Peter Zaffino
Chairman, CEO at American International Group
Good morning and thank you for joining us to review our Fourth-quarter and full-year 2022 results. Following my remarks, Sabra will provide more detail on certain topics including life retirement results and our path to a 10% or greater ROCE and then we will take questions. Kevin Hogan and David McElroy will join us for the Q&A portion of the call.
Today. I will cover four topics. First, I will provide an overview of our fourth-quarter financial results. Second, I will review highlights from the full year including some of our major accomplishments which were remarkable given the very challenging conditions we faced throughout 2022 in the equity markets and the insurance industry. Third, I will unpack in some detail, market conditions leading up to January 1 reinsurance renewals where we saw significant shifts that we believe will impact the industry throughout 2023 and perhaps longer. Suffice it to say this one-one renewal season was the most challenge than many including myself have seen in our careers. And fourth, I will outline our 2023 priorities and outlook regarding capital management.
Before turning to our results, I'd like to welcome Sabra to the call. We are fortunate to have her in the interim CFO role while Shane is on a medical leave. Regarding Shane. I am personally deeply appreciative of the tremendous outreach from many of you, the number of people has saying good wishes for a speedy recovery, it's incredibly meaningful to me and our management team and particularly to Shane and his family. We look-forward to welcoming him back at AIG.
Now, let me begin with a brief overview of AIG's Fourth-Quarter Results. Adjusted after tax income in the Fourth quarter was a $1 billion and $1.36 per diluted common share. We repurchased approximately $780 million of AIG common stock and redeemed $1.8 billion of debt. AIG paid $243 million in dividends in the Fourth quarter and Corebridge paid two dividends totaling approximately $300 million following its IPO in September of 2022. Turning to General Insurance, in the Fourth quarter, the accident year combined ratio ex-CATs improved to 140 basis-points year-over-year to 88.4% representing the 18th consecutive quarter of margin improvement. Notably, underwriting income in the fourth quarter increased 27% year-over-year to $635 million.
Global commercial drove the year-over-year increase achieving an accident year combined ratio ex-CAT of 84.1% at 380 basis-point improvement and a 69% increase in underwriting income. Global personal report an accident year combined ratio ex-CATs of 100.4% at 610 basis-point increase from the prior year quarter as we continued to reposition this portfolio. Moving to Global Commercial on an FX adjusted basis, North America commercial net premiums written increased 3% and international increased 2%. Global Commercial had strong renewal retention in its in-force portfolio and new business continued to be strong. Turning to rate momentum continued in North America commercial with overall rate increases in the quarter of 3%, 7% if you exclude financial lines and 9% if you also exclude workers' compensation. These rate increases were driven by retail property at 15%, Lexington at 12% and excess casualty at 9% and the exposure increase in the North America portfolio was 3%.
International commercial rate increases were 4% driven by Asia Pacific at 9% and EMEA at 7% and the exposure increase in the international portfolio was around 2%. Pricing, which includes the rate plus exposure, was up 6% in both North America and International. While we experienced downward pressure on rates in certain lines early in the fourth quarter, we saw a re-acceleration of price increases towards the end-of-the quarter. For example, retail property was up 15% in the fourth quarter with rate improvement of 24% in December when market impacts from increased catastrophes started to be felt. We saw similar upward movement at Lexington and particularly within the property portfolio with December seeing the strongest rate increases in the fourth quarter. Overall, we continue to earn rate above loss cost trends, which contributed to positive margin expansion. And Global personal starting with North America net premiums written declined 7%, reflecting our ongoing reshaping of this portfolio, particularly in the high and ultra-high net-worth businesses that are part of PCG.
Later in my remarks, I will discuss our announcement on Monday relating to PCG and our partnership with Stone Point Capital to create a new Managing General Agency or MGA. In international personal net premiums written slightly increased by 1% on an FX adjusted basis due to a rebound in travel and growth in A&H. Now turning to the full year, we made tremendous progress throughout 2022 on a number of key priorities. I could not be more pleased with our team's ability to actually could on multiple complex strategic objectives across AIG that wants. Our most significant and impactful accomplishment was completing the IPO of Corebridge in September of 2022. Despite the very challenging equity market conditions, we had to navigate. Notably, Corebridge was last year's largest IPO in the US and the largest financial services IPO since 2020. We also continue to grow underwriting income in general insurance, which increased approximately $1 billion year-over-year. The second year in a row with over $1 billion of growth in underwriting income. As I noted on last quarter's call, we also reached significant milestones on AIG 200 that have modernize our technology infrastructure and operational capabilities while executing on an exit run-rate savings of $1 billion six months ahead of schedule.
We also changed AIG's investment management strategy and structure through successful partnerships with Blackstone and BlackRock and we are seeing the benefits of these partnerships across AIG and Corebridge. Turning to full year consolidated financial results for AIG adjusted after tax income in 2022 reached $3.6 billion and was $4.55 per diluted common share. We returned $6.1 billion to shareholders through $5.1 billion of AIG common stock repurchases and $1 billion of dividends. We finished 2022 with 734 million shares outstanding, a 10% decrease since the end of 2021. And we executed on a number of capital management actions to establish the standalone corporate capital structure, while reducing AIG debt by roughly $10 billion. Consolidated financial debt outstanding was approximately $21 billion at year end, with $11.8 billion at AIG and $9.4 billion at Corebridge.
Now let me cover full year 2022 results for general insurance. As you know, an important aspect of our turnaround over the last few years has been instituting a culture of underwriting excellence and our rigor in this area is now clearly benefiting our financial results. General Insurance achieved underwriting income of $2 billion in 2022 despite the industry again experiencing over $100 billions of insured natural catastrophe losses and we exceeded our combined ratio commitment by achieving a sub 90 accident year combined ratio ex-CATs in all four quarters. As I've noted on prior calls and it's worth repeating since 2018, we completely overhauled our underwriting standards and overlay these standards with a comprehensive reinsurance program that can adapt to market conditions and to our portfolio as it continues to change and improve. Overall gross limits deployed were reduced by over $1.2 trillion during this period.
We also meaningfully and deliberately shifted our global portfolio mix in order to reposition AIG for the future. For example, global commercial now represents 74% of our net premiums written up from 57% in 2018 and Lexington is now 17% of our North America commercial business up from 25% in 2018. If you exclude about 3, Lexington is now 23% of North America commercial. As a result of this work our current portfolio is very well-positioned for 2023. I will discuss in more detail later when I review January one reinsurance renewals, how market dynamics have shifted and how AIG should benefit as we look to capitalize on attractive opportunities for better risk-adjusted returns.
Now let me highlight a few of the key businesses in general insurance that contributed to our performance in 2022. Lexington, our market-leading excess and surplus lines business had 18% net premiums written growth in 2022, up over 50% since we transitioned this business to focus on the wholesale market. This business also increased underwriting profitability excluding CATs by 60% and it achieved a sub 80% accident year combined ratio ex-CATs for 2022. Gladfelter continued its terrific performance growing net premiums written by 14% increasing underwriting income and achieving an 85% accident year combined ratio ex-CATs. The acquisition of Gladfelter allowed us to significantly elevate the quality of our programs business. Global Specialty, which includes our global marine, energy and aviation businesses grew net premiums written by over 15% on an FX adjusted basis. This was driven by strong client retention of 88%, new business growth and rate increases across the portfolio.
Global Specialty generated strong earnings in 2022 with an impressive accident year combined ratio excluding CATs of 80%. These are just some examples of businesses that we prioritize last year based on their market position, our differentiated value proposition to clients and our ability to generate strong underwriting results. We see great opportunities for these businesses going-forward and they are strong anchors for AIG that we expect will contribute to profitable growth in 2023. Our global personal business performed well considering some of the post pandemic headwinds we saw in the first half of 2022 in our strategic repositioning of the business.
Also, as I mentioned on our last call, the impact from deemed hospitalizations in Japan and to a lesser extent Taiwan contributed over $160 million of losses in 2022, having a 290 basis-point impact on the international personal accident year combined ratio. This accident and health product was discontinued in 2022. Turning to full year net premiums written, general Insurance grew 4% on an FX adjusted basis, driven by 6% growth in global commercial, North America grew 7% and international commercial grew 6%. We had strong renewal retention in our in-force portfolio with North America improving by 300 basis-points to 86% and international achieving 86% for the full year. And as a reminder, we calculate renewal retention part of the impact of rate and exposure changes.
Turning to underwriting profitability for the full year 2022 was another year with strong progress. The general insurance accident year combined ratio ex-CATs were 88.7% an improvement of 230 basis points year-over-year. The full year saw 180 basis point improvement in the accident year loss ratio ex-CAT and a 50 basis point improvement in the expense ratio. Global commercial achieved an impressive accident year combined ratio ex-CATs of 84.5% an improvement of 460 basis points year-over-year. The loss ratio was the biggest contributor with a 330 basis-point improvement and the combined ratio including cats in PYD of 89.6% represented a 920 basis-point improvement year-over-year. The accident year combined ratio ex-CATs and global personnel deteriorated 430 basis points at 99.2% for the reasons I've outlined before.
Now let me turn to reinsurance renewals at January 1 of this year. As I stated on our last earnings call, we knew this renewal season will be very challenging and lead to fundamental changes in the market that would impact one-one renewals. The market was faced with a combination of factors, the added further pressure to dynamics that were already creating considerable stress. We had top global macroeconomic trends. We had geopolitical uncertainty. We had short-term pressure on the asset side of the balance sheet as a consequence of rising interest rates, inflation and currency fluctuation. We had additional natural catastrophe losses late in the fourth quarter, an increasing frequency and severity of secondary perils continued. And 2022 ended with over $130 billions of insured natural catastrophe losses, making 2022 the fifth costliest year on record for insurers with five out-of-the last six years having exceeded $100 billion.
Hurricane Ian in particular proved to be a catalyst that changed market dynamics even more significantly than expected and ultimately led to shifts in the market that required the industry to rethink reinsurance placements and the commensurate changes that needed to take place in the primary market. The unprecedented levels of natural catastrophes on a global scale massively impacted the reinsurance market in a couple of ways. Increased natural cat activity has resulted in elevated property cat ceded loss ratios, with average incurred loss ratios from 2017 through 2022 exceeding 85% compared to 2012 through 2016 when average incurred loss ratio kind of below 30%, a dramatic deterioration. And over the last five years secondary perils contributed more than 50% ultimate loss when compared to primary perils. These market dynamics also impacted the supply of reinsurance and retrocessional capacity and the cost-of-capital increase for the industry, which impacted almost all lines of business and territories regardless of loss experienced. On top of all of this very little new capital entered the market. Available capital is estimated to have decreased approximately 20% year-over-year.
Now let me outline what happened in the property cat and retro markets in particular due to the high-level of cat losses in 2022, which were further exacerbated by events in the fourth quarter. 50% of global property cat limits which we estimate to be $425 billion renewal January 1. Approximately 70% of global retro limits estimated at 60 billion incepted January 1. Reinsurers heavily relying on peak peril retro protection face greater pressure as a result, whereas larger more diversified reinsurers were better able to manage retro capacity constraints. As a result, a majority of programs placed on January 1 insurance companies forced increased retentions. Despite these market challenges, AIG navigated this complex and intense renewal season extremely well. We knew we were in a strong position heading into January 1 given the repositioning and improved quality of our global portfolio coupled with our considerable efforts to reduce our gross portfolio peak exposures. As we expected, this allowed us to capitalize on many attractive opportunities and this proved to be a competitive advantage as we had an exceptionally successful renewal season.
It's also worth noting that AIG's reinsurance purchasing is by design more heavily weighted to January 1 than the wider market. The benefits of this are twofold, concentrating the bulk of our purchasing at January 1 allows AIG to maximize the outcome across all of our reinsurance placements and we have clear line-of-sight on our reinsurance costs for the full year, which is particularly valuable in a market, which we believe will continue to be incredibly challenging. Some of the highlights of our January placements include the following, with respect to property catastrophe placements we obtained more limit than we purchased in 2022 and we believe we have the lowest attachment points on a return period measurement for North America windstorm and earthquake amongst our peer group and our modeled exhaust limits are at higher-return periods compared to last year for each of our placements. These placements should further reduce volatility, which is something we remain very focused on, and they provide us with significant balance sheet protection in the event one or a series of significant catastrophe events occurred.
Specifically, we separately made appropriate changes to our North America property cat treaties to reflect our improving portfolio with retention of our commercial cat portfolio attaching a $500 million in Lexington in our programs business having an attachment point of $300 million. The property cat aggregate cover that we placed as for retentions before attaching and for North America, Japan and rest-of-world, it now could attach in the second event which is an improvement from 2022. Our property cat per current structures largely stay the same for international and we believe they are market-leading with Japan's retention staying flat at $200 million and the rest-of-world attaching at $125 million. Many factors improved our overall property cat reinsurance program with highlights being we were able to obtain approximately 6 billion of limit, including increasing our per occurrence excess-of-loss placements. We maintain low attaching on a model basis. We receive support for a $500 million aggregate placements. And our overall spend for AIG increased less than 10% on an absolute and risk-adjusted basis versus 2022.
With respect to PCG, we accelerated portfolio remediation, which is driving further gross exposure reductions in key cat-exposed states where loss costs, inflation and necessary modeling changes have not kept pace. This allowed us to reduce the total limit purchase for the PCG specific cat program, which partially offset increased pricing pressure due to Hurricane Ian. Overall casualty renewals both excess-of-loss in our quota-share placements renewed close to expiring terms on a risk-adjusted basis with no impact on ceding commissions. Our reinsurance partners maintain their support for AIG with consistent capacity deployment and reinsurance terms in clear recognition of the quality of our portfolio. The outcomes we achieved at January 1 also reflect the value of investments we have made in our reinsurance strategy and coupled with our relationships incredibility with reinsurance partners are a testament of the confidence the reinsurance marketplace has in AIG and its management team.
We appreciate the ongoing support we have received from our reinsurance partners. As we look ahead to 2023, the world faces many uncertainties and in uncertain times our role as a market-leading global insurance company is even more important. With the momentum we have built and the strength of our portfolio, AIG is now extremely well-positioned to strategically grow and lead the market by providing thoughtful expert advice on risk solutions for our clients, distribution partners and other stakeholders. Like 2022, we have set-out ambitious strategic in operational priorities for 2023. We will continue to improve and invest in lines of business in general insurance where we see significant growth potential notably Lexington and Global Specialty. I highlight Lexington because it is presented and will continue to present tremendous growth and profitability opportunities for us. And early indications are that the rate momentum we saw in this business at the end of 2022 and into early 2023 will continue. We expect meaningful growth in Lexington this year led by property. We're over the last few years we have prudently tightened limits, improved terms and conditions and increased profitability while driving topline growth.
We also plan to increase investment in our assumed reinsurance business in 2023 particularly through Validus Re. As we have discussed on prior calls over the past few years, we've been highly focused on driving value through a disciplined approach involving strong risk assessments, some portfolio construction, a steadfast commitment to underwriting excellence and prudent capital management. Over this period of time the de-risking within Validus Re was particularly acute in the global property cat market where year-over-year we reduced participations across the portfolio while concurrently purchasing sound retrocessional protections to prudently manage the portfolio and reduce volatility, all-in line with our cycle management strategy. As a result, we're in a strong position to capitalize on attractive opportunities at January 1. The property market in particular repositioned and became very compelling in terms of risk-adjusted rates along with enhanced structures as well as beneficial terms and conditions.
Rate changes within property cat range between 30% and 100% in the U.S. as well as in peak zones outside the U.S. Risk-adjusted rate increases were approximately 50% in the U.S. property and 35% in international property and similarly average margin improvement was approximately 50% year-over-year across the entire portfolio. Property cat ROEs for both the U.S. and International business increased by greater than 100% year-over-year. Additionally, we obtain improved terms and conditions including favorable movement and attachment points and all property lines. For casualty lines quota shares remain sound with ceding commission is moving favorably for reinsurers by one to two points along with terms and conditions remaining in-line or improved. The result of these actions included net premiums written at January 1 increased over $500 million or 50% year-over-year. This increase was driven roughly 30% from U.S. property, 15% from international property, 45% from casualty placements and the remaining 10% was from specialty including marine and energy. The majority of new property limit was deployed to existing clients with a significant level of private terms being achieved on our US property writings. Looking ahead, we will continue our measured approach for other renewals. For example, if meaningful market changes continue, we will carefully consider our positions at the April 1st Japan renewals and we will continue to be very cautious with capital deployed at June 1 in Florida.
Turning to Private Client Group or PCG, this business remains a strategic priority for us in 2023. As you know, over the last few years, we have undertaken a significant re-underwriting efforts in this portfolio reduced aggregate exposure, transition certain states to the non-admitted market and developed strong partnerships with Lloyd's and reinsurers to reduce volatility. On Monday, we announced our intention to launch in partnership with Stone Point Capital, a newly formed MGA that will underwrite on behalf of AIG and eventually other capital providers in the high and ultra-high net-worth markets. AIG will transfer PCG solutions to the MGA which will offer a single and then broker and client portal, a comprehensive set of product offerings, a simplified data warehouse and the underwriting capabilities of AIG. The MGA will be rebranded as private clients select or PCS and will be led by Kathleen Zortman and our current team at PCG. We see this new structure as a logical next step-in the evolution of PCG and believe it will create significant value for clients, brokers, and other stakeholders.
Additionally, expense discipline will continue to be a priority for AIG. In addition to savings from AIG 200 that we expect to earn in during 2023, we plan to move $300 million of expenses currently sitting in AIG corporate GOE to Corebridge upon deconsolidation. Separately, we will continue to align our target operating model and further reduce absolute expenses across AIG parent and general insurance to reflect the fact that AIG is becoming one company. This year we will also remain focused on completing the operational separation of Corebridge from AIG and we are working towards a secondary offering of Corebridge common stock by the end of the first quarter subject to-market conditions and regulatory approvals. Our current expectation is that the majority of net proceeds of the secondary offering will be used for AIG common stock repurchases. And as I've stated on our last call, we are revisiting AIG's dividend, which has not changed in many years. We expect to say more about this on our first-quarter call-in May.
With respect to capital management priorities in 2022, we did a significant amount of work to materially improve the capital structures of both AIG and Corebridge. With the reduction in AIG debt, we achieved our post deconsolidation leverage will be in-line with best-in class peers and with respect to share buybacks we have $3.8 billion remaining on our existing share repurchase authorization. Our balanced capital management philosophy will continue to allow for investment in growth opportunities while returning appropriate levels of capital to shareholders through share buybacks and dividends. We also remain open to compelling inorganic growth opportunities should they arise. Before turning the call over to Sabra, I would like to pause and say that 2022 was another incredibly important year for AIG, our colleagues did an exceptional job, particularly on the Corebridge IPO and the continued underwriting and operational improvements that are clearly showing through in our financial results. Our journey to be a top-performing company continues and I fully expect 2023 to be another year with significant momentum and progress across the organization.
With that, I'll turn the call over to Sabra.
