Peter Zaffino
Chairman & Chief Executive Officer at American International Group
Good morning, and thank you for joining us today to review our first quarter 2024 financial results. Following my remarks, Sabra will provide more detail on the quarter and then we'll take questions. Kevin Hogan will join us for the Q&A portion of the call.
Here are some highlights from the quarter. Adjusted after-tax income was $1.2 billion or $1.77 per diluted common share, representing a 9% increase in earnings per share year-over-year. Consolidated net investment income on an adjusted pretax income basis was $3.5 billion, a 13% increase year-over-year. General Insurance underwriting income was $596 million, a 19% increase year-over-year, reflecting improved accident year results, including lower catastrophes and increased 67% year-over-year on a comparable basis, if you exclude divested businesses from the prior year quarter.
The accident year combined ratio, excluding catastrophes, was 88.4%, a 30 basis point improvement from the prior year quarter and was the tenth consecutive quarter of a sub-90 combined ratio. The quarter also reflected the significant improvement we have made in controlling volatility in our property portfolio as total catastrophe-related losses in the quarter were $107 million or 1.9%, representing a 230 basis point improvement year-over-year.
Turning to Life and Retirement. The business reported very good results with premiums and deposits of $10.7 billion in the first quarter, their highest quarterly result achieved in the last decade, and strong APTI growth of 12% over the prior year quarter.
Last September, Corebridge entered into a definitive agreement to sell the U.K. Life Insurance business to Aviva plc, which calls on April 8. Net proceeds were approximately $550 million and will be used for Corebridge share repurchases.
During the quarter, we returned over $2.4 billion to shareholders through $1.7 billion of common stock repurchases, $250 million of dividends and the redemption of all our outstanding Series A preferred stock for $500 million. We repaid $459 million of debt upon maturity, lowering our total debt to $9.8 billion. In addition, we repurchased approximately $613 million of common stock in April. Based on our strong performance, the AIG Board of Directors approved an 11% increase in AIG's quarterly common stock dividend to $0.40 per share. The AIG Board of Directors also increased the share repurchase authorization to $10 billion, effective May 1. Lastly, we ended the first quarter with strong parent liquidity of $5.1 billion.
Overall, I'm very pleased with our first quarter results and the continued strong execution of our strategy to deliver sustained underwriting excellence, profitability and disciplined capital management.
During my remarks this morning, I will discuss four important topics. First, I will provide some financial highlights in the quarter focused on the General Insurance business, including some insight into our net premiums written. Second, I will talk briefly about the results in Life and Retirement. Third, I will provide an update on our capital management strategy, specifically our plans for 2024 and 2025. And finally, I will discuss our path to a 10%-plus ROCE and provide more detail on AIG Next and our future state operating structure that will create value through a leaner and more unified company.
Let me take a moment to update you on our sell-down of Corebridge. Our Corebridge holdings currently stand at 324 million common shares outstanding, which represents a 53% ownership stake. We continue to explore all alternatives to reduce our ownership stake in Corebridge. Once Corebridge is deconsolidated from AIG, Life and Retirement's balance sheet and income statement will no longer be included in AIG's consolidated financial statements, and our remaining ownership stake will be reported in parent investments with dividends reported in net investment income. Sabra went through this in detail on our last earnings call.
We have been evaluating opportunities to maximize long-term value for Corebridge and have considered multiple strategic alternatives that we believe will best position Corebridge for future success. We remain committed to reducing AIG's ownership and to fully selling our remaining stake, and I will continue to provide updates to all of our stakeholders.
In terms of the use of Corebridge-related proceeds, AIG expects to continue to utilize excess capital and liquidity, with a focus on returning capital to shareholders through share repurchases and liability management, which I will discuss later when I outline our capital management strategy.
Now turning to General Insurance. Net premiums written were $4.5 billion and reflected the impact of the dispositions of Validus Re and Crop Risk Services as well as actions we've taken to restructure specific treaty reinsurance. Overall, Global Commercial had a very strong quarter. Excluding the impact of our divestitures, Global Commercial net premiums written growth was 1% year-over-year. First, I want to reconfirm the guidance for the year. We expect high-single-digit growth in net premiums written for the full year in our Global Commercial Insurance business.
Now the results. In North America Commercial, net premiums written grew 4%. Lexington grew 24%, which was led by Casualty and Western World. Our Excess Casualty line grew 46% and our Captive Solutions grew 20%. There's been meaningful commentary on the Excess & Surplus Lines market, and we continue to experience terrific fundamentals and results in Lexington. Let me provide a few examples. Our submission volume was up over 50% year-over-year. Lexington delivered strong new business, outperforming last year's record first quarter results, balanced across all lines. And retention remains strong for Lexington at 78%.
Shifting to North America Retail Property, net premiums written were negative $120 million in the quarter, driven by first quarter reinsurance purchased and had over a 600 basis point impact on the first quarter net premiums written growth for North America commercial compared to prior year. North America Financial Lines declined 4% year-over-year. In prior quarters, we provided meaningful commentary on the dynamics within Financial Lines, so I will not go through that again.
It's been a challenging market environment with continued headwinds on rate. Having said that, we continue to believe our portfolio is strong, and we remain disciplined. Sabra will give more detail in her prepared remarks.
In International Commercial, net premiums written were flat for the quarter. International Property grew 23% and Talbot grew 18%. This was offset by a decline in our Global Specialty business of slightly over 10% due to some top line weakness in energy and the effects of the reinsurance restructuring. Also, we had a 5% decline in International Financial Lines.
Now turning to the combined ratio. Our Global Commercial business in the first quarter had an outstanding result with an 84.4% accident year combined ratio, excluding catastrophe, a 150 basis point improvement year-over-year. The accident year combined ratio, including catastrophe, was 86.6%, a 500 basis point improvement year-over-year. This was led by International Commercial which, on a comparable basis, had an 82.8% accident year combined ratio, excluding catastrophe, which is a 140 basis point improvement year-over-year; and an 83.5% accident year combined ratio, including catastrophe, which is a 770 basis point improvement year-over-year.
North America Commercial also had an outstanding result with an 85.9% accident year combined ratio, excluding catastrophe, which is a 180 basis point improvement year-over-year; and an 89.5% accident year combined ratio, including catastrophe which is a 260 basis point improvement year-over-year. These results were simply outstanding and are a testament to our commitment and culture of underwriting excellence.
Shifting now to Global Personal Insurance. Net premiums written were flat to prior year. We had modest growth in Personal Auto and Individual Travel and reductions in high net worth driven largely by reinsurance and Accident & Health, largely driven by wo non-renewals in China, as part of our focus on portfolio improvements in our Accident & Health business. North America Personal had a 97.7% accident year combined ratio, excluding catastrophe. This is a 990 basis point improvement year-over-year and a 101.6% accident year combined ratio, including catastrophe, which is an 870 basis point improvement year-over-year.
As we discussed last year, we expect a material financial improvement in 2024 that will be driven by higher earned premium and a lower loss ratio from the high net worth business. We saw this manifest in the first quarter and expect this improvement to continue throughout 2024.
International parcel insurance had a 96.8% accident year combined ratio, excluding catastrophe, which increased 90 basis points year-over-year; and a 96.8% accident year combined ratio, including catastrophe, which is a 20 basis point improvement year-over-year. Overall, I'm very pleased with the financial performance of General Insurance, which delivered another excellent quarter.
Our reinsurance decisions in the first quarter had an impact on net premiums written. As we've discussed over the past several years, our reinsurance partnerships and global treaty structures have been purposeful. Our objective has been to deliver improved underwriting profitability and evolve our business portfolio to be appropriately diversified to deliver consistent results throughout the market cycle. We believe this strategy has provided sustained value to our clients while also delivering improved risk-adjusted returns. It has significantly repositioned AIG, especially as we prepare to deconsolidate from Corebridge.
Our goals with our reinsurance purchasing have been to preserve and optimize capital and enhance the quality of earnings through active management of the volatility of our underwriting results. This deliberate approach to reinsurance has helped position AIG with a very strong balance sheet and has given us the flexibility to add exposure where risk-adjusted returns are very attractive while also moderating volatility in our underwriting results.
As a result of our divestiture of Validus Re, combined with the reduction in gross limits in property through our underwriting strategy, we have reduced our PMLs and created meaningful capacity to increase our property writings throughout our global platform should they meet our expected returns.
Without going through each return period by peril and region, our key zone PMLs on average, have decreased by over 40% compared to the first quarter of 2023, which provides considerable aggregate for future growth while appropriately managing the exposures we're assuming. Our reinsurance purchasing is deliberately concentrated at January 1. As a result, any changes in purchasing tend to be more pronounced in the first quarter reporting of net premiums written.
In January 2024, we also made some changes related to the allocation of catastrophe costs among the businesses, so that catastrophe costs are more accurately reflected in pricing. Historically, some of these costs have been shared with Validus Re. We reallocated PMLs and the catastrophe costs to where we believe the most attractive opportunities for growth existed in our portfolio.
It's worth noting, when considering our property catastrophe placement, we believe we have the lowest attachment point of our peer group. Over time, we have the balance sheet and perhaps the risk appetite to take more net on our catastrophe program post deconsolidation and subject to market conditions. As a point of reference, if we chose to raise our catastrophe attachment point to $500 million worldwide, our attachment point would likely remain the lowest among our peer group with a 111 [Phonetic] attachment point in North America wind and a 119 [Phonetic] attachment in North America earthquake based on today's exposure.
Importantly, our net premiums written in commercial would have been 15% greater in the first quarter if we had elected to have a $500 million attachment point across our global portfolio.
Our earnings potential is significant. And when combined with the strength of our balance sheet, it will provide us with the flexibility to continuously evaluate and refine our strategic reinsurance purchasing as we enter 2025.
Turning to Life and Retirement. As I noted earlier, the business continued to produce strong results in the first quarter. In April, Corebridge completed their Corebridge forward restructuring. $400 million of savings has been actioned or contracted, and they expect to realize the vast majority of the savings by the end of 2024 at a cost to achieve of $300 million. Corebridge repurchased approximately $240 million of common shares during the first quarter, and they have repurchased $370 million of common shares year-to-date. Corebridge ended the quarter with a strong balance sheet with parent liquidity of $1.7 billion. This week, the Corebridge Board of Directors approved a share buyback authorization of $2 billion, which reflects their stated commitment to delivering a 60% to 65% payout ratio to shareholders, subject to market conditions.
Turning to other operations. We have made significant progress towards our future state operating model. Adjusted pretax loss from other operations in the quarter, including Life and Retirement, was $408 million, a 17% improvement year-over-year. The improvement was primarily attributable to lower general operating expense, higher short-term investment income and lower interest expense at AIG due to debt reduction actions. We expect our future state parent expenses to be in the range of $325 million to $350 million by year-end 2024. After deconsolidation, we intend to use 1% to 1.5% of net premiums earned as a benchmark of total parent expenses in the future.
Turning to capital management. In the first quarter, we continue to execute on our balanced capital management strategy. Over the past couple of years, we have significantly strengthened our balance sheet by making key decisions that have increased our financial flexibility while always planning for the long term, which has allowed us to accelerate the execution of our strategy and unlock meaningful value for AIG shareholders. Along with establishing appropriate debt capital structures for AIG and Corebridge and diligently executing on AIG's capital management priorities, we have also completed over $40 billion of capital market transactions since 2022.
We have been very disciplined in the execution of the components of our capital management strategy that we first outlined in 2022. As a reminder, our objectives were: to maintain very strong insurance company capital levels to support organic growth and a steady source of operating subsidiary dividends to service parent company needs; to reduce our total debt outstanding and improve our leverage ratios, providing a well-structured and well-laddered debt portfolio with no outsized amounts due in any given year, particularly over the next five years; to return excess capital to shareholders in the form of share repurchases and dividends; to increase our dividend as our earnings and financial flexibility improved; and to maintain a strong parent liquidity position.
All of our Tier 1 insurance company subsidiaries are at or above their target capital ranges and have the ability to support meaningful growth without additional capital contributions. At current profitability levels, we had approximately $3 billion of run rate dividend capacity from our global General Insurance subsidiaries with approximately $2 billion attributable to the U.S. General Insurance company's dividend capacity. We have increased the U.S. General Insurance company dividend capacity by approximately 400% over the last three years. This reflects a significant increase from 2021, when it was $550 million; and in 2022, when it was $1.4 billion. Looking forward, we expect to continue positioning AIG with maximum capital flexibility for growth, including reviewing our reinsurance over time and considering compelling and strategic inorganic growth opportunities should they exist.
In addition to strong insurance company capitalization, we've continued to significantly reduce our overall debt. Outstanding debt is now approximately $9.8 billion, a reduction of over $12 billion since the end of 2021, which has been a remarkable result for AIG. We had previously provided guidance that we're targeting a 20% to 25% total debt-to-capital ratio, and we expect to be in the 15% to 20% range upon deconsolidation.
While we may do additional work on maturities, we would not expect that to take priority over share repurchases. Since 2022, we've increased our focus on share repurchase activities. We completed over $5 billion of repurchases in 2022 and approximately $3 billion in 2023. Looking ahead, we expect up to $6 billion in repurchases in 2024 and up to $4 billion in 2025, depending on the timing of future Corebridge sell-downs and market conditions.
All of the expected activity in 2024 and 2025 will be covered by the $10 billion share authorization that we announced yesterday. For the balance of 2024, we expect to be able to repurchase about $1.5 billion of common stock a quarter depending on excess parent liquidity levels, including future Corebridge sale proceeds, General Insurance dividends and market conditions. And based on the current stock price, we would expect this to get us closer to the higher end of our target share count range of 600 million to 650 million common shares by the end of the second quarter and towards the lower end of the range by the end of 2024. Furthermore, based on this outlook and depending on the stock price and market conditions, we would expect to be between 550 million and 600 million shares outstanding by year-end 2025.
Turning to our dividend. The AIG Board of Directors recently increased the cash dividend of $0.40 per share on AIG common stock up 11%, the second consecutive year with an increase of more than 10%. I could not be more pleased with our progress. We remain confident in our ability to deliver while continuing the positive momentum in our financial performance.
We remain committed to delivering an adjusted 10%-plus ROCE post deconsolidation of Corebridge. For the first quarter, we achieved a 9.3% adjusted ROCE and a 13.3% adjusted ROCE in General Insurance. Contributing to ROCE will be AIG Next, which will focus on achieving an expense base that will generate additional savings for AIG while reducing complexity throughout our organization and simplifying how we operate. AIG Next will create clarity in our operating structure, including aligning our underwriting and claims organizations with our operations and functions while defining our parent company of the future. This is the key objective as we weave AIG together; to be a less complex, more effective and leaner company with the appropriate infrastructure and capabilities for the business we will be post deconsolidation. AIG Next has clearly defined work streams governed by a very experienced, centralized team with significant experience in transformations and company design reporting directly to me.
As I stated on previous calls, we expect AIG Next to generate approximately $500 million in annual run rate savings by the end of 2025. Of the $500 million in run rate savings, we expect $350 million to be actioned in 2024, which is an increase of the guidance we have provided in the past, and the balance will be actioned within 2025 with a cost to achieve of $500 million.
To date, we've made meaningful progress on AIG Next across multiple work streams. In April, we announced a voluntary early retirement program available to colleagues in the United States who meet the eligibility criteria. Eligible participants will have the opportunity to accelerate their retirement from AIG with enhanced retirement benefits. The population of eligible participants represents approximately 25% of our U.S. workforce. About half of the eligible participants are located in the high-cost New York metropolitan area. We are anticipating a 50% take-up rate, which would result in approximately $225 million of one-time cost and a net run rate benefit of approximately $150 million after reinvestment for the skills and capabilities we need for the future. The numbers I have provided for our early retirement program are included in the total numbers I provided for AIG Next.
In summary, I'm very pleased with our overall performance as we start 2024. As I said in my recent letter to shareholders, our ability to execute continues to be one of the company's best attributes. We have accomplished a significant amount in the past several years in order to position AIG for the future, and we have continued to deliver in the first quarter, which will enable us to achieve our objectives in 2024 and beyond. I am confident that we will continue to uphold our commitment to achieving underwriting excellence and high-quality earnings over the long term, benefiting all of our stakeholders as we continue to simplify and streamline our business and create the AIG of tomorrow.
With that, I'll turn the call over to Sabra.
