Peter Zaffino
Chairman & Chief Executive Officer at American International Group
Good morning and thank you for joining us today to review our fourth quarter and full year 2023 financial results. Following my remarks, Sabra will provide more detail on the quarter and some perspective on the year and then we'll take questions. Kevin Hogan and David McElroy will join us for the Q&A portion of the call.
We had a very strong fourth quarter, which highlighted a significant year of achievements at AIG. Throughout 2023, we continued to build on our underwriting excellence, repositioned the portfolio through several divestitures, made meaningful progress towards the deconsolidation of Corbridge including three secondary sell-downs, delivered disciplined premium growth in businesses where we have scale and outstanding combined ratios and continue to execute on our balanced capital management strategy. I'm very proud of the work our colleagues delivered for all of our stakeholders throughout the entire year.
In the fourth quarter, adjusted after tax income per diluted common share was $1.79, an increase of 29% year-over-year, driven by continued strong underwriting results, 17% growth in net investment income and excellent execution of our balanced capital management strategy, that resulted in a 6% reduction in diluted common shares outstanding. For the full year 2023, adjusted after tax income per diluted common share was $6.79, an increase of 33% over 2022. AIG overall produced an adjusted return on common equity of 9% for the year, up from 7% in 2022. As I will share with you today, 2023 was an extraordinary year for AIG. During my remarks this morning, I'll discuss the following topics.
First, I will provide an overview of our fourth quarter financial results. Second, I will review AIG's significant accomplishments in 2023, including our strategic repositioning and our financial highlights. Sabra will comment on the life retirement business in her prepared remarks. Third, I will cover insights on the January 1 reinsurance market and specifically AIG's reinsurance renewals. And finally, I'll share some thoughts on how we're building on our momentum and positioning the company as we enter 2024, including some specifics on AIG next, our initiative focused on creating the AIG of the future.
I will also discuss our capital management strategy and growth expectations. AIG's strong fourth quarter results demonstrated our continued execution across all aspects of our strategy. Within general insurance, underwriting income was $642 million. Gross premiums written for the fourth quarter were $7.6 billion, an increase of 4% from the prior year quarter. Net premiums written for the quarter increased by 7% from the prior year quarter to $5.7 billion. Global commercial grew 5% and global personal grew 9% from the prior year quarter. If you exclude financial lines, global commercial would have grown 11%.
In North America Commercial, fourth quarter net premiums written grew 5% over the prior year quarter, led by retail property, which grew 32%, Lexington which grew 20%. These were offset by North America Financial Lines, which was lower by 13%. In International Commercial, fourth quarter net premiums written grew 6% over the prior year quarter, as international property grew 28% and Talbot grew 12%. These were offset by international financial lines, which was lower by 7%.
In the fourth quarter, Global Commercial had very strong renewal retention of 86% in its enforced portfolio, as well as very strong new business performance. North America Commercial produced new business of $503 million in the quarter, an increase of 21% year-over-year. The growth was led by retail casualty, Lexington and retail property. International Commercial produced new business of $467 million for the quarter, representing an increase of 14% year-over-year. This growth was led by Global Specialty and Talbot.
Moving to rate, in North America Commercial, overall rate increased 4% in the fourth quarter, with exposure adding three points and the overall pricing was up 7%. In North America Commercial, if you exclude financial lines and workers compensation, overall rate would have increased 11% in the quarter and with exposure adding four points, overall pricing would have been 15% meaningfully above the loss cost trend.
North America Commercial rate increases were driven by Lexington wholesale, which was up 17%, retail property, which was up 19% and excess casualty, which was up 13%. In International Commercial, overall rate increased 3% in the fourth quarter, with exposure adding two points and the overall pricing was up 5%, which is slightly below loss cost trend. The rate increase was driven by property, which was up 12% and marine, which was up 8%.
Turning to Personal Insurance, fourth quarter net premiums written increased 9% from the prior year quarter, primarily driven by North America. In North America Personal, net premiums written increased 37% in the quarter. As we've seen in prior quarters in 2023, the significant premium growth for North America Personal was driven by our high net worth business. And as we discussed in prior quarters, the growth in North America earned premium continued to generate a lower expense ratio and we expect the expense ratio will continue to improve in 2024.
Now let me turn to the full year financial results. 2023 was another year of meaningful, strategic repositioning and was in many ways our best year yet. The repositioning included the disposition of Validus Re and Crop Risk services, which generated a combined $3.5 billion of proceeds, including a preclosed dividend. Additionally, we settled a $1 billion intercompany loan from Validus Re to AIG and received approximately $250 million of RenaissanceRe common stock.
The changes to our portfolio further reduced volatility and allowed us to focus on businesses where we believe we have better opportunities for stronger risk adjusted returns. We reshaped the reinsurance structure of our high net worth business and launched a newly formed MGA called Private Client Select. We made significant progress towards Corbridge's separation, another major strategic milestone on our journey to becoming a less complex company. We completed three secondary offerings in 2023 that generated approximately $2.9 billion in cash. We worked with Corbridge on the divestiture of Laya Healthcare and announced the sale of the UK Life business.
In 2023, AIG received $1.4 billion of capital from Corbridge through $385 million of regular dividends, $688 million of special dividends and $315 million of share repurchases. At the end of 2023, our ownership staking Corbridge was approximately 52%. In 2023, we continued to execute on a thoughtful and balanced capital management strategy. During the year, AIG returned $4 billion of capital to shareholders through $3 billion of share repurchases and a $1 billion of dividends. We reduced our common shares outstanding by 6% and increased quarterly dividends by 12.5%.
On August 1st, the AIG board of directors increased our share buyback authorization to $7.5 billion. At the year end 2023, we had $6.2 billion remaining on that authorization. We reduced AIG net debt by $1.4 billion in 2023 after successfully conducting a senior notes tender offer in November. We finished 2023 with very strong parent liquidity of $7.6 billion, which gives us ample capacity to continue executing on our capital management priorities.
Turning to the full year result for General Insurance, throughout 2023 we delivered terrific financial performance. General insurance full year underwriting income was $2.3 billion, a 15% increase year-over-year. For the full year, the General Insurance accident year combined ratio excluding catastrophes was 87.7%, an improvement of 100 basis points year-over-year. Global commercial achieved an accident year combined ratio excluding catastrophes of 83.3% for the full year, an improvement of 120 basis points year-over-year, driven by loss ratio improvement.
The calendar year combined ratio was 87.1%, a 250 basis point improvement year-over-year. Excluding Validus Re and Crop Risk Services for the full year results, the Global Commercial accident year combined ratio excluding catastrophes would have increased by 50 basis points to 83.8% and the calendar year combined ratio would have increased by slightly over 20 basis points to 87.3%. In Global Personal, the full year accident year combined ratio excluding catastrophes was 99.3% in line with the prior year.
For the full year, General Insurance grew net premiums written by 7% year-over-year, driven by 5% growth in Global Commercial and 10% in Personal Insurance. North America Commercial grew 5% and International Commercial grew 6% year-over-year. A couple of highlights, Lexington and Global Specialty had outstanding years. We remained very focused on these businesses and made investments to accelerate growth and continue to deliver strong underwriting profitability. Lexington grew its net premiums written by 17% year-over-year. Growth was driven by historically high retention, which was 80%, $1 billion of new business and rate increases of approximately 18%.
Global Specialty, which includes businesses in marine, energy, trade credit and aviation, grew its net premiums written 10% year-over-year, driven by 88% retention, almost $750 million of new business and rate increases of 7% for the year. Also, there are two parts of our business that impacted growth in Global Commercial, which I would like to offer some perspective.
First, if you exclude financial lines, our net premiums written growth would have been 10%. Second, as we've outlined on prior calls, we decided to non-renew two programs that had significant property catastrophe exposure that no longer met our underwriting guidelines. We did not believe that the premium increases on a risk adjusted basis for these two programs delivered an acceptable return. The decision to non-renew impacted the gross and net premiums written for Lexington specifically, as well as the Global Commercial business throughout 2023.
If you exclude financial lines in these two programs that I just mentioned, our year-over-year net premiums written growth would have been 13%, which gives you a sense as to why we have significant confidence in our core portfolio, where we saw meaningful overall growth for the year. It's worth providing a little bit more detail on financial lines. In financial lines, particularly in our public directors and officers book of business, we continue to exercise underwriting discipline by maintaining our primary position in our portfolio and being very prudent on large account excess layers, where there is significant exposure to vertical loss and these layers are highly commoditized where typically the best price wins.
We've spoken about the cumulative rate change in Financial Lines before, but I want to provide a little bit more detail. The compound annual growth rate for Financial Lines achieved from 2019 through 2023 was 49%. If you exclude 2023, the compound annual growth rate was 63%. It's a business we're very focused on and our underwriters are continuing to carefully monitor market conditions and underwrite conservatively.
Now, I'd like to provide you with some insight into the current reinsurance market generally and an overview of our January 1 reinsurance renewals. As I mentioned on previous calls, AIG's reinsurance purchasing is deliberately weighted to January 1, which enables us to strategically optimize the outcome across our reinsurance placements and provides us with clarity on our cost of reinsurance at the beginning of the year.
Before I go into detail on this year's outcomes, I want to speak about how we evaluate our reinsurance purchased. We've seen significant changes in the global property market over the last two years and analyzing and quantifying changes and a portfolio's risk profile has become increasingly complex.
Currently, one of the most overused phrases that has been used with more frequency in the last year is risk adjusted pricing or risk adjusted rate changes, which have multiple interpretations, particularly when it comes to property treaty reinsurance. Calculating the risk adjusted rate change can be complicated and is often inconsistent. I want to outline how AIG determines risk adjusted pricing changes, which we believe is an industry best practice.
To begin, you must determine the baseline structure and all the variables required to assess and quantify the risk adjusted pricing change. To do that, the base analysis should be set at the identical structure and coverage with the exact terms and conditions of the prior year's structure. The analysis needs to compare the cost of capital year-over-year and any model changes from vendor model output, such as RMS to determine if the loss costs have increased or decreased at the attachment point and the vertical limits deploy. Also, an analysis is needed for any changes to the coverage provided in the treaty placement.
For instance, over the last few years, many programs have gone from an all risk coverage basis to a named or peak peril basis. To correctly calculate the risk adjuster rate change, perils no longer covered need to be analyzed and priced separately and the impact of any reduced coverage should be factored into the assessment of the price change. This can be particularly difficult when assessing perils that would not be economically viable to place on a standalone basis with significant limits, which could include wildfire, flood or terrorism.
There needs to be consideration given to the volatility associated with the expected loss in calculating the risk adjuster rate change. Given the complexity of these calculations, the methodologies applied should be done with consistency and discipline. When applying the methodology I just described, AIG had a tremendous outcome with our reinsurance partners at the January 1 renewal season, building upon the very strong result achieved in a very challenging market in 2023.
Now let me turn to AIG's reinsurance renewals at January 1 of this year. To level set, the natural catastrophe insured loss activity remained at the forefront of the market with a record setting 37 events in 2023 that exceeded a billion dollars of insured loss. These events contributed to a total annual insured loss currently estimated at over $100 billion, marking the sixth time in the past seven years that insured loss from natural catastrophes has exceeded $100 billion. Over the last seven years, there's been nearly $1 trillion of aggregate losses, with over 60% driven by secondary perils.
The headline is that we were able to significantly improve our property cap structure and reinsurance coverage provided. When you review what we purchased last year, including for Validus Re, the overall spend has reduced by approximately $200 million and our core property treaties, excluding Validus Re, have slightly lower ceded premium year-over-year.
Let's start with our property catastrophe placements. Our core commercial North America retention of $500 million remained unchanged for the second straight year. The attachment on our dedicated Lexington occurrence tower was unchanged at $300 million. In both cases, the modeled attachment point is lower and the exhaust limit is higher. Our international property cat per occurrence structures renewed with a reduced retention in Japan to $150 million, a $50 million improvement from the prior year. The rest of the world attachment remains unchanged at $125 million.
We were very pleased to have achieved broader coverage across all of our core occurrence towers, with nominal attachment points unchanged or in the case of Japan decreasing, the modeled probability of attaching our cat reinsurance improved with respect to key perils and across every major territory following the growth achieved in the property portfolio in 2023.
Our property cat aggregate cover was also successfully renewed with improved coverage, further reducing our volatility from frequency of loss. The aggregate now includes a standalone sublimit dedicated to losses in North America, arising from secondary perils. Importantly, it also now covers contributing losses from our high net worth portfolio. Our annual aggregate deductible for North America is $825 million. The North America other perils deductible is $350 million, which is a new deductible and Japan and the rest of the world deductibles are $200 million and $175 million respectively.
These are subject to each and every loss deductibles of $20 million, other than for North America wind and earthquake, which are at $50 million. Our return period attachment point is lower year-over-year. For all of our major proportional treaties across a range of classes, we improved or maintain our ceding commission levels, reflecting our market leading underwriting expertise and position in the market.
Turning to casualty, the challenges we've spoken about previously regarding the impact of inflation, both social and economic and litigation funding in the US were a focal point for reinsurers at one [Indecipherable]. For casualty at AIG, we remain very focused on our underwriting standards and the positioning of the portfolio. Our team has done a terrific job of re-underwriting the entire business, particularly considering the amount of work that was needed to reposition it to where it is today.
Additionally, our pricing assumptions today have loss trends ranging from the high single digits to over 10%. These were increased over the past two years given inflationary dynamics. I do want to make a few comments about the last ten years of casualty results for the industry.
The industry as a whole has reported meaningful reserve releases in four of the past ten calendar years, including in calendar year 2017. At the same time, there have been six years of significant reported industry strengthening in the last ten calendar years, including in all of the most recent five calendar years. Focusing on AIG, for accident years 2016 through 2019, our initial loss picks in our casualty lines excluding workers compensation averaged 78%.
Looking specifically at accident years 2016 and 2017, the initial loss picks were approximately 81% in both years. These loss picks exclude unallocated loss adjustment expense. We significantly strengthened the reserves by over a billion dollars for accident years 2016 through 2019, which revised our year end ultimate loss picks to 91% in 2016 and 96% in 2017 and an average of 87% over accident years 2016 through 2019.
To further analyze how our casualty results compare to industry results for other liability in commercial auto using the most recent schedule P data. They are well above the average industry loss picks on both measures. Our initial and year end ultimates for both lines are roughly ten to 20 points higher than the overall industry average. In addition, we have reinsurance in place for 2016 and 2017 to mitigate our gross results.
As we outlined last quarter, we put a comprehensive reinsurance treaty in place starting in 2018, that provides us with substantial amount of vertical protection. Our renewal of the casualty reinsurance protections allowed us to maintain the same net retained lines with no impact on seating commissions, which is an outstanding outcome. At January 1, our reinsurance partners maintained their significant support of AIG with consistent capacity and improved reinsurance terms that demonstrate a clear recognition of the quality of our portfolio and our underwriting teams.
I'll now turn to discuss our efforts to create a future state business structure for AIG post deconsolidation of Corbridge. As part of this effort, we've launched a new program, AIG Next, to create a company that's leaner, less complex and more effective with the appropriate infrastructure and capabilities for the size of business we will be post deconsolidation.
AIG Next will focus on the following key principles, driving global consistency and local relevancy across our end-to-end processes to improve operational efficiency and effectiveness, reducing organizational complexity to create a better and differentiated experience for our clients and colleagues, creating an agile and scalable organization to support business growth, optimizing our ecosystem to modernize our data analytics, digital and technology capabilities, clarifying roles responsibilities, while eliminating duplication and increasing our speed of execution.
As we've stated in the past, we expect the simplification and efficiencies created through this program to generate $500 million of sustained annual run rate savings and to incur approximately $500 million of one-time spend to achieve these savings. As part of AIG Next, we are creating a leaner parent company, with a target cost structure of 1% to 1.5% of net premiums earned. Some of the current costs and other operations will be eliminated, contributing to the $500 million savings and others will be moved into the business where the service is utilized.
In 2023, we began this work, as we've moved approximately $140 million of expenses from other operations into general insurance for services that are more closely aligned to our business operations. Even with this shift, the full year combined ratio of 90.6% improved 130 basis points year-over-year and the full year GOE ratio only increased 40 basis points due to offsetting savings within General Insurance.
Throughout the year, we built efficiencies into our business which have allowed general insurers to absorb these costs. We've already begun to make meaningful progress against our $500 million savings target and have established a team to drive and govern the AIG Next program with focus and discipline.
Sabra and I will provide more detail on next quarter's call regarding the specific cost to achieve by category and the expected timeline for the realized benefits in 2024 and 2025. As we are approaching the final steps of the Corbridge deconsolidation, we remain agile and continue to explore all options based on market conditions, with respect to our remaining ownership of Corbridge, always focusing on what's aligned with the best interest of our stakeholders.
Sabra will take you through a pro forma capital structure based on assumptions about the deconsolidation. Throughout 2024, we expect to continue to execute the capital management strategy we've outlined before. Our insurance company subsidiaries continue to have excess capital to support the type of organic growth we have seen through 2023 and would expect to see in the future. We made enormous progress on our debt structure and maturities, since year end 2021, we've reduced over 50% of AIG's debt outstanding, which is over $11 billion of debt reduction.
The primary focus in 2024 will be on returning capital to shareholders through share repurchases and dividends. Since the start of 2024, we have repurchased an additional $760 million of common shares. We expect to continue at this pace for the first half of 2024 subject to market conditions, which should bring us near the high end of our target share count range. Post Corbidge deconsolidation, we should achieve the low end of our range, which is approximately $600 million of common shares.
The AIG board increased the dividend in 2023, reflecting our confidence in the future earnings power of AIG and we will continue to evaluate our dividend policy in 2024. And lastly, as I enter my 7th year at AIG, I've never been more optimistic about our opportunities for growth and the momentum that AIG has entering 2024. We now have a terrific business. Global commercial, which we've been working on for years to reposition is now one of the most respected portfolios in the industry.
While there's always pruning to do in any business, the remediation is now behind us. We're well positioned to grow based on AIG strong retention, strong opportunities for new business, excellent combined ratios and a company that has been able to distinguish itself amongst our clients and distribution partners. In Personal Insurance, we will continue to make investments, particularly in our Japan business, our global A&H business and our high net worth business, where we anticipate continued growth and more importantly, profitability improvement.
With that, I will turn the call over to Sabra.
