss.

So Paul let me just jumped they look at you know <unk> are we insurance is is good and salad and it is done you know tremendous drive along with his team to put that together our first line of defense.

The way, we manage our portfolio to start with you know and so you know you can't rely on reinsurance who to make you know portfolio a better than it is so.

We've done you know a tremendous amount of work.

Rift selection.

Limit management attack point and pricing along all the lines.

<unk>.

Casualty.

That's where we feel very confident about our situation. They use the v. impacted goes it will.

Well you know as a as those impacts unfold. So I just want to add that to have another anything else.

No that's okay.

Very much.

You're welcome full thanking next question out.

The next question I'm, Ryan Tunis with economists research.

He thinks the morning.

One of the confirms and I guess peterschmidt earlier in the culinary yeah, there's affirmative B.I. coverage for one person or total property.

It sounds like that could be someone in a big emotional number.

Well.

It was going to go ahead you to go ahead.

Like Brian why would I said was not that that was affirmative <unk> limits wouldn't trigger coverage. What I said is that the limits that we provided on the affirmative which have again a bunch of triggers that I outlined in my previous answered that we have well less than 1% of our total.

Diminish when you compare that to our property you know gross limit, so again and fits well less than 1% and I'm not suggesting that we've confirmed that there is coverage or that we are adjudicating claims on that amount. It's just that we have for women and then it goes case by case insured by and.

Sure in terms of what the losses.

Yep.

Add something here and that is you know you appear to talk about that process with evaluating the losses, you know occurring in the first quarter.

I've I've been in this business, a long time 40 plus years and.

In a lot of you know things come and go I've seen you know difficulties and trying to access.

Loss I have to tell you the process that they that we went through that they went through we went through.

As good as anything I've ever see they have gone through every bit of the portfolio.

They looked at everything where there with a potential.

And and and evaluated whether there would be reason to put up a reserve. If it was it was done so we have posted the reserved.

That we believe are appropriate you know, albeit a conservative.

For that everything that happened in the fourth quarter I, just want to make sure everybody understands that.

<unk> yeah, yeah. So could you do something a little bit about how you're you're assuming business interruption losses might respond with them to balance book and also just the 272 net loss number well does that look like on a grossly since reinsurance it's okay, well cuter that few again.

Oh, Okay, you know without a tree, we'd gone cheating by feeding taking a look at our you know gross met exposures and put up what we thought was the best estimate based on again the same process to we outline for the core of a of A.I.G. in the first quarter in terms of.

The net and gross I mean look if there's some you know reinsurance I I, it's not going to go into great detail in terms of what the net is versus the growth is still an evolving you know loss as we outlined with meeting <unk>, but again I'm outline what I thought were the reinsurance structures that could apply indeed.

That the last word to grow overtime.

Okay. Thanks, right I go to the next question.

We will take on to action Meyer she'll quit tapes.

Related and stuff.

A lot of investors.

I really think about.

<unk>.

Where there is.

No affirmative Hubbard, but no but.

Given some apparent court decision thing that nonsensical damage with qualified.

Well the technical question.

<unk>.

Admire it's a really hard question to answer because it's you know hypothetical you know the only thing I can really do with comment on the policies. Then we have and where we think you know getting an outline the demographics of it and think that exclusions that we have and where we grant that affirmative coverage.

Very specific and so you know it's hard to answer that because I don't think I'm really apply for portfolio.

Okay that sample unrelated but.

I wouldn't like that maybe better results and international personal line.

You mean, an international south or in place or.

Mmm.

Natural personal wants a theater.

Yeah, what what would happen in international personal lines, it's not an anomaly, but we'd basically had a one off program that impacted we still have earned premium. So it was put into one off in 2018 [laughter] earn premium in 19 and have you been doing the we underwriting of the portfolio.

Not as much as we did on a commercial we just lost a little bit a premium unsold you know the ratios Ah look like they perhaps or knock on the right direction, but the absolute performance is very strong we'd like the personal book you know very much anything that there's some real discrete opportunity to grow, particularly and H.M. and an area of the cross.

All of international enactment album, New digital by former putting in.

I wouldn't read into that in terms of a trend is just you know the impact of a runoff on business my.

Yeah.

<unk> either connect Meyer, let let's go to the next questionnaires.

Our next question can turn Brian Meredith.

Yeah.

Yeah. Thanks to bring will have this year.

<unk> with 19 on the general turns didn't smoke a life insurance.

I'm wondering if you all received from the strategic rationale of actually having both like in the P.T. operations named company.

Well you know right I guess you know my job is to continue we always think about you know.

So that we have does it make sense.

Would we be better in a different structure, so that that thing can continue.

I think at this point you know, we're we're comfortable with where we are but I. You know that's my job is to come to continue to do that so will continue to keep flipping it that you know.

<unk>.

Why these two belong together and any of those who are still there, but we would oh, what we think about.

But there's nothing that I would talk about you know right now I think we're comfortable.

And the other quite.

Yeah, just just one of the quickly.

So given that you send the largest natural last week you know.

No problem. However, you know.

<unk> no yeah, I G.P.R.W.I. well over $2 billion wants to yeah are we are we talking about it tends to Los here you know, there's gonna be well most of the billion dollars for you guys. Ultimately the date treating allergic natural whatsoever.

Well I look at we're not the company we were huh right <unk>. We're not the company then you know that's been a complete you know.

We look at the risk you know that the risking that we've done a you know the limits management.

Reinsurance profiles all lead US you know put us in a position where we are a much stronger in it and and able to withstand and events.

And so you know I I point out that this is the largest event because I want I want people to understand that you know, it's creating an inflection point in the industry, but they were going to be found Hutu do well in this process and some to won't we're we believe we will do well <unk>. This this event.

And that we will <unk> will emerge stronger and more in demand.

Then we were before.

Thank you.

You walk in Abby next question.

We will take our next.

Andrew Triggerman with credit.

[noise] morning.

Taking my question I'm a license.

I'm one of them yeah.

It's more.

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Oh these are what you might as well and.

Yeah.

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You wouldn't.

Oh, well yeah hedging.

Number.

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Yeah.

That's really what.

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Okay, Andrew Thanks, So I'm going to have Kevin an obvious they talk about the the sensitivity around cope with 19 and and the hedging program and having program I think yeah, because I want it to you know the piece about the variable annuity, but I I would like does the jump in on the what would happen with.

Fortitude as well so Kevin why don't you start.

Yeah. Thanks, Brian facts. Thanks, Andrew So so look I guess I'll address that from a couple of perspectives I I covered the market impacts the short term market impacts.

So I'm not sure what I need to go back to that but I mean, clearly when equity markets move it and ask the.

P. and in the in the back and when the fair value is moves that impacts that their value options. Yeah. Those are the line line.

Wow.

I'm, sorry, I just.

Yeah I.

I needed to be clear I mean.

Well I'm working on it yet so.

So it's very it's it's very it's very straightforward that in the first quarter.

We saw immortality, better then pricing, we believe that were delays and the recording of those claims.

As we look at second quarter and third quarter based on you know where the current estimates are this as well within our first level modeled stress scenario, we don't expect any significant impact on the balance sheet and there's also you know it it's difficult to <unk> project, how people are going to behave help.

You're going to respond so that's about the best that we can do is just based on where we believe our market presence and G.R. geographical present star versus the current expect says the losses.

You know in terms of hedging what I would say is as first of all you can only heads what you have and so the liability profile that we have is a big part of the success of our hedging program because we have primarily d. wrist benefits sold well after the V.A. arms race of the mid 2000.

And so you know that includes our feature of requiring income allocation volatility control phones et cetera. We've hedged all you know hedgeable market risks, we've left an open position relative to credit spreads because we believe that that is a a a natural hedge against our general account port.

<unk> overtime, our heads effectiveness as around 90 per cent sentence continued to perform.

Almost exactly as we expected in the various market dynamics, resulting in you know I think the the results for good results reported to the quarter.

But I'm gonna pass on to dumb because another feature of our hedging success and the first quarter was also in the fortitude portfolio.

I think you Kevin so so I just wanted a comment on the fact that but what do you don't really see in the financial is is with respect to the legacy segments are seeing all the market market impact, particularly of the fair value option securities that are are in like a C.N.N. Some to some extent <unk> like you don't see the fact that we had established interest rate and.

Credit hedges, which all that P.N.L. in effect goes to realize capital gains and losses. So you don't really see the data that like the best way to look at how that how the entity performed and how those hedges a foreign how effective they where it says mark played in his prepared remarks, he said that the regulatory capital ratios for the entity what <unk>.

<unk>.

Over a year ago. So that gives you a sense of how effective hour hedging strategy was for things that you're not necessarily seeing when you look at the mark to market volatility that.

Financial statements and the H.T. I don't think.

Okay. Thanks, Thanks, Doug and Abby I think we're you know we're running a little long, but why don't we pick one last question.

Yeah. Our next question will be.

<unk>.

Thank you would take my question you said you expect Cove it to be the largest single P.N.C. event industries ever seen could you give us some background on what the bases with this stuff that.

Specifically the length of shut down you're assuming here.

And what are your thoughts on the wheel is peace released Friday.

And over how many years you expect claims to develop them be paid I'm, assuming multi year.

Paver profile, but if I'm wrong. Please correct me.

Okay, well, let me let me start with that and then you know Peter can can add from it but you know in terms just in terms of the payments to know.

These are particularly business interruption claims or very you know long and processed and and and payment.

You know I think we're just.

I think we just cleaned up the last business interruption from from a.

So they had these to give you some ideas so anyway, but.

You know in terms of the of the estimate I mean, we've seen a lot of different estimates I think you know they run the range, but the first thing you have to understand is this is global in nature.

And then make us affected every corner of the world. It isn't that hard to you know come up with you know Ah you know reasonable assumption around you know the effects because we're seeing effect in Europe, we're saying effects in Japan with being effects in Latin America and of course.

You know here in North America. So you know whether it's whether it's the you know the effects of cost that we thought to that or it.

With this with interruption you travel and.

Event cancellations and on and on and on it though because it doesn't take much to figure out how this is spread across the glow in the the question for US is you know what what is our with our position on all those things and you know we feel very very comfortable with.

<unk> manage this risk.

In general and now we you know, we're well position for covert Peter if you want to add anything to that.

Would probably not much the only thing I would just add a is what you said we've seen a lot a very good written documents that have come out, but just because of the ongoing nature of the event and the complexity of the different lines of business. It's the wide range of upscale and turns the low end to the high end is about as wide as you'll see in terms of predict.

In cash so it's it's very hard to you know pinpoint anything or the level of accuracy until this evolves over time.

Well, how can we say that it's gonna be the largest of that we've ever seen when there's a wide range me to get your <unk> you were saying there's going to see Katrina.

So on the basis of that what I mean, it again, what what are we what are we saying I mean, the the world's reports the linked to shut down is really the determining factor there, saying a year at $80 billion.

When you say, it's greater than Katrina is that is that the basis of your.

Statement or tend to be less than the I mean, what I'm trying to get that is how are you getting too.

That statement.

You see on me.

Yeah.

<unk>.

Yeah I mean.

So looking at I mean, once you get off the Willis is that you know we've done a you know ground up analysis based on what we think can be an industry loss.

With a lot of assumptions you know again length of time severity geographic spread and I've done it across multiple lines of business and again, we're not in the business of you know pointing out ranges as to what is going to happen to the industry as we look at our own portfolio, but when we look at market share of you know different.

The business, we came up with a a estimates that exceeded Katrina and I think that was the basis of Brian statement.

Yeah.

Well yeah, okay. It wouldn't be helpful. It'd be helpful. If you'd told us some of the assumption behind that.

Thank you appreciated comments well. Thank you very much I got that we've we've gone past, though it's time, so I I want to wrap this up.

And so <unk> I want to thank everyone again for joining us today and I also want to <unk> clients and distribution partners or shareholders other stakeholders.

Yeah, we're all in this together and and we will get through this quality time together.

Most importantly, finally, you know I Wanna, Thank our colleagues sent round the world.

Guys, you, you've exceeded my expectations and and I could not be prouder of of what a we've accomplished together over the last few months.

So everyone. Please be say.

And be healthy and thank you again.

Right.

Yeah.

Ladies and gentlemen, miscanthus today's column, we thank you for your participation.

Yeah.

Yeah.

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