Q4 2020 American International Group Inc Earnings Call

February 17, 2021

[music].

Good day and welcome to Aig's fourth quarter 2020 financial results Conference call. Today's conference is being recorded at this time I would like to turn the conference over to the newspaper EPP Hertzel head of Investor Relations. Please go ahead ma'am.

Thank you Orlando.

Morning, and thank you all for joining us.

Today's call will cover Aig's fourth quarter and year end 2020 financial results announced yesterday afternoon. The news release financial results presentation and financial supplement are available on our website at www Dot AIG dotcom.

Our 10-K for 2020 will be filed on Friday February 19th.

Our speakers today include Brian Duper of CEO, Peter Zaffino, President and CMO of AIG, and Mark Lyons Chief Financial Officer.

Following their prepared remarks, we will have time for Q&A, David Mcelroy CEO of General insurance, Kevin Hogan CEO of life and retirement and Doug The Schiel, our chief investment officer will be available for Q&A.

Today's remarks may contain forward looking statements, including including comments relating to company performance strategic priorities, including AI cheese intent to pursue the separation of its life and retirement business business mix and market conditions, including the effects of COVID-19 on the AIG. These.

Payments are not guarantees of future performance or events and are based on management's current expectations.

Actual performance and the events may materially differ.

Factors that could cause results to differ include the factors described in our third quarter 2020 report on form 10-Q, and our annual 2019 annual report on form 10-K, and our other recent filings made with the SEC AIG is not under any obligation and expressly disclaims any obligation to update any forward looking statements.

Whether as a result of new information future events or otherwise. Additionally.

Additionally, some remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in the earnings release financial supplement and earnings presentation, all of which are available on our website at www Dot AIG Dot com I'll now turn the call over to Brian.

Good morning, and thank you for joining us today.

I'd like to highlight some of the important milestones we achieved in 2020, and then I'll turn it over to Peter to provide more detail on our results for general insurance and life and retirement as well as updates on strategic initiatives such as the separation of the life and retirement business.

G 200, lastly, mark will provide the CFO update.

But it's when he was an extraordinary year during which our company demonstrated tremendous resiliency, we quickly and effectively transitioned more than 90% of our work force and over 50 countries to remote working we established a cross functional task force to implement best practices to protect the health and safety of colleagues.

While continuing to deliver high quality service the clients distribution partners and other stakeholders.

<unk> continues to effectively manage through COVID-19, and its collateral effects of the global economy because of the strong foundation, we began to build beginning in late 2017.

Instill the culture of underwriting excellence adjusted risk tolerances and implemented best in class reinsurance programs strengthens our vast global footprint de risk the balance sheet and maintain a balanced and diversified investment portfolio.

And then October we announced our intention to separate the life and retirement business for me I G, which was made possible by the work our team has done to strength of general insurance in particular.

And each business as the market leader.

Before I turn it over to Peter I want to note that this is the last earnings call I will participate in as you know we announced that on March 1st I will become executive Chairman of the board of Pedro will take over as President and Chief Executive Officer the.

Transition will be seamless.

Peter and I have tackled many of the systemic and pervasive fundamental problems from the past and the company is now positioned for long term sustainable and profitable growth.

Well there is still work to be done and I have every confidence of Aig's stakeholders will continue to reap the benefit of the hard work that is taking place across the organization on our journey to make AIG the top performing company.

The turnaround of the general insurance in the enterprise wide transformation at AIG is on the scale I've not seen them of 45, plus year career I take great pride in what the team has accomplished and know that the company and our colleagues will be in great hands with Peter as the CEO of AIG now I'll turn the call over to Peter.

Separation of life of retirement from AIG capital management progress, we've made on AIG 200, and financial and operating highlights for general insurance and life of retirement.

2020 was the pivotal year for AIG and I'm pleased to report the 'twenty 'twenty, one has gotten off to a good in the fast start due to the momentum we have coming into the new year.

2020, this year will be another year of substantial progress for our company.

As Brian noted, we made the critical and strategic decision last October to separate the life retirement business from AIG.

We could not have made this decision without the significant turnaround taking place in general insurance and solid performance in the life and retirement.

Our fourth quarter results provided further evidence that each of our businesses remain financially strong market leaders and well positioned for profitable growth over the long term in their respective markets.

Since our last earnings call, we've been working purposefully and with the sense of urgency on several fronts related to separation.

We are actively working towards an IPO of up to 19, 9% of life and retirement with teams focus on Standalone audited financials actuarial work and rating agency discussions among other things.

Just on our work the day, we continue to believe that no additional equity capital will be required given the improvements in our subsidiary capital positions over the last few years.

Additionally in connection with our October announcement, we received inquiries from parties interested in strategically aligned with us and potentially purchasing the 19, 9% stake in life retirement.

We are pleased with the level of interest and quality of potential partners for life and retirement business and believe the sale of a minority stake could be an attractive option for AIG the shareholders and other stakeholders.

We are carefully weighing the relative merits of this path compared to a minority IPO.

Taking into account the impact on value creation for AIG execution certainty regulatory and rating agency implications and delivery of life retirement growth strategy over the long term.

As you know in any decisions, we make will be subject to regulatory approvals overall I am very pleased with the progress we're making on the separation and we will provide a further update in the near term.

Turning to capital management, we ended 2020 with parent liquidity of $10 $5 billion, a $2 $9 billion increase from 2019.

We enter 2021 with significant financial flexibility as a result of our focus on Derisking capital management and liquidity, particularly in 2020 as a result of COVID-19.

We will continue to invest in our businesses to support growth and operational transformation and we will return at least $500 million of capital to our shareholders through stock repurchases in the first half of 2021.

This amount will more than offset dilution from stock based compensation, which out of minimum will be of core principle of our capital management strategy going forward.

As we move forward on the path of separate life retirement and generate capital. We will continue to focus on delevering and investing investing in growth in our businesses.

We also intend to be active and prudent managers of capital and return it to shareholders when appropriate.

Current expectation is that an initial disposition of 19, 9% of life retirement, whether through a minority IPO or sale to a third party will generate net proceeds of such that some portion can be used towards the further share repurchases.

And while it is not currently of priority over time, we may consider inorganic growth opportunities that would be accretive to our businesses and growth strategy and otherwise create value for our shareholders and other stakeholders.

Once we make a decision on the initial step of the separation of life retirement, we will provide more detail on our medium and longer term capital management priorities.

Now I'd like to provide an update on AIG 200, as a reminder, AIG 200 is core for core objectives underwriting excellence modernizing our operating infrastructure.

The user and customer experience and becoming a more unified company.

Throughout 2020, we made measurable progress in spite of the ongoing remote work environment and in some cases accelerated certain initiatives.

On December 31.

We completed the sale of our shared services operations to Accenture, which streamlines.

Lines are operating model.

We've made significant progress in driving improvements in infrastructure and systems architecture, while reducing the real estate costs and other general operating expenses.

We exceeded our target run rate savings for 2020, and the cost required to achieve were lower than initially expected.

We exited 2020 with a $400 million run rate benefit with the 30% ahead of the guidance we provided in 2020.

The success of AIG 200 to day demonstrates the discipline and rigor that the.

The team leading the strategic initiative that's using.

The team is taking decisive action as we execute to position the company for the long term.

T 200 success to date also reflects the resiliency and flexibility of our global colleagues, who have embraced change, while making significant contributions to our progress.

In 2021 of major focus of AIG 200 will be advancing our digital strategy through effective use of data and process, enabling technologies as well as driving greater operational efficiencies and improved customer experience.

We also expect to make significant progress in 2021 on a global data warehouse in support of our financing underwriting transformations.

Our overall targets for AIG 200 remain unchanged, we still expect to achieve run rate savings of $650 million by the end of 2021 and to deliver aggregate run rate savings of $1 billion by the end of 2022 against the total investment of $1 3 billion.

Turning to our financial results I'll start with general insurance in the fourth quarter of 2020.

We saw growth of net premium written in our commercial businesses with year over year net premiums written increasing 7% after adjusting for foreign exchange driven by improved retention and higher rates.

North American commercial grew approximately 10% with meaningful growth for me I jewelry and international was up 5% after adjusting for foreign exchange.

As we've previously outlined North America personal insurance continued to experience reduced net premium volumes.

It was primarily due to our decision to strategically reposition our high net worth business. The syndicate 2019, the partnership we established with Lloyds, which resulted in higher ceded premiums.

The impact of COVID-19 on line, such as travel and accident and health.

While it's still very early in the year based on what we are seeing we expect a similar overall growth trend to continue particularly in commercial and.

And we will achieve top line growth for the full year 2021.

Turning to the combined ratio, we achieved another quarter of positive results in our core business with continued improvement in underwriting margins.

In the fourth quarter the accident year combined ratio, excluding cash improved by 290 basis points to 92, 9% compared to 95, 8% a year ago.

This improvement was led by our commercial businesses, which improved our accident year combined ratio, excluding cash by 440 basis points with international commercial improving by 490 basis points in North American commercial improving by 400 basis points.

The adjusted accident year combined ratio for the full year 2020 was 94, 1% of 190 basis point improvement year over year.

Commercial's adjusted accident year combined ratio for the full year 2020 was 93, 2% of 340 basis point improvement year over year.

These combined ratio of improvements reflect very strong performance of general insurance continues to benefit from an improved business mix in the commercial portfolio driven by the strategic underwriting actions we've been taking.

Turning to range in the fourth quarter, we continue to see considerable improvement and tighter terms and conditions and commercial we saw sustained strong rate momentum and improvement across all lines of business.

With the exception of workers' compensation for the fourth quarter, our commercial business achieved rate increases of approximately 15%.

North American commercial rate increases were 21% in the fourth quarter compared to the 14% in the prior year quarter. This improvement was driven by excess casualty, which saw rate increases of 45%.

Financial lines with rate increases of over 25% led by 35% increases in D&O retail property in Lexington wholesale property, both of achieving approximately 30% rate increases and Lexington casualty with 25% rate increases.

International commercial rate increases remained strong at 14% in the fourth quarter with second half of 2020 rate improvement accelerating from the first half of the year. The largest rate increases were in global energy with over 30% increases financial lines with 20% increases.

With over 15% increases in commercial property with 15% increase.

Turning to Validus re one one renewals overall, we saw solid risk adjusted rate improvements in the U S property Cat U S casualty International Cat Marine and energy financial lines and specialty lines.

For the U S proportional business material underlying rate improvement was generally applicable for our <unk> portfolio and international rate improvements were achieved in essentially every territory.

For all of US achieved a material increase of net written premium at the January one renewal period, which generated better balance across our portfolio led by international property New business along with final sign is across our portfolio, we're very favorable as well.

With respect to re insurance AIG purchased overall, we're extremely pleased with the outcome of our January one renewals in a challenging market environment.

This was a critical year for us to evolve our reinsurance program strategically to reflect our significantly improved underlying portfolio.

In General insurance, we maintained our philosophy of the partnership with reinsurers and reducing volatility in the portfolio.

We restructured our core placements in every major treaty.

Keep in mind that AIG places over 35 treaties at one one so I'll provide a few key highlights.

We reduced the aggregate amount of property catastrophe limit purchase as a result of a significantly reduced gross exposure and property Pms.

We reduced the catastrophe per occurrence attachment point in the North America from 500 million for 200 million for all territories, except the southeast and Gulf, which remained at $500 million.

We reduced the global share to aggregate limit retention in North America from 750 million to $500 million.

We purchased the cap program for PC G are high net worth of business that protects syndicate 2019, and AIG without taking on additional debt limit.

We reduced our overall catastrophe premium costs by over $150 million and our casualty quota share we improved the ceding commission by four points and reduced our overall session.

We also introduced the new access layer of $10 million excess of $15 million to remain consistent with our risk appetite.

Those were just some of the highlights of our one one renewal season, we are particularly pleased with the ongoing support we receive from the global reinsurance market, particularly our core partners.

With respect of life and retirement the business continued sequential improvement generating quarterly adjusted pre tax income of $1 billion and adjusted return on segment of common equity of 16, 4%.

For the full year 2020, adjusted pre tax income of $3 5 billion and adjusted return on segment common equity was 13, 9%.

Results for 2020 reflected higher private equity returns and higher call and tender income driven by lower interest rates and tighter credit spreads. This was partially offset by the impact of COVID-19 mortality lower fair value option bond income and base spread compression.

Life retirement of strong performance in the face of macroeconomic stress and high levels of volatility. During 2020 is a testament to the quality of the balance sheet diversified product offerings and disciplined risk management. The hedge program performed as expected throughout the year and the balance sheet remains strong.

Life retirement has a large and diverse in force portfolio and as the result of the Fortitude sale has relatively limited net exposure to legacy blocks of business no long term care exposure and limited risks associated with pre 2010 variable annuity living benefits.

This broad portfolio of approach across products and channels with particularly advantageous during 2020.

Given the disruption in retail sales during the year the team focused on attractive opportunities to deploy capital in the institutional markets business.

<unk> and strong growth for both pension risk transfer transactions direct and through reinsurance and debt issuances.

Group retirement maintained steady payroll deduction periodic deposits and improved large group plan retention results overall.

Overall life retirement remains well positioned to meet the ever growing needs for protection.

<unk> savings and lifetime income solutions.

As I mentioned, we entered 2021 with significant momentum and the continued sense of urgency on our path to becoming a top performing company.

I'd like to thank our colleagues around the world for their focus and determination and supporting one another while delivering significant value to our stakeholders. Thanks for their efforts, we made tremendous progress in 2020, a year when the world changed for everyone. In every organization the <unk>.

Responsibility accountability and opportunity of that commercial enterprises face today surpass anything corporate America, and the global business community to have ever faced.

In the months and years ahead, we will continue to adapt and evolve and introduce the stronger version of AIG as we strive to become a leading global insurance franchise.

I'm privileged to be taking on the role of Chief Executive Officer of AIG and appreciate the opportunity to lead this company I.

I want to thank Brian for the partnership over the many years, we've worked together and for asking me to join him in at AIG back in 2017 professionally.

Professionally the last few years have presented the greatest challenge my career, but I know that this experience will also be the most rewarding.

And I want to extend a special thanks to Brian on behalf of all of our colleagues for his leadership commitment to solving complex problems and building a foundation of stability that position us well for the future.

I look forward of continuing our work together as Brian steps into his new role as executive Chairman now I'll turn it over to Mark.

Thank you Peter and good morning, everyone.

Before I go into the fourth quarter results I want the highlight that we re segment of our financials. This quarter and now have three business segments of general insurance life and retirement and other operations. The historical recast that information and description of the changes for in the 8-K filed on February one and posted on our website and were principally the.

Elimination of the legacy segment and the realignment of its book into the life and retirement and the other operations as well as the small shifts within general insurance starting for the quarter AIG reported adjusted pretax income or a P. T. I of $1 1 billion and adjusted after tax income of $827 million of 94.

<unk> per diluted share compared to 923 million or a dollar of free cents per share in the fourth quarter of 2019 of the key drivers of this quarter were first of general insurance accident year 2020, combined ratio ex cats of 92, 9%, which is the 290 basis point improvement over the fourth quarter of 2019.

The second strong life and retirement a P. T I of 1 billion driven by individual and group retirement as well as institutional markets activity.

Strong net investment income thirdly, $3 2 billion of consolidated net investment had come on in a T T I basis, primarily reflecting higher private equity and hedge fund income move.

Moving to travel insurance fourth quarter, adjusted pre tax income with $809 million up $31 million year over year as increased net investment income from alternatives offset the impact of higher catastrophe losses, which totaled 545 million pre tax or nine loss ratio points this quarter compared to six of the half loss ratio points in the.

During the quarter the cat losses were comprised of $367 million of natural cats, primarily related to fourth quarter events Hurricanes Degas, He's troublesome and silverado fires and Hurricanes Delta along with the revised estimates for Hurricane Sally which occurred late in the quarter of Hurricane Laura where Delta had a similar path.

Additionally, there were $178 million of Covid.

Latest losses, primarily related to travel contingency and Validus re.

Prior year development or P y D with slightly out of favorable this quarter at $45 million compared the favorable development of 130 in the 139 million in the prior year quarter.

This quarter included 51 million of net unfavorable development in North America, and 6 million of net favorable development internationally.

The North America unfavorable P Y D was driven mostly by financial lines E. T. L. I E. You know and mergers and acquisition of insurance, primarily from accident years 2016 to 2018, and that's not covered by the ADC with favorable indications primarily in G. L. A growth some workers compensation units and shortly.

Headlines as the.

An additional lens the $45 million of unfavorable development was also split as 5 million unfavorable in global commercial lines at 40 million unfavorable in global personal lines, primarily driven by adverse development in prior year cats as opposed to Attritional losses as usual there was net favorable amortization.

For the ADC, which amounted to $52 million this quarter.

I'll point out that our 2020 net premium profile is now skewed towards our international operations totaling 57% of global net premium.

Furthermore, the international book is nearly evenly balanced between commercial and personal lines and this demonstrates the truly global platform of our general insurance business led by an international book has had better results with less volatility than North America. We.

We expect these proportional to stay approximately the same in 2021, but skewed a bit less towards the international as North American commercial growth struggles of.

A key indicator of the turnaround of our general insurance business is the improvement in the accident year ex cat combined ratio results for North America, and the international commercial lines as Peter's noted North American commercial how the accident quarter combined ratio ex cat that was 400 basis points better than last year's quarter to 93.

6% and international commercial lines improve their accident year combined ratio of ex cat by 490 basis points to 89, 2%.

We continue to view the current accident year of prudently with an appropriate view towards the margin of safety as the book has undergone a massive transformation and also anticipate continued margin expansion into 2021, resulting from the favorable global market conditions as Peter discussed our personal insurance premiums and underwriting.

Results continued the impacted by the repositioning of our high net worth of business and the global pandemic.

North America personal lines was impacted the most with an accident year combined ratio ex cats of of hundreds of two 6% versus 92, two in the prior year quarter and a 55% drop in net premiums written in 2021, our year over year comparisons will begin to improve although the first quarter was still the unfavorable.

Since Covid was just beginning to impact travel and syndicate 2019 was formed in the second quarter of 2020.

On the other hand, our international personal insurance the business continues to perform well with the 93, 9% accident year ex cat combined ratio, which is 130 basis point improvement from 95.2 of 2019, reflecting favorable of Japanese auto trends and improving business mix offset slightly by the travel book.

Expense management also contributed to the improvement with 160 basis point reduction in the general insurance expense ratio driven by a lower acquisition ratio compared to the prior year quarter.

Lastly, before we leave general insurance, we'd like to reiterate our outlook for of sub 90 accident year combined ratio ex cat by the end of 'twenty 2022. The 94, 1% that we achieved in 2020 is a significant accomplishment, but theres more to come with the significant re underwriting of the book.

For the past few years as well as the current very firm commercial lines market. We're highly confident that we will achieve more progress in 2021 and 2022 as we reestablish aig's of leadership and general insurance.

Turning to life and retirement.

The pre tax income was $1 billion for the quarter up 20% compared to the prior year quarter.

Total life and retirement premiums and deposits increased by 4% compared to the prior year quarter driven by two large get the issuances. In addition pension risk transfer activity grew sequentially life and retirement continues to see a rebound in retail annuity sales as the distribution partners became more accustomed to the new environment with <unk>.

Higher sequential sales for both variable and index annuities fixed annuity sales were lower sequentially as life and retirement maintained pricing discipline in this challenging rate environment, although still lower than the prior year index annuity sales continued to grow sequentially contributing strong positive net flows helping offset declines in variable.

In fixed annuity net flows group retirement net flows improved from the prior year quarter due to strong.

Group planned acquisition and retention.

Results, reflecting the investments made the modernize that platform.

On February 8th AIG announced the sale of its retail mutual fund business. The sale has the nearly immaterial impact on a P. T I, but will benefit our overall net flow metrics given the platform has generally experienced significant outflows over the last few years.

Base investment spreads for variable and index annuities and fixed annuities and group retirement were virtually flat sequentially as noted in previous quarters of life and retirement reported base investment spread compression was impacted by substantially lower returns on cash and short term investments through 2020, excluding this impact based on the.

We see today, we continue to expect base spread compression across the portfolio in the range of eight to 16 basis points annually.

Recognizing the limits of sensitivities, especially at times of macroeconomic uncertainty and the higher market volatility or sensitivity estimates for U S equity markets and rates are as follows.

We would expect a plus or minus 1% change in equity market returns to respectively increase or decrease adjusted pretax income by approximately $40 million to $50 million annually.

Plus or minus 10 basis points movement on the 10 10 year reinvestment rates would increase or decrease earnings by approximately $10 million to $20 million annually as always it is important to note that these market sensitivity ranges are not exact nor linear since our earnings are also impacted by the timing and degree of movements as well as the other factor.

Yeah.

Moving to other operations, which now includes portions of the legacy segment for prior general insurance exposures of the judge.

The pre tax loss of 700 of $20 million inclusive of $292 million of losses for consolidation of eliminations, which this quarter principally reflects realized capital gains on private equities, which are recorded as NII in the subsidiaries, but eliminated another operations a T. G. I L recorded as realized capital gains in net income.

T O.

For the quarter corporate interest expenses were slightly higher than the prior year, reflecting the interest on the $4 1 billion of senior notes issued in May 2020, and the other operations Joey was down $38 million from the comparable quarter last year for 2021, we expect the corporate interest expense and the decrease due to debt repayment.

And lower corporate expenses.

However, we expect continued volatility in asset management and in the consolidation and elimination lines due to returns interest rates and credit spread volatility ship.

Shifting to investments net investment income on an <unk> basis was $3 2 billion or $236 million lower than the fourth quarter of 2019, principally due to the June 2020 sale of fortitude.

That's the income was included in the prior year's quarter.

<unk> the fourth quarter 2019, Accordingly, this quarter's net investment income on an AP AP ti basis was $262 million or 9% higher than the prior year and reflected the strongest quarterly returns in 2020 for hedge funds and private equity as well as having strong bond tender of call premiums. It's also.

Worth, noting that on a full year basis net investment income out of the atti basis, excluding fortitude, whereas the 11 8 billion.

Turning to the balance sheet at December 31, 2020 book value for common share was $76 46, that's up three 5% from September 20th of 2020, and adjusted book value per share was $57. One set up slightly from September 30 day as Peter mentioned at year end AIG parent had cash and short term liquid.

For the assets of $10 5 billion during the quarter, we repaid our December debt maturity of $708 million, bringing our debt leverage for year end 2020 to 28, 4%, which is 220 basis points lower than second quarter of 2020, when we raised $4 1 billion of senior notes to pre finance.

The <unk> 'twenty and 'twenty 'twenty, one maturing debt.

Our primary operating subsidiaries remain profitable and well capitalized for general insurance, we estimate the U S pool fleet risk based capital ratio for year end 2020 to be approximately 455%.

Life and retirement is estimated to be approximately 430% both above our target range is in both providing a good absorbency buffer.

The impacts of an investment downgrades and credit losses to RBC ratios were less than anticipated, reflecting the high quality investment for a flow that is positioned well to navigate the uncertain environment.

With respect to the capital management in 2021 as intended we repaid $1 5 billion of maturing senior notes on February one of which reduces our leverage ratio by about 1.6 points on a pro forma basis approaching towards our 25% leverage target.

In addition, we repurchased approximately 92 million of shares to offset dilution associated with AIG warrants that were exercised prior to exploration of January 19 2021.

As Peter mentioned, we intend to repurchase additional common shares in the first half of 'twenty 'twenty, one to manage dilution and in addition, we expect to execute some liability management actions in the first half of 2021 to facilitate the life and retirement separation and with that I'll now turn it back over to Brian. Thank you Mark.

Operator, we're ready for Q&A.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if using the speaker phone. Please make sure. Your mute function is turned off to a lot of your signaled the retired equipment.

Please limit yourself to one question and one follow up question again, everyone. Please press star one to ask a question.

Okay.

And we will take our first question from Elyse Greenspan with Wells Fargo. Your line is open. Please go ahead.

Good morning, My first question.

Hum.

Peter.

The comment on life.

Brian.

However, the 19, 9% of transactions.

That's important.

Yeah.

Share repurchase.

I'm, just kind of get a sense.

All of that.

Hum.

Leverage target.

Sure.

And then also.

For our main point.

Debt target.

In the vicinity of I think.

Okay.

Yeah.

Okay. So Peter the question is.

For the repurchase and leveraging the AIG I believe so you want to start of maybe.

Mark you can jump in the past too.

Yes sure.

I think of at least what I've said in my October comments, then and then just reinforced and provided a little bit more detail on the prepared remarks is that we have made assumptions in terms of.

The Standalone life of retirement business with the acceptable.

Debt and capital structure that is going to work with the rating agencies. We've also had assumed you know how we would set up.

G of the remaining company with the guidance of the marks given on our Delevering I focused out of my prepared remarks, it's our first priority and we think that based on the base case.

Getting life retirement set up getting.

The Delevering Don net at AIG, We think we will have capital available for share repurchase that was the context of the car.

One of my.

You want to enter the market.

I think he covered of Peter.

Okay.

Follow up on some.

I'm pretty healthy price.

For another quarter.

Your line.

You know where I'm getting at.

Question for I am right in kind of bucket.

The pricing cycle.

Top line momentum.

Hum.

One of them beyond them.

Hmm.

The level of pricing.

Throughout the commercial lines up in both North American internationally.

The part of 'twenty, 'twenty, one and perhaps on the 20th.

Yeah.

Peter.

Thanks for lease.

Yeah. The this momentum will continue as.

As we look into 2021, we expect to see rate increases to continue we expect to see these rate increases to be above loss costs. We expect that these rate increases will be balanced across our global portfolio and across.

Multiple lines of business and so this.

This is a very disciplined market one that our capacity is highly valued and as we deploy it in property and casualty.

We're going to be very disciplined in making sure we get the right.

<unk> for the exposure and make sure that we're there to solve problems for our broker distribution partners and clients.

Big market mix of add something theater, yeah, but if I could at least also.

You know the figures kind of the noted we have momentum has been strong we have really seen no evidence of deceleration of it it's pretty broad based across the all lines and geographies and I would just remind you that the the timing was different internationally versus in North America. So it started a little bit later, so its trajectory is going to be different.

The definition and thus far no slowdown.

Okay. Thanks, Alicia we'll go to the next questioner.

And next we'll hear from Tom Gallagher with Evercore. Please go ahead.

Thanks first Brian just wanted to say best of luck for you and the new role.

And and.

And Peter.

Just wanted to come back on the net consideration of the of the private shell.

For the 19, 9% stake in LNR.

Should we think about this is just the sale of the stake or are you considering doing something more strategic including reassuring of portion of your in force block or outsourcing of investment management functions.

Anything you could add.

Hey, Peter.

Well as I mentioned in my prepared remarks, I mean, we have.

You know receive the number of inbound inquiries high quality companies and those high quality companies see the real value in our life of retirement franchise, a very diversified portfolio minimal legacy and so how they are approaching us.

AIG is that they want to do something strategically on the $19 nine because that's what we've outlined.

But we are focused on how we drive long term value for life and retirement with any partner that we decide to go with in the event. We do go with that over the initial.

The offering and that's we're working towards that as a no.

The primary focus so I don't want to go into the specific details because we don't have them, but you should just think about of that if we did enter into an agreement it would be about positioning the business for a more long term success.

Gotcha, and then and then.

And just my follow up is just a.

I guess, how are you thinking about the adverse development you saw on the 16th the 18 action of years.

Yeah, particularly 2016 seems to be of recurring.

Problematic year do you feel there is some conservatism in there.

Yeah.

How does that how does that inform your picks going forward any.

And anything we should be thinking about with regard to what you saw with the year end there'll be of thanks.

Mark I think the history, though yeah happy to Hey, Tom how are you.

So a few things like I just pointed out is then in North America, We had we recognized and financial lines I'd say on the E. P of life side, a little bit on the eve of outside and the mergers and acquisitions insurance.

Some little changes in the M&A insurance.

Originally it was a product that was really two sellers in the sellers and buyers that kind of changes you're at your forecast the utilization and things like that so there's sort of recognition there, which I think makes some sense.

In the past when we talked about this we've always focused on like primary D&O and F C. As in the and so forth and every assumption that we had all of the public side still is still coming to bear the matter, how we look at it our commercial book or our National book.

It's the it's the FCA continue the drop as the underwriting.

It continues to improve and that's been the steady pattern.

What what we would say they start is really on the private not for profit side, mostly centered in the U P. L. I E.

We saw some trends that we recognize but we did say for a pretty good shape. The fact, we've pretty much nailed. It. It's just at this point and I would say the second part of your question out of on a go forward. It's out of this book has had such massive transformation that the predictive value given the turnover of the path to the to the few.

Sure is almost non existent so.

We use it we try to carve all of those things out index forward.

But the impact of that audit such a transfer of book is negligible. So the net is we're very comfortable with where in 19 of 20 are.

Okay next question please.

And next we will hear from Tracy <unk> with Barclays. Please go ahead. Your line is open.

Thank you congratulations to both Brian and Peter and Brian I would think of finding a nice island for life.

Many of the town.

Thanks Stacy.

And I have to income.

Some of my questions about the or the development, maybe you could just talk about how you feel about rate adequate and liability.

Type of matrix.

Casualty and I never day.

It is one of the or many commercial line.

Line, where you actually had net premiums written declined.

Maybe I'll start and then.

Thanks trace and then I'll turn it over to Mark There's just two things to keep in mind one of the net premium written.

What I said in my prepared remarks on how we restructure of the reinsurance the.

Tenants of the 15 was purchased in December. So you would just would have seen that as the impact.

The impact on net premium written for the the casualty lines in the fourth quarter. So that's one.

And two is I just want to reinforce.

You know March point of giving you. An example in terms of what we're doing would be what.

The excess casualty book we.

We had talked about we were years ago over 90% lead and what we were doing in excess casualty you wanted to make sure that we're getting better balance and so you know the team led by Dave Mcelroy Barbara market have done an amazing job.

Now half the increase like our mid excess by over 400% in terms of the policy Council of the book is changing and getting better balance across the portfolio and you don't really see that but I think that's the Mark's point before when he was commenting on the bass change of the improvement of the portfolio, but that just needs to emerge a little bit over time, but I think we have done some.

Very strong work on the underwriting side and the balance is much better as we position ourselves for the future Mark I don't want anything in terms of just excess casualty specifically, yeah sure two things what I'll follow up on your direct question, which is on on the rate changes and rate adequacy and secondly, I think on the thin.

We could've done a little better job, we said the excess casualty and was really the Lexington casualty, which I really is the primary unit. The traditional admitted casualty book, that's either written out of American home or less of London, or Bermuda had has performed very very well during the year and so I would just let that get out of that.

The other an issue whatsoever. So it's really a combination of of Lexington, a primary of excess but but my comments will now.

Address all of that so.

As you know the rate changes I'd already been large they've been compound over.

A period of the terms and conditions with the drive this line of business are tighter and tighter and whether you have a E com or an aggressive view of loss cost trends that could affect our casualty businesses getting further away from risk is is the preferred way to go in and that strategy of that Peter and David.

Put in place moving that portfolio of higher say your further away from from rest of the case anything unforeseen happens so.

We're very comfortable with with that we're very comfortable on our indications are that the rate adequacy as opposed to rate change is stronger on new business that is on renewal business, which you would expect to be the case.

Art cycle of acceleration like we have and we continue to see inferior rate adequacy on the business, where we're not renewing so that's what I call. The implicit lifts as opposed to the explicit left so we feel good about that.

Excellent.

And at this point Dennis the main concern of somehow the suffering LNR and I know part of a lot of discussion right now.

That's the wrong I'm, just wondering of the <unk>.

How firm is your 19.9 personnel and also sell part of it I got your point would be of full of preparation.

I just wanted to tell the clients since you had no.

Maybe more flexibility by the rating agencies for our you figure it out of the range to accelerate your debt structure.

Back to a day.

Pat.

Peter I think you should the dress island, okay. Thanks, Tracy the 19 nine remains of the base case.

We think it's the best way forward for for the organization. We're working on all of the different work streams that I outlined in my prepared remarks, working with all of our stakeholders and believe that that will be the path of that maximizes value for the organization.

Thank you.

Okay next question please questioner.

And next we will hear from your own Qunar with Goldman Sachs. Please go ahead.

Good morning, everybody and I'll reiterate the congratulatory comments and for Brian and Peter.

I guess my first question is on the comment around expectation of the similar growth trends in our commercial lines.

Or are you, saying that you expect commercial net premiums written to be in the high single digit range of in 'twenty 'twenty, one and I guess, what I'm trying to get out of why Wouldnt. We see further acceleration from point of view levels, considering that you know rates remain very robust.

Lots of reinsurance purchase and potentially you see of economic recovery.

Peter.

Thanks Sharon.

It's hard to give specific guidance in terms of you know.

Whether it's going to be high single digits.

Or even more I mean, we have a lot of momentum in the commercial portfolio, we talked about strong retention strong rate of new.

New business in 2020 was impacted by you know if I look globally, particularly in international some of the specialty classes.

The business was very strong, but it wasn't at the normal levels that we expect within 2021.

And again, we're still in the global pandemic, we'll see what the economic recovery.

Cautious, but we're optimistic that new business will continue to pick up and we believe our retentions will get stronger.

And so we're very optimistic that we'll have very good growth balanced across.

Commercial globally next year I don't know, David if you want to add anything in particular on the on the new business and your optimism of growth.

Yes, Thank you Peter.

And the simple way I guess I think we've had a couple of turns for the book.

We look at this as less limit reduction, Okay, and then of our new business opportunities have always continued to be and on the commercial side and $3 billion range for <unk>.

One of the platform that we have and.

And then I look at our the the renewal retention of rate. Okay. We can forecast rate, but we also.

<unk> had certain positions that we think that we can actually.

Consistently earn those rates going forward, okay, we're not in the commodity position in our portfolio and.

If you look at this worldwide in terms of the different franchises. We have we think that pay rate, we're looking at and the risk adjusted the range Andy.

And what how we're thinking about the portfolio. They are very defendable. So there was a lot of work done over the last couple of years kind of meet freely admit that in terms of addressing the exposure of that might've been the outlier exposure, we feel very comfortable with where we are going into 2021 with a portfolio that we can add.

Add to not only on rate, but new business and then our renewal retention and key point out of it.

It's worth saying the the limit reduction that went through in these last two years. We are we are through that portal and therefore, if anything we're adding risk and we're thinking about our growth with risk not not just risk on top of limits on top of the accounts.

But additional risk with additional clients and that's actually where we think very strongly that the the plan and the formidable nature of what you're saying Gee, we will succeed in 2021, okay.

It's very much part of the plan is that we've taken some of the outlier.

Outlier exposures down to the studs and now we are very comfortable with the portfolio of do we have going for us.

I think mark wanted to add something too David Yeah, Yeah, Yeah, and if I cut out of that purposely give you a arithmetic view.

And as its first Peter touched on it a bit with the ex ol. When he was talking about some of the reinsurance. So lots of current contracts you basically have ceded written all of.

Bulleted right in the quarter and then it turned smoothly.

The risk attaching quota shares you see the recognition quarter by quarter. So from a net earned basis, which is what's going to really matter youre going to see.

For uplift on a net earned basis over the course of the year the.

The benefit of the smaller session on the casualty quota share will overwhelm the.

The additional ex ol session. So you'll see that increase our credit, but it wont be out of <unk> youre going to see that over the course of the year.

Okay.

Got it very helpful comments, Thank you and then switching over the LNR.

A lot of moving parts of this quarter, you know kind of.

None of the mortality alternative income however, they are the 200.

Can you help us think about kind of need the core earnings power of that business, whether it's the earnings power of our ROE.

You talked about in the past.

Alright, how should we think about that going forward.

Peter do you want to take that.

I'll give you the Kevin.

Yeah.

Yeah. Thanks.

No I think Mark's comments highlighted the sensitivities to the equity markets and interest rate levels.

This year, we did benefit from some strong market support.

That frankly is laid out in the noteworthy items in the.

The earnings deck.

We had a strong year.

Some of where the markets for them with both also on the call in terms of income we continue to target low to mid double digit returns.

For the medium term and our current pricing conditions.

I suggest that we are able to continue that and so.

I think that's really the alternatives are the big anomaly. This year turbos sort of normalized levels apartments under income strength could continue based on where interest rates are and that's to a certain extent of the wildcard.

Thank you okay. Thanks, our next questioner please.

And next we will hear from Josh Shanker with Bank of America. Please go ahead.

Yeah. Thank you very much true my call.

I wanted to go back to the guidance of what called guidance of about.

90% our accident year ex cat.

Yeah.

The combined ratio for 2022 is that of your.

Your forecast for the exit for care.

And the other part of your both of my questions upfront. If you told me, we'd have 15% to 20% rate increases in 2020 of them. Maybe in 2021 I would think of you could improve the combined ratio by more than three or 400 basis points.

And the harmony with AIG 200.

You're talking about too.

The area.

Well, let's let's have Mark talk about it are the.

The 90% and.

And we'll take it from there right. So I think I'll go back and forth on this yeah on the 90% of which.

Which we are Josh ret reiterating the appeared I'll get into some of the expense ratio.

Aspects of it with regard to.

Loss ratio that was the second part of it.

The.

Well, we would expect.

Improving margins as well as we go through 'twenty one of 22.

We're viewing that as exit of Josh So that's much closer and the equivalent to <unk>.

But the but nevertheless, yet you you have to watch the compound growth of <unk>.

Change because as the book continues to improve and it's improved.

Fabulously.

The degree of improvement narrows and hours and hours of that you can do it so the big huge changes have already of already occurred.

But we're comfortable on our on our cadence and the approach to get there.

Peter Yeah can I, just add to that Josh I mean, a couple of things to keep in mind.

One is AIG 200 contribute a meaningful portion.

The improvement in expense ratio now, while I said $400 million was the exit run rate of 2020 of that haven't even fully earned in yet. So we expect you know the.

Full billion dollars by 2022. So you can just do the math of that will contribute to the expense ratio an overall combined ratio. The other is we think theres two components of growth one as Dave mentioned is that we think that the portfolio is in a very good place for topline growth.

And we would expect to see that to continue in 2021 and 2022. In addition, contributing to that growth will be we need less reinsurance I think the terms of conditions that we were able to improve at one one speak volume in terms of the trajectory and what we would expect for reinsurance going forward that will contribute I think when we do.

And the team has proven it does.

Very good work on operational excellence that when we.

Separate life retirement, AIG remain co we will find ways to improve the expense ratio as we worked through the actual separation and we have a very disciplined expense.

Behavior of the company and then just the rate above loss cost and as we continue to reposition the portfolio. We think there will be improvement in the loss ratio.

As we look for the future. So when you add all of those components together.

We are very confident that we will be below the 90 as we exit 2022.

Insurance don't forget this is a josh that the.

Don't forget this is both commercial and personal.

It's the entire book of business going below 90 day in the personal lines.

Is not getting the kind of rate increases the commercial so you've just got to put that weighted average into do you have enough of you ask your questions. The new jobs. Those are two good luck in your new role and congratulations to everyone.

I appreciate that Josh. Thank you very much I think we have of maybe time for one more question.

Alright, and we won't hear from Erik bass with Autonomous Research. Please go ahead. Your line is now open.

Hi, Thank you I just wanted to follow up on Toms question about the potential sale of the 19 nine 9% stake in LNR can you just discuss how you're thinking about the benefits of that approach versus an IPO and some of the key considerations on which makes more sense for delivering long term value.

Peter.

And Mark you can you can weigh in I mean, certainly the path with the IPO is very clear the 19 nine point of 19, 9%.

I P O sales when we looked at.

I think the heart of your question on the private is that it has to be a better alternative for us and it has to be more strategic.

More financially advantageous and making certain that when we look at the 99%. We don't look at that in isolation, we looked at the 81% in how we position the life retirement business for the future. So those of the things among other factors that we will consider in terms of do.

Do we go through the IPO or would we do of private sale as we worked through the coming months.

Got it thank all of the product when you.

Do you have another follow up there.

Yes, the way, it's just one other on life and retirement I was just hoping you could provide some additional detail on the mortality result, this quarter any sensitivity to general population COVID-19 deaths or maybe another metric to help us think about the potential impacts in <unk>.

Kevin do you want to do that.

Absolutely.

Thanks, Eric so okay.

The reality is it's hard to isolate COVID-19 deaths. So the way we approach it and looking at our portfolio of us to focus on.

The total portfolio, absolutely sort of expected versus pricing.

And in this context, we saw mortality for the year of continued to be.

First of all relative to our pricing in terms of short line variances driven by Covid.

Either way, we look at their sales and earnings amount of capital events, and we haven't seen any data that suggest a change to our long term assumptions.

Now that being said.

<unk>.

Based on our best understanding of what are the COVID-19 related deaths.

Estimates of up to 40% of the reported the claims Covid reported claims well it could be an acceleration of life claims.

Claims we would otherwise expect in the next.

Five years, and again based off of our best understanding of the Covid bad debts.

We estimate our exposure to the population of approximately <unk> <unk>.

65 million for $75 million for 100000 a pop.

Populations, that's which is a slightly better estimate than what we would've assumed a couple of quarters ago.

Great. Thank you.

Okay. So look the thank you all for you for all your questions before I end the call I want to thank everyone who's been part of the multi year journey of that began when I joined AIG in 2017, the fix the fundamental needed needed fundamentals needed for AIG. The once again be of leading insurance franchise.

What has been accomplished over the last for years with none of it possible life without the extraordinary efforts of Aig's exceptional found at all levels of of the organization and I'm thankful for everyone's dedication and commitment to this great organization.

I'm also grateful to the client's distribution reinsurance partners shareholders regulators and many other stakeholders who've actively supported me since I returned to AIG I look forward to being a part of the next chapter of AIG under Peter's leadership.

The well stay safe and healthy.

And ladies and gentlemen. This concludes today's call. We do thank you for your participation you may now disconnect.

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Good day and welcome to Aig's fourth quarter 2020 financial results Conference call. Today's conference is being recorded at this time I would like to turn the conference over to MS. Sabra <unk> head of Investor Relations. Please go ahead ma'am.

Thank you Orlando and good morning, and thank you all for joining US today's call will cover Aig's fourth quarter and year end 2020 financial results announced yesterday afternoon. The.

News release financial results presentation, and financial supplement are available on our website at www Dot AIG dot com or.

Our 10-K for 2020 will be filed on Friday February 19th.

Today include Brian Duper of CEO, Peter Zaffino, President and CMO of AIG, and Mark Lyons Chief Financial Officer.

All of them in their prepared remarks, we will have time for Q&A, David Mcelroy CEO of General insurance, Kevin Hogan CEO of life and retirement and that the Schiel, our chief investment officer will be available for Q&A.

Isn't this mix and market conditions, including the effects of COVID-19 on AIG. These statements are not guarantees of future performance or events and are based on management's current expectations actual performance in the events may materially differ.

Factors that could cause results to differ include the factors described in the third quarter 2020 reported on form 10-Q, and our annual 2019 annual report on form 10-K, and our other recent filings made with the SEC AIG is not under any obligation and expressly disclaims any obligation to update any forward looking statements.

Whether as a result of new information future events or otherwise.

Now I'll turn the call over to Brian.

Good morning, and thank you for joining us today.

But when he was an extraordinary year doing which our company demonstrated tremendous resiliency, we quickly and effectively transitioned more than 90% of our work force and.

In over 50 countries to remote working we established a cross functional task force to implement best practices to protect the health and safety of colleagues, while continuing to deliver high quality service the clients distribution partners and other stakeholders.

<unk> continues to effectively manage through COVID-19, and its collateral effects of the global economy because of the strong foundation, we began to build beginning in late 2017, we instill the culture of underwriting excellence adjusted risk tolerances.

The <unk> best in class reinsurance programs strengthens our vast global footprint de risk the balance sheet and maintain a balanced and diversified investment portfolio.

And then October we announced our intention to separate the life and retirement business from AIG, which was made possible by the work our team has done to strength in general insurance in particular and position each business as the market leader.

Before I turn it over to Peter I want to note that this is the last earnings call I will participate in as you know we announced that on March 1st I will become executive Chairman of the board and Pedro will take over as President and Chief Executive Officer the.

Transition will be seamless.

Peter and I have tackled many of the systemic and pervasive fundamental problems from the past and the company is now positioned for long term sustainable and profitable growth.

There is still work to be done and I have every confidence of Aig's stakeholders will continue to reap the benefit of the hard work that is taking place across the organization on our journey to make AIG the top performing company.

The turnaround of general insurance in the enterprise wide transformation at AIG is on a scale I have not seen them of 45, plus year career I take great pride in what the team has accomplished and know that the company and our colleagues will be in great hands with Peter as the CEO of AIG now I'll turn the call over to Peter.

Thanks, Brian Good morning, everyone and thank you for joining US today. This morning I'd like to cover four topics that are key areas of focus for us in 2021, and which we will update you on each quarter. The separation of life of retirement from AIG capital management progress we've made on AIG 200.

<unk> financial and operating highlights for general insurance and life and retirement.

2020 was a pivotal year for AIG and I'm pleased to report that 2021 has gotten off to a good in the fast start due to the momentum we have coming into the new year like 2020. This year will be another year of the substantial progress for our company.

As Brian noted, we made a critical and strategic decision last October to separate the life retirement business from AIG.

We could not have made this decision without the significant turnaround taking place in general insurance and solid performance in life and retirement.

Since our last earnings call, we've been working purposefully and with the sense of urgency on several fronts related to separation.

We are actively working towards an IPO of up to 19, 9% of life and retirement with teams focus on Standalone audited financials actuarial work and rating agency discussions among other things.

Based on our work the D. We continue to believe that no additional equity capital will be required given the improvements in our subsidiary capital positions over the last few years.

We are carefully weighing the relative merits of this path compared to a minority IPO taking.

Taking into account the impact on value creation for AIG execution certainty regulatory and rating agency implications and the delivery of life retirement growth strategy over the long term.

As you know any decisions, we make will be subject to regulatory approvals overall I am very pleased with the progress we're making on the separation and we will provide a further update in the near term.

Turning to capital management.

Ended 2020 with parent liquidity of $10 5 billion, a $2 $9 billion increase from 2019.

We entered 2021 with significant financial flexibility as a result of our focus on Derisking capital management and liquidity, particularly in 2020 as a result of COVID-19.

This amount will more than offset dilution from stock based compensation, which out of minimum will be of core principle of our capital management strategy going forward.

As we move forward on the path of separate life retirement and generate capital. We will continue to focus on delevering and investing investing in growth in our businesses.

We also intend to the active and prudent managers of capital and return it to shareholders when appropriate.

Current expectation is that in the initial disposition of 19, 9% of life retirement.

Through a minority IPO or sale to a third party will generate net proceeds of such that some portion can be used towards the further share repurchases.

And while it does not.

Currently of priority over time, we may consider inorganic growth opportunities that would be accretive to our businesses and growth strategy and otherwise create value for our shareholders and other stakeholders.

Once we make a decision on the initial step of the separation of life retirement will provide more detail on our medium and longer term capital management priorities.

Now I'd like to provide an update on AIG 200.

As a reminder, AIG 200 is core for core objectives underwriting excellence modernizing our operating infrastructure.

Hansen user and customer experience and becoming a more unified company.

Throughout 2020, we made measurable progress in spite of the ongoing remote work environment and in some cases accelerated certain initiatives.

On December 31.

We completed the sale of our shared services operations to Accenture.

Which streamlines our operating model.

We've made significant progress in driving improvements in infrastructure and systems architecture, while reducing the real estate costs and other general operating expenses.

We exceeded our target run rate savings for 2020, and the cost required to achieve were lower than initially expected.

We exited 2020 with a $400 million run rate benefit what's the 30% ahead of the guidance we provided in 2020.

The success of AIG 200 to day demonstrates the discipline and rigor.

The team leading the strategic initiative that's using.

The team is taking decisive action as we execute to position the company for the long term.

G 200 success can be also reflects the resiliency and flexibility of our global colleagues, who have embraced change, while making significant contributions to our progress.

We also expect to make significant progress in 2021 on a global data warehouse in support of our financing underwriting transformations.

Our overall targets for AIG to wanted to remain unchanged, we still expect to achieve run rate savings of $650 million by the end of 2021 and to deliver aggregate run rate savings of $1 billion by the end of 2022 against the total investment of $1 3 billion.

Turning to our financial results I'll start with general insurance in the fourth quarter of 2020.

North American commercial grew approximately 10% with meaningful growth for me I jewelry and international was up 5% after adjusting for foreign exchange.

As we've previously outlined North America personal insurance continued to experience reduced net premium volumes.

This was primarily due to our decision to strategically reposition of our high net worth business. The syndicate 2019, the partnership we established with Lloyds, which resulted in higher ceded premiums and the impact of COVID-19 on line, such as travel and accident and health.

While it's still very early in the year based on what we are seeing we expect a similar overall growth trend to continue particularly in commercial.

We will achieve top line growth for the full year of 2021.

Turning to the combined ratio, we achieved another quarter of positive results in our core business with continued improvement in underwriting margins.

In the fourth quarter the accident year combined ratio, excluding cash improved by 290 basis points to 92, 9% compared to 95, 8% of year ago.

The adjusted accident year combined ratio for the full year 2020 was 94, 1% of 190 basis point improvement year over year.

Commercial's adjusted accident year combined ratio for the full year 2020 was 93, 2% of 340 basis point improvement year over year.

These combined ratio improvements reflects very strong performance of general insurance continues to benefit from an improved business mix in the commercial portfolio driven by the strategic underwriting actions we've been taking.

Turning to range in the fourth quarter, we continue to see considerable improvement in China in terms of the conditions.

The commercial we saw sustained strong rate momentum and improvement across all lines of business.

With the exception of workers' compensation for the fourth quarter, our commercial business achieved rate increases of approximately 15%.

North American commercial rate increases were 21% in the fourth quarter compared to the 14% in the prior year quarter. This improvement was driven by excess casualty, which saw rate increases of 45%.

With over 15% increases in commercial property with 15% increase.

South of US achieved a material increase of net written premium at the January one renewal period, which generated better balance across our portfolio led by international property, New business, along with final signings across our portfolio, we're very favorable as well.

With respect to reinsurance Aig's purchased overall, we're extremely pleased with the outcome of our January one renewals in a challenging market environment.

This was a critical year for us to evolve our reinsurance program strategically to reflect our significantly improved underlying portfolio.

In General insurance, we maintained our philosophy of the partnership with reinsurers and reducing volatility in the portfolio.

We restructured our core placements in every major treaty.

Keep in mind that AIG places over 35 treaties at one one so I'll provide a few key highlights.

We reduced the aggregate amount of property catastrophe limit purchased as a result of a significantly reduced gross exposure and property Pms.

We reduced the catastrophe per occurrence attachment point in the North America from 500 million for 200 million for all territories, except the southeast and Gulf, which remained at $500 million.

We reduced the global share in aggregate limit retention in North America from 750 million to 500 million.

We purchased the cap program for P. C. G of our high net worth of business that protect the syndicate 2019, and AIG without taking on additional debt limit.

We reduced our overall catastrophe premium costs by over $150 million and our casualty quota share we improved the CD commission by four points and reduced our overall session.

We also introduced the new access layer of $10 million excess of $15 million to remain consistent with our risk appetite.

Were just some of the highlights of our one one renewal season, we are particularly pleased with the ongoing support we receive from the global reinsurance market, particularly our core partners.

With respect of life and retirement the business continued sequential improvement generating quarterly adjusted pre tax income of $1 billion and adjusted return on segment of common equity of 16, 4%.

For the full year 2020, adjusted pretax income of $3 5 billion and adjusted return on segment common equity was 13, 9%.

The result for 2020 reflected higher private equity returns and higher call and tender income driven by lower interest rates and tighter credit spreads. This was partially offset by the impact of COVID-19 mortality lower fair value option bond income and base spread compression.

This broad portfolio of approach across products and channels with particularly advantageous during 2020.

Given the disruption in retail sales during the year the team focused on attractive opportunities to deploy capital in the institutional markets business.

<unk> strong growth for both pension risk transfer transactions.

And through reinsurance and debt issuances.

Group retirement maintain steady payroll deduction periodic deposits and improve large group planned retention results.

Overall life retirement remains well positioned to meet the ever growing needs for protection retirement savings and lifetime income solutions.

As I mentioned, we entered 2021 with significant momentum and the continued sense of urgency on our path to becoming a top performing company.

Responsibility accountability and opportunity of that commercial enterprises face today surpass anything corporate America, and the global business community have ever faced.

In the months and years ahead, we will continue to adapt and evolve and introduce the stronger version of AIG as we strive to become a leading global insurance franchise.

I'm privileged to be taking on the role of Chief Executive Officer of AIG and appreciate the opportunity to lead this company I want to thank Brian for the partnership over the many years, we've worked together and for asking me to join him in at AIG back in 2017.

Professionally the last few years have presented the greatest challenge of my career, but I know that this experience will also be the most rewarding.

And I want to extend a special thanks to Brian on behalf of all of our colleagues for his leadership commitment to solving complex problems and building a foundation of stability that the.

Position us well for the future.

I look forward of continuing our work together as Brian steps into his new role as executive Chairman now I'll turn it over to Mark.

Thank you Peter and good morning, everyone.

Before I go into the fourth quarter results I want the highlight that we re segment of our financials. This quarter and now have three business segments total insurance life and retirement and the other operations the historical recast that information and description of the changes were in the 8-K filed on February one and posted on our website and were principally the.

Elimination of the legacy segment and the realignment of its book into life and retirement and the other operations as well as some small shifts within general insurance starting for the quarter AIG reported adjusted pretax income or or a P. T. I of $1 1 billion and adjusted after tax income of $827 million of 94.

The second strong life and retirement a P. T I of 1 billion driven by individual and group retirement as well as institutional markets activity.

The strong net investment income thirdly, $3 2 billion of consolidated net investment income on an a P. T I basis, primarily reflecting higher private equity and hedge fund income.

Moving to travel insurance fourth quarter, adjusted pre tax income with the $809 million up $31 million year over year as increased net investment income from alternatives offset the impact of higher catastrophe losses, which totaled 545 million pre tax or nine loss ratio points this quarter compared to six of the half loss ratio points in the <unk>.

Higher year quarter, the cat losses were comprised of $367 million of natural cats, primarily related to fourth quarter events Hurricanes Zika the east troublesome Silverado fires and Hurricanes Delta along with the revised estimates for Hurricane Sally which occurred late in the quarter of Hurricane Laura We're at Delta had a similar path.

Additionally, there were $178 million of Covid.

Related losses, primarily related to travel contingency and Validus re.

Prior year development or P Y D was slightly unfavorable this quarter at $45 million compared the favorable development of $1 30 in the $139 million in the prior year quarter. This.

This quarter included 51 million of the net unfavorable development in North America, and 6 million of net favorable development internationally.

The North American unfavorable Py D was driven mostly by financial lines E. T. L. I E N O and mergers and acquisition of insurance, primarily from accident years 2016 to 2018, and that's not covered by the ADC with favorable indications primarily in G. L. A growth some workers compensation units and short term.

Airlines.

As an additional lens the 45 million of unfavorable development was also split as 5 million unfavorable in global commercial lines at 40 million unfavorable in global personal lines, primarily driven by adverse development in prior year cats as opposed to Attritional losses as usual there was net favorable out of.

<unk> for the ADC, which amounted to 52 million this quarter.

I'll point out that our 2020 net premium profile is now skewed towards our international operations totaling 57% of global net premium. Furthermore of the international book is nearly evenly balanced between commercial and personal lines and this demonstrates the truly global platform of our general insurance business led by an international.

The book that does had better results with less volatility than North America.

We expect these proportions to stay approximately the same in 2021, but skewed a bit less towards the international as North American commercial growth strength.

A key indicator of the turnaround of our general insurance business is the improvement in the accident year ex cat combined ratio of results for North America, and the international commercial lines as Peter's noted North American commercial how the accident quarter combined ratio ex cat that was 400 basis points better than last year's quarter to 93.

The 6% and international commercial lives improve their accident year combined ratio ex cat by 490 basis points to 89, 2%.

The results continued the impacted by the repositioning of our high net worth of business and the global pandemic.

North America personal lines was impacted the most with an accident year combined ratio ex cats of hundreds of two 6% versus 92, two in the prior year quarter and a 55% drop in net premiums written in 2021, our year over year comparisons will begin to improve although the first quarter will still be unfavorable.

Since Covid was just beginning to impact travel and syndicate 2019 was formed in the second quarter of 2020.

On the other hand, our international personal insurance the business continues to perform well with the 93, 9% accident year ex cat combined ratio, which is the 130 basis point improvement from 95.2 of 2019, reflecting favorable Japanese auto trends and improving business mix offset slightly by the travel book.

Expense management also contributed to the improvement with 160 basis point reduction in the general insurance expense ratio driven by a lower acquisition ratio compared to the prior year quarter.

Lastly, before we leave general insurance, we'd like to reiterate our outlook for a sub 90 accident year combined ratio ex cat by the end of 'twenty 2022, the 94, 1% debt. We achieved in 2020 is a significant accomplishment, but there is more to come with the significant re underwriting of the book of.

For the past few years as well as the current very firm commercial lines market. We're highly confident that we'll achieve more progress in 2021 and 2022 as we reestablish aig's of leadership and general insurance.

Turning to life and retirement.

The pre tax income was $1 billion for the quarter up 20% compared to the prior year quarter.

Total life and retirement premiums and deposits increased by 4% compared to the prior year quarter driven by two large get the issuances. In addition pension risk transfer activity grew sequentially life and retirement continues to see a rebound of retail annuity sales as distribution partners became more accustomed to the new environment with <unk>.

In fixed annuity net flows group retirement net flows improved from the prior year quarter due to strong group planned acquisition and retention with <unk>.

<unk>, reflecting the investments made to modernize that platform.

On February 8th AIG announced the sale of its retail mutual fund business the sale as the nearly immaterial impact on a P. T I, but will benefit our overall net flow metrics given the platform has generally experienced significant outflows over the last few years.

We see today, we continue to expect base spread compression across the portfolio in the range of eight to 16 basis points annually.

Recognizing the limits of sensitivities, especially at times of macroeconomic uncertainty and the higher market volatility or sensitivity estimates for U S equity markets and rates are as follows.

We would expect a plus or minus 1% change in equity market returns to respectively increase or decrease adjusted pretax income by approximately $40 million to $50 million annually.

Plus or minus 10 basis points movement on the 10 10 year reinvestment rates would increase or decrease earnings by approximately $10 million to $20 million annually.

As always it is important to note that these market sensitivity ranges are not exactly linear since our earnings are also impacted by the timing and degree of movements as well as other factors.

Moving to other operations, which now includes portions of the legacy segment from prior general insurance exposures at the adjusted pre tax loss of 700 of 20 million income.

Lucid of up $292 million of losses for consolidation of the eliminations, which this quarter principally reflects realized capital gains on private equities, which are recorded as NII in the subsidiaries, but eliminated another operations a T. G. I L recorded as realized capital gains the net income not a a J F.

For the quarter corporate interest expenses were slightly higher than the prior year, reflecting the interest on the $4 1 billion of senior notes issued in May of 2020, and other operations Joey was down $38 million from the comparable quarter last year for 2021, we expect the corporate interest expense and the decrease due to debt repay.

And lower corporate expenses.

However, we expect continued volatility in asset management and in the consolidation and elimination lines due to returns interest rates and credit spread volatility shift.

Shifting to investment net investment income on an <unk> basis was $3 2 billion or 236 million lower than the fourth quarter of 2019, principally due to the June 2020 sale of fortitude.

That's the income was included in the prior year's quarter.

<unk> the fourth quarter 2019, Accordingly, this quarter's net investment income on an AP a P. T I basis was $262 million or 9% higher than the prior year and reflected the strongest quarterly returns in 2020 for hedge funds and private equity as well as having strong bond.

Tender of the call premiums. It's also worth noting that on a full year basis net investment income out of atti basis, excluding fortitude, whereas the 11 8 billion.

Turning to the balance sheet at December 31, 2020 book value for common share was $76 46, that's up three 5%.

September 20th of 2020, and adjusted book value per share was $57. One set up slightly from September 30, as Peter mentioned at year end AIG parent had cash and short term liquidity assets of $10 5 billion during the quarter, we repaid our December debt maturity of $708 million, bringing our debt leverage for your <unk>.

And 2020, and 28, 4%, which is 220 basis points lower than second quarter of 2020, when we raised $4 1 billion of senior notes to pre finance 'twenty, 'twenty and 'twenty 'twenty, one maturing debt.

Our primary operating subsidiaries remain profitable and well capitalized for general insurance, we estimate the U S pool fleet risk based capital ratio for year end 2020 to be approximately 455% of life and retirement is estimated to be approximately 430% both above our target range is it.

Both providing a good absorbency buffer.

The impacts of an investment downgrades in credit losses to our RBC ratios were less than anticipated, reflecting the high quality investment for a flow that is positioned well to navigate the uncertain environment.

With respect to the capital management in 2021 as intended we re.

Repaid $1 5 billion of maturing senior notes on February one, which reduces our leverage ratio by about one six points on a pro forma basis.

Approaching towards our 25% leverage target.

In addition, we repurchased approximately 92 million of shares to offset dilution associated with AIG warrants that were exercised prior to exploration of Janney.

Your line 19 2021 of.

Operator, we're ready for Q&A.

Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if using a speaker phone. Please make sure. Your mute function is turned off to allow your signaled the retired equipment.

Please limit yourself to one question and one follow up question again, everyone. Please press star one to ask a question.

Okay.

And we will take our first question from Elyse Greenspan with Wells Fargo. Your line is open. Please go ahead.

Good morning, My first question.

Yeah.

Peter.

The comment on life.

On the team.

19, 9%.

That's important.

Yeah.

Further share repurchase.

I'm, just kind of get a sense.

All of that.

Hum.

Okay leverage target.

Sure.

And again the awful.

The main point.

Debt.

In the book.

And I think the bag.

Okay.

Yeah.

Okay. So Peter the question is.

For the repurchase and Leverages the AIG I believe so you want to start of maybe.

With Mark you can jump in the past too.

Yes sure.

I think of at least what I've said in my October comment then and there.

Then just reinforced and provided a little bit more detail on the prepared remarks is that we have made assumptions in terms of.

The Standalone life of retirement business was acceptable.

Debt and capital structure of that is going to work with the rating agencies. We've also had assumed you know how we would set up.

G of the remaining company with the guidance of the marks given on our Delevering I focused out of my prepared remarks, it's our first priority and we think that based on the base case.

Getting life retirement set up getting.

The Delevering Don net at AIG, We think we will have capital available for share repurchase that was the context of of the car.

All of it on me.

Don't know if you want to enter the market.

I think he covered of Peter.

Okay.

My follow up on line.

I'm pretty healthy price.

For another quarter.

Your line.

You know where I'm getting at.

Question for I am right in terms of the pricing cycle.

Top line momentum.

Thank you bye for was about one one and beyond.

Hmm.

The level of pricing.

So that the commercial line stuff in both North American internationally, where the good part of 'twenty 'twenty, one and perhaps into 2022.

Peter.

Thanks for lease.

Yeah. The this momentum will continue as.

Multiple lines of business and so this.

This is a very disciplined market one that you know our capacity is highly valued and as we deploy it and property and casualty.

We're gonna be very disciplined in making sure we get the right.

<unk> for the exposure and make sure that we're there to solve problems for our broker distribution partners and clients.

The big marketing sort of add something theaters, yeah, but if I could lease also.

As Peter said of the noted the momentum has been strong we have really seen no evidence of deceleration of it it's pretty broad based across the all lines and geography. So I would just remind you that the the timing was different internationally versus in North America. So it started a little bit later, so its trajectory is going to be different by debit.

Initiatives and thus far no slowdowns.

Okay.

We'll go to the next questioner.

And next we'll hear from Tom Gallagher with Evercore. Please go ahead.

Thanks first Brian just wanted to say best of luck to you in the new role.

And and.

And Peter just.

Just wanted to come back on the net consideration of the of the private shell.

For the 19.9% stake in LNR.

Anything you could add.

Hey, Peter.

Well as I mentioned in my prepared remarks, I mean, we have.

Received the number of inbound inquiries high quality companies and those high quality companies see the real value in our life and retirement franchise, a very diversified portfolio minimal legacy and so how they are approaching.

AIG is that they want to do something strategically on the $19 nine because that's what we've outlined.

But we are focused on how we drive long term value for life and retirement with any partner that we decide to go of in the event. We do go with that over the initial public offering and that's we're working towards that as a.

Gotcha and then.

Just my follow up is.

Just a day.

I guess, how are you thinking about the adverse development you saw on the 16 to 18 accident years.

Yeah, particularly 2016 seems to be of recurring.

Problematic year do you feel there is some conservatism in there.

Yeah.

How does that how does that inform your picks going forward any.

And anything we should be thinking about with regard to what you saw with the year end there'd be of banks.

Okay, Tom Mark I think the history, though yeah happy to Hey, Tom how are you.

So a few things like I just pointed out is then in North America. We had we recognized in financial lines I'd say on the E. P of life side, a little bit on the eve of outside and of mergers and acquisitions insurance.

Some some little changes in the M&A insurance originally was a product that was really to sellers and sellers and buyers that kind of changes you're at your forecast the utilization and things like that so there's sort of recognition there, which I think makes some sense.

In the past when we've talked about this we've always focused on like primary D&O and S. E T A's and the and so forth and every assumption that we had all of the public side is still coming to bear the matter, how we look at it our commercial book or our National book.

It's the it's the FCA continue the drop as the underwriting.

It continues to improve and that's been a steady pattern.

What what we would say is they start is really on the private not for profit side, mostly Saturday in the U P. L I E.

Go forward. It's out of this book has had such massive transformation that the predictive value given the turnover of the path to the to the future is almost non existent. So we use it we try to carve all of those things out index forward.

But the the impact of that audit such a transfer of book is negligible. So the net is we're very comfortable with where the 19 of 20 are.

Okay next questioner please.

And next we will hear from Tracy been weekly with Barclays. Please go ahead. Your line is open.

Thank you congratulations to both Brian and Peter and Brian I would think of finding a nice island for work.

Many years of town.

Thanks Stacy.

Yeah, I don't think of.

Some of my questions about the repair of development, maybe you could just talk about how you feel about rate adequate and liability.

Type of matrix.

Our cash and I never day.

It is one of the or many commercial line.

Line, where you actually had net premiums written declined.

Maybe I'll start and then.

Thanks trace and then I'll turn it over to Mark There's just two things to keep in mind one of the net premium written.

You know what I said in my prepared remarks on how we restructure of the reinsurance the.

Tenants of 15 was purchased in December. So you would just would have seen that as the.

The impact on net premium written for the the casualty lines in the fourth quarter. So that's one.

And two is I just want to reinforce.

You know March pointing to give you. An example in terms of what we're doing would be what.

The excess casualty book we.

We had talked about we were you know years ago over 90% lead and what we were doing in excess casualty you wanted to make sure that we're getting better balance and so you know the team led by Dave Mcelroy Barbara market have done an amazing job.

Now half the increase like our mid excess by over 400% in terms of the policy Council of the book is changing and getting better balance across the portfolio and you don't really see that but I think that's the Mark's point before when he was commenting on the vast change of the improvement of the portfolio, but that just needs to emerge a little bit over time, but I think we have done some.

Very strong work on the underwriting side and the balance is much better as we position ourselves for the future Mark I don't want anything in terms of just the excess casualty specifically yeah sure two things of what I'll follow up on your direct question, which is on on the rate changes and rate adequacy and secondly, I think on the thin.

We could've done a little better job, we say the excess casualty and was really the Lexington casualty, which I really is the primary unit of traditional admitted casualty book, that's either written out of American home or likes of London, or Bermuda had has performed very very well during the year and so I'll, just let that get out of that line.

The other issue whatsoever. So it's really a combination of of Lexington, a primary of excess but but my comments will now.

Address all of that so.

As you know the rate changes I'd only been large they've been come out over.

A period of the terms of conditions, which drive this line of business are tighter and tighter and whether you have a E com or an aggressive view of loss cost trends that could affect our casualty businesses getting further away from risk is is the preferred way to go in and that strategy of that Peter and David.

Put in place moving that portfolio of higher say your further away from from rest of the case anything unforeseen happens so.

We're very comfortable with with that we're very comfortable on our indications are that the rate adequacy as opposed to rate change is stronger on new business that is our renewal business, which you would expect to be the case.

Excellent.

And at this point Dennis the main concern of somehow the property R&R and I know part of a lot of this platform.

Market share.

I'm just wondering.

How firm is your 19 point non personnel almost no sales target I got your point would be a flow of preparation.

I just wanted to tell the clients that you had maybe more flexibility by the rating agencies are you figure it out of the way to accelerate your debt structure.

On the back to a different topic.

Peter I think of you should address that one okay. Thanks, Tracy that the 19 nine remains the base case, we think it's the best way forward for for the organization. We're working on all of the different work streams that are outlined in my prepared remarks, working with all of our stakeholders and believe that that will be the path of the Max.

<unk> value for the organization.

Thank you.

Okay next question please questioner.

And next we will hear from your own Qunar with Goldman Sachs. Please go ahead.

Good morning, everybody and I'll reiterate the congratulatory comments into Brian and Peter.

I guess my part of my first question is on the comments around expectation of the similar growth trend in the commercial lines.

Or are you, saying that you expect commercial net premiums written to be in the high single digit range of in 'twenty 'twenty, one and I guess, what I'm trying to get out of why Wouldnt. We see further acceleration from point of view levels. Considering that you know rates remain very robust you have less reinsurance purchase and potentially in the field.

All of the recovery.

Theater.

Thanks Sharon.

It's hard to give specific guidance in terms of weather.

Whether it's going to be high single digits.

Or even more I mean, we have a lot of momentum in the in the commercial portfolio, we talked about strong retention strong range new.

New business in 2020 was impacted by you know if I look globally, particularly in international some of the specialty classes.

New business was very strong, but it wasn't at the normal levels that we expect within 2021.

And again, we're still in the global pandemic, we'll see what the economic recovery.

Cautious, but we're optimistic that new business will continue to pick up and we believe our retentions will get stronger.

And so we're very optimistic that we will have very good growth balanced across.

Commercial globally next year I don't know, David if you want to add anything in particular on the on the new business and your optimism of growth.

Yeah. Thank you Peter.

And the simple way I guess I think we've had a couple of turns for the book.

We look at this as less limit reduction, Okay, and then our new business opportunities have always continued to D and on the commercial side and $3 billion range worldwide with the platform that we have and.

And then I look at our B the renewal retention of rate. Okay. We can forecast rate, but we also.

<unk> had certain positions that we think that we can actually.

Consistently earned those rates going forward, Okay, we're not in the commodity position in our portfolio and if you look at this worldwide in terms of the different franchises the rehab.

Debt paid right, we're looking at and the risk adjusted the rate and the and what.

How we're thinking about the portfolio. They are very defendable. So there was a lot of work done over the last couple of years kind of meet freely admit that in terms of addressing the exposure of that might've been the outlier exposure, we feel very comfortable with where we are going into 2021 with a portfolio that we can add true.

Not only on rate, but new business and then our renewal retention.

Key point out of it.

Of course thing the.

The limit reduction that went through in these last two years.

We are through that portal and therefore, if anything we're adding risk and we're thinking about our growth with risks not not just risk on top of limits on top of accounts, but additional risk with additional clients and that's actually where we think very strongly that.

At the the plant and the formidable nature of what you're saying Gee, we will succeed in 2021, Okay. That's that's very much part of the plan is that we've taken some of the outlier.

Outlier exposures down to the studs and now we are very comfortable with the portfolio of that we have going for us.

I think mark wanted to add something too David Yeah, Yeah, Yeah, I mean, if I cut out a bit of purposely give you a arithmetic view.

And as its first Peter touched on it a bit with the ex ol. When he was talking about some of the reinsurance. So lots of current contracts you basically have ceded written all of bulleted right in the quarter and then the turn smoothly.

The risk attaching quota shares you see the recognition quarter by quarter. So from a net earned basis, which is what's going to really matter youre going to see.

Much more uplift on a net earned basis over the course of the year the the bed.

Fit of the smaller session on the casualty quota share will overwhelm the.

Additional ex ol session. So you'll see that increase of great, but it won't be at <unk>, you're going to see that over the course of the year.

Got it very helpful comments, Thank you and then switching over the LNR.

A lot of moving parts of this quarter, you know pandemic mortality alternative income all of them as they are do come out.

Great.

All of the think about kind of the core earnings calls that business, whether it's returning sour or our ROE on net.

You talked about in the past.

How should we think about that going forward.

Peter do you want to take that.

The cabinets.

Yeah. Thanks.

No I think Mark's comments highlighted the sensitivities to equity markets and interest rate levels.

This year, we did benefit from some strong market support.

That frankly is laid out in the noteworthy items in the.

Our earnings deck, we had a strong year based on where the markets for with both also on the call in terms of income.

We continue to target low to mid double digit returns for.

For the medium term and our current pricing conditions.

It suggests that we are able to continue that and so.

It's really the alternatives are the big anomaly this year turbos sort of normalized levels. The calling center of income strength could continue based on where interest rates are and that's sort of certain extent of the wildcard.

Thank you okay. Thanks, our next questioner please.

And next we will hear from Josh Shanker with Bank of America. Please go ahead.

Yes. Thank you very much for taking my call.

I wanted to go back to the guidance of what called guidance of about.

90% our accident year ex cat combined.

Combined ratio in general and for 2022 is that of your.

Your forecast for the exit for care.

And the other part of your both of my questions upfront. If you told me, we'd have 15% to 20% rate increases in 2020 of them. Maybe in 2021 I would think you could improve the combined ratio by more than three or 400 basis points in the.

Harmony with the AIG 200.

You're in talks in the two.

The area.

Well, let's let's have Mark talk about it are the.

The 90% and then.

And then we'll take it from there right. So I think I'll go back and forth on this.

On the 90% of which we are Josh for at reiterating the peers will get into some of the expense ratio of aspects of it with regard to.

The loss ratio that was the second part of it.

Uh huh.

Well, we would expect.

Improving margins as well as we go through 'twenty one of 22.

We're viewing that as exit, though Josh so that's much closer and the equivalent to <unk>.

But the.

But nevertheless, you have to watch the compound growth of our.

Because as the book continues to improve and it's improved.

Fabulously the.

The the degree of improvement narrows and hours and hours of that you can do it so the big huge changes on behalf of already occurred.

But we're comfortable on our on our cadence and the approach to get there.

Peter.

Can I just add to that Josh I mean, a couple of things to keep in mind.

One is AIG 200 contribute a meaningful portion.

Of the improvement in expense ratio now, while I said $400 million was the exit run rate of.

Of 2020, none of them even fully earned in yet so we expect the full billion dollars by 2022. So you can just do the math of that will contribute to the expense ratio an overall combined ratio. The other is we think there's two components of growth one as Dave mentioned is that we think that the portfolio is in a very good place for <unk>.

<unk> line growth.

And we would expect to see that to continue in 2021 and 2022. In addition, contributing to that growth will be we need less reinsurance I think the terms of conditions that we were able to improve out at one one speak volume in terms of the trajectory and what we would expect for reinsurance going forward that will contribute I think when we do.

And the team has proven it does.

Very good work on operational excellence that you know what.

We.

Separate life retirement, AIG remain co we will find ways to improve the expense ratio as we worked through the actual separation and we have a very disciplined expense.

You know our behavior in the company and then just the rate above loss cost and as we continue to reposition the portfolio. We think there will be improvement in the loss ratio.

As we look for the future. So when you add all of those components together, we are very confident that we would be below the 90 as we exit 2022.

Insurance don't forget this is a josh the debt.

Don't forget this is both commercial and personal.

It's the entire book of business going below 90, and the personal lines.

No it's not getting the kind of rate increases the commercial so you've just got to put that weighted average into the.

Do you have enough of you ask your questions. The new jobs that those are two good luck in your new role and congratulations everyone.

I appreciate that Josh. Thank you very much I think we have maybe time for one more question.

Alright, and we won't hear from Erik bass with Autonomous Research. Please go ahead of your line is now open.

Peter.

Yes, Mark you could you could weigh in I mean, certainly the path with the IPO is very clear the 19 nine point of.

99%.

You know I P O sales when we looked at.

I think the heart of your question on the private is that it has to be a better alternative for us we'd have to be more strategic.

Do we go through the IPO or would we do of private sale as we work through the coming months.

Got it thank all the products.

Yeah, Matt you have another follow up there.

Yes, the way, it's just one other on life and retirement I was just hoping you could provide some additional detail on the mortality result, this quarter many of sensitivity to general population COVID-19 deaths or maybe another metric to help us think about the potential impacts of <unk>.

Kevin do you want to do that.

Absolutely thanks, Eric so okay.

The reality is it's hard to isolate COVID-19 deaths. So the way we approach it and looking at our portfolio was to focus on.

The total portfolio absolutely for expected versus pricing.

And in this context, we saw mortality for the year of continued to be.

Acceptable relative to our pricing you know in terms of short line variances driven by Covid.

Either way, we look at this as an earnings amount of capital events and we haven't seen any data that suggest a change to our long term assumptions are that being said.

Based on our best understanding of what are the Covid related deaths, we estimate that up to 40% of the reported claims Covid reported claims could be an acceleration of life claims we would otherwise expect in the next.

Five years.

And again based on the best understanding of the Covid. The that's a yes.

We estimate our exposure to the population of approximately <unk>.

$65 million to $75 million for 100000 a pop.

Populations that's true.

Slightly better estimate than what we would've assumed a couple of quarters ago.

Great. Thank you.

Okay. So look the thank you all for you for all your questions before I end the call I want to thank everyone who's been part of the multi year journey of that began when I joined AIG in 2017, the fixed the fundamental needed needed fundamentals needed for AIG. The once again be of leading insurance franchise.

What has been accomplished over the last few years with none of it possible life without the extraordinary efforts of Aig's exceptional of down at all levels of of the organization and I'm thankful for everyone's dedication and commitment to this great organization.

I'm also grateful to the client's distribution reinsurance partners of shareholders regulators and many other stakeholders who've actively supported me since I retired AIG I look forward to being a part of the next chapter of AIG under Peter's leadership.

The well stay safe and healthy.

Yeah.

And ladies and gentlemen. This concludes today's call. We do thank you for your participation you may now disconnect.

Q4 2020 American International Group Inc Earnings Call

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