Peter Zaffino
Chairman and Chief Executive Officer at American International Group
Good morning, and thank you for joining us today to review our second quarter 2024 financial results. We have transformed AIG and have done the foundational work for the next chapter, and I'm excited to take you through it today. Following my remarks, Sabra will provide more detail on the second quarter. Then our North America and international leaders, Don Bailey and Jon Hancock will join us for the Q&A portion of the call. Our prepared remarks have a lot of detail, particularly related to our deconsolidation of Corebridge. We intend to provide ample time for Q&A.
I want to start with highlights of our outstanding second quarter performance. As Quentin mentioned at the beginning of the call, all figures I will reference today, will be on a comparable basis, excluding the impact of Validus Re and Crop Risk Services unless otherwise noted, in order to provide a clear view of our underlying performance. Adjusted after-tax income was $775 million or $1.16 per diluted share, representing a 38% increase in earnings per share year-over-year driven by strong organic growth, a continuation of our very strong underwriting performance, ongoing expense discipline, volatility containment and a decrease in shares outstanding.
General Insurance net premiums written grew 7%, led by Global Commercial, which grew over 8%. Underwriting income was $430 million. The underlying underwriting income excluding catastrophes and prior year development improved $110 million or 17% year-over-year. The calendar year combined ratio was 92.5%, a slight increase of 10 basis points from the prior year. The accident year combined ratio, excluding catastrophes, was 87.6%, a 170 basis point improvement from the prior year. The cat loss ratio was 5.7% or $325 million of total catastrophe-related losses. Consolidated net investment income on an adjusted pre-tax income basis was $884 million, a 14% increase year-over-year. During the quarter, we returned nearly $2 billion to shareholders through $1.7 billion of stock repurchases and $261 million of dividends.
We ended the second quarter with a total debt to a total capital ratio of 18%, including AOCI, and we have strong parent liquidity of $5.3 billion. Overall, I'm very pleased with our ability to continue to deliver outstanding financial performance, and I'm equally pleased with the progress we're making on multiple strategic initiatives. There are several things I want to cover on this call to give you a sense of where we are now, how we got here and what the future holds. In addition to walking through our financial results on today's call, I plan to outline the recently announced transactions for our personal travel business and Private Client Select, provide a quick update on -- reinsurance renewals and a market update, discuss our disciplined execution of our capital management strategy, and provide an update on AIG Next. I should note that our strong financial results in quarter were complicated by the complex accounting treatment of deconsolidation.
In Sabra's prepared remarks, she will explain the impact to our capital structure, including shareholders' equity, as well as details on the GAAP accounting implications to our financial statements. Before I go further, I want to take a moment to comment on the deconsolidation of Corebridge, which marked a major milestone for both AIG and Corebridge. It's important to reflect on the four-year journey, the significant accomplishments along the way and the rationale behind this pivotal decision for AIG. At the height for the pandemic in 2020, we undertook detailed analysis to explore strategic options to maximize value for AIG's shareholders, including evaluating whether to separate our Life and Retirement business, which would eventually become Corebridge from AIG.
In October 2020, we announced our intention to separate. There were many noteworthy accomplishments along the way, and I'd like to highlight a few. In July of 2021, AIG announced that Blackstone Group will become an anchor investor in the new standalone company with its acquisition of 9.9% of Corebridge. Corebridge also entered into a long-term strategic asset management relationship with Blackstone to manage up $92.5 billion of assets under management over the subsequent six years. At the end of March of 2022, AIG announced a strategic partnership with BlackRock where they would manage $150 billion of certain fixed income and privately placed assets, of which $90 billion would come from the Corebridge portfolio. In mid-September of 2022, AIG flowed at 12.4% of Corebridge and the largest US IPO of the year, a particularly noteworthy achievement during a time of significant market volatility.
During 2023, we executed three marketed deals, reducing our overall ownership to 52% by year end. In 2023, Corebridge divested with considerable strategic and transactional support from AIG, Laya Healthcare and U.K. Life. These sales generated over $1.2 billion UK Life. These sales generated over $1.2 billion of proceeds for Corebridge Investors. In May of 2024, AIG announced that it would sell 122 million shares of Corebridge, representing an approximately 20% stake in the company to Nippon Life Insurance Company, one of the most respected life insurance companies in the world, subject to customary regulatory approvals and closing conditions.
Lastly, in mid-June of this year, AIG announced it had met the requirements for the deconsolidation of Corebridge for accounting purposes. We remain committed to fully selling down our remaining ownership stake in Corbridge over time, subject to market conditions and other considerations. It's been quite a journey, and we have accomplished a tremendous amount. Now let's turn to the travel business. During the quarter, we also announced the sale of our global individual personal travel insurance and assistance business, which is another important strategic step in positioning AIG for the future to further simplify our portfolio.
The transaction includes the Global Travel Guard Insurance business, as well as its service companies and infrastructure, and excludes our travel insurance businesses in Japan and our AIG joint venture arrangement in India with the Tata Group. AIG will continue to provide corporate group travel coverage through our accident and health business. The annual net premiums written for travel are approximately $750 million, most of which are reported under North America Personal Insurance. The sale is expected to close by the end of 2024, subject to customary regulatory approvals and closing conditions. And last week, we announced another significant transaction involving our high net worth business.
As we've discussed in prior quarters, over the course of several years, we've been deliberately transforming our high net worth business to be better positioned for the future. We've done this through a series of strategic actions, including the most recent announcement about entering into a strategic relationship with Ryan Specialty to become our excess and surplus lines distribution partner for high and ultra high net worth markets through our Managing General Underwriter Private Client Select insurance services. We like the business and we're committed to it. We've invested over $100 million in infrastructure and digital capabilities for our high net worth business over the past several years, and we believe the business is well positioned for the future. We're also committed to delivering solutions and growing our admitted capabilities.
As we previously communicated, our plan for the portfolio has been to establish an MGU with appropriate infrastructure and core foundational capabilities, enable multiple points of distribution, and eventually attract more capital resources for the MGU, all while continuing to drive exceptional value for our high net worth clients as we grow the business. AIG will provide exclusive E&S paper in all 50 states through Marvel Shore Specialty Insurance Company subject to regulatory approvals. This progress reflects the Shore Specialty Insurance Company subject to regulatory approvals. This progress reflects the momentum we've created with expanded capabilities and broader partnerships.
Now turning to general insurance results. Gross premiums written for the quarter were $9.9 billion, an increase of 7% from the prior year. Net premiums written for the quarter were $6.9 billion, a 7% increase from the prior year with 8% growth from global commercial and 5% growth from global personal. Global commercial had an excellent quarter with strong net premiums written growth of 8%, driven by significant new business, impressive retention and continued accident year combined ratio improvement. In North America Commercial net premiums written grew 10%, Lexington grew 16%, led by wholesale casualty, which grew 35%, Western World, which grew 20%, and Wholesale Property, which grew 12%.
Retail casualty grew 11% with 21% growth in our risk management business, and we had 16% growth in excess Casualty and Captive Solutions grew 30% driven by new business. In International Commercial net premiums written grew 6%. Global Specialty grew 8%, led by 18% growth in energy. Talbot grew 12% and retail property grew 11%. In the second quarter, global commercial produced record new business of nearly $1.3 billion, which is an 18% increase from the prior year quarter. North America commercial produced new business of $753 million in the quarter, an increase of 26% year-over-year and an increase of over 60% from the prior quarter. The growth was led by Lexington, which had 31% new business growth year-over-year, and 75% new business growth from the first quarter. The highest new business volume of any quarter in my tenure.
Lexington also achieved a significant milestone with over $1 billion of gross premiums written this quarter, a 16% increase from the prior year quarter. This is the highest gross premiums written quarter for Lexington since we repositioned the business in 2018. In other businesses, retail casualty new business grew over 40%, led by our risk management business and excess casualty, international commercial produced new business of $522 million for the quarter, an increase of 9% year-over-year. This growth was led by Global Specialty, which had 17% new business growth led by Energy and Marine. Casualty, which had over 30% growth, and property which had over 10% growth. In addition, Global Commercial had very strong renewal, retention, international retention was 89% and North America retention was 87%.
Moving on to global personal insurance, net premiums written grew 5% year-over-year. North America personal net premiums written increased 8% from the prior year quarter, primarily driven by the high net worth business. International personal net premiums written increased by 4% year over year, driven by growth in personal auto and accident and health new business. Shifting to the combined ratio, as I noted earlier, the second quarter general insurance accident year combined ratio excluding catastrophes was 87.6%, a 170 basis point improvement year-over-year, driven by 140 basis point improvement in the expense ratio.
In Global Commercial, the second quarter accident year combined ratio, excluding catastrophes was 83.5%, a 180 basis point improvement. The North America commercial accident year combined ratio, excluding catastrophes, was 84.7% a 250 basis point improvement. And the International commercial accident year combined ratio, excluding catastrophes, was 82.1%, or a 130 basis point improvement. The Global personal accident year combined ratio, excluding catastrophes, was 96.8%, a 130 basis point improvement from the prior year quarter. North America Personal improved its accident year combined ratio excluding catastrophes, to 101.8% a 530 basis point improvement. International personal improved its accident year combined ratio, excluding catastrophes, by 50 basis points to 94.8%, driven by improvements in the expense ratio.
Now I want to shift to provide some context around mid-year reinsurance renewals and recent conditions in the reinsurance market. As we have previously discussed, we purchased the vast majority of our treaty reinsurance at January 1. However, approximately 20% of our overall core reinsurance purchasing occurs in the second quarter. We were able to execute on all of our strategic reinsurance goals this quarter, achieving risk adjusted rate decreases and lowering or maintaining retentions across all of our major purchases. The outlook for the second half of 2024, particularly with respect to natural catastrophes, is uncertain. The five leading forecasters are predicting above-average hurricane activity for the 2024 season.
While there was a lot of positive sentiment across the industry following modest natural cat loss activity in the first quarter, I've learned over my career to wait until the wind and typhoon seasons are over before declaring how the year will be impacted by natural disasters. It's simply too unpredictable. When reviewing capacity in the market, it's important to analyze the available capacity from the rated market and alternative capital market. We're all well aware of what happened with the rated reinsurers in 2022. On average, they moved attachment point significantly higher, to higher return periods and they restricted coverage mostly named perils.
If you were to look at the complementary alternative capital market, it has approximately $110 billion of estimated capital deployed and in many ways, more stated available capital in any individual year over the five or 10 years. However, you need to review what makes up that $110 billion to appreciate the true availability for reinsurance. The cat bond market and ILW market make up approximately 50% of the alternative capital market, the highest nominal amount of any time in history and those products are accompanied with basis risk and in some cases, meaningful basis risk.
Additionally, the collateralized market is back to 2016 levels, which is somewhere between $45 billion to $50 billion of capital. The market is deploying 90% of the collateralized limit as occurrence reinsurance or occurrence retro, leaving less than 10% of the remaining collateralized reinsurance available for aggregate covers. Why do I outline this level of detail? Because we remain very disciplined and maintained our aggregate cover at the same attachment point and AIG utilizes approximately 50% of the globally available ILS reinsurance aggregate cat capacity. This purchase protects us from the potential frequency of cat and allows us to prudently manage volatility. And again, based on my experience, once insurers give up lower occurrence or aggregate attachment points, you simply do not get them back.
Further, analyzing industry data from over 150 companies published by Aon between 2013 and 2024, average attachment points went up on an inflation-adjusted nominal basis everywhere in the world, in some cases, significantly during that period. For example, in Asia, average attachment points increased over 270%, EMEA and the U.K. over 250% and in the U.S., over 280%. AIG has structured its treaties to have lower attachment points with less volatility. When examining our current attachment points across the world from 2022 to 2024, which is another very another very good measurement, AIG has maintained or reduced its attachment points, making it the lowest amongst our peer group.
For the balance of 2024, we have approximately $95 remaining on our international aggregate cover, excluding Japan and $270 million on our North America aggregate cover, including wind and quake. This is well within our established risk appetite and believes we remain well protected against both the frequency and severity of cat events. Reinsurance premiums are well embedded in our original pricing and our portfolio for property is performing exceptionally well. Now I'll provide a high-level summary of our capital management strategy and the milestones we've accomplished. We've made enormous progress executing against our capital management goals in a disciplined manner with focus on positioning AIG for the future and driving value for our shareholders.
We have deployed over $30 billion in cash towards that capital management strategy over the last three years, which has provided AIG with maximum flexibility. To provide context on the magnitude of what we accomplished, there are some key highlights. In 2021, AIG had greater than 850 million shares outstanding and approximately $25 billion of outstanding debt and preferred stock. Using current liquidity and proceeds generated from divestitures and earnings over the past three years, we repurchased over $13.5 billion of shares, reducing our overall share count by over 200 million shares or approximately 25%. As of June 30, 2024, we have less than 650 million shares outstanding.
We expect to further reduce this in the second half of 2024 and in 2025, depending on the timing of the closing of the Nippon Life transaction, subject to regulatory approvals, as well as additional future sell downs of our remaining Corebridge shares subject to market conditions. By the end of 2025, we expect our share count to be in the 550 million to 600 million target range consistent with the guidance that I provided last quarter, representing a total of $10 billion of share repurchases over the course of 2024 and 2025, subject to market conditions. Since 2021, we paid approximately $3 billion of shareholder dividends. We increased the dividend by more than 10% in each of the last two consecutive years. Additionally, we reduced AIG's debt outstanding from $25 billion to $9.8 billion and have achieved our target debt to capital leverage ratio range of 15% 20% with the second quarter leverage of 18% versus 27% three years ago.
Our insurance company subsidiaries are in a very strong capital position with capital ratios above target ranges, which will enable us to continue to grow profitably without having to contribute additional capital. We ended the second quarter with $5.3 billion of parent liquidity, and we continue to explore compelling and strategic and organic opportunities that are complementary to our current business. As part of positioning AIG for the future, over the past several years, we've been on a journey to simplify AIG where we've been in the company together to operate seamlessly as one cohesive organization across underwriting, claims and all of our functional areas with the skills and capabilities to compete in the future.
As a company, we've completed multiple transformation programs. These efforts, including AIG 200 has resulted in a reduction of our expense base of approximately $1.5 billion since 2018, while investing for the future. For example, over the last two years, we've invested approximately $300 million in data, digital workflow, AI and talent to accelerate our progress. If you look over the past five years, it includes technology, end-to-end process workflow and foundational data investments that were part of AIG 200, our investment has been over $1 billion. Also at the beginning of 2024, we formally launched AIG Next to further accelerate the realization of additional operational efficiencies.
As part of the AIG Next program, we're redefining our existing retained parent costs to reflect only expenses related to being a global regulated public company such as costs related to corporate governance, enterprise risk management and audit. Our objective is to decrease retained parent cost to $325 million to $350 million or 1% to 1.5% of net premiums earned going forward. Expenses not defined as parent company costs will be fully embedded within the General Insurance results, although be redundant. All of the factors being equal, we would expect our full year 2025 calendar year combined ratio to be the same or lower than the full year 2023 metric on a comparable basis as a result of the actions were taken as part of AIG Next.
We originally provided guidance that we would reach the combined ratio as the exit run rate at the end of 2025, and we now believe we can achieve it in the 2025 calendar year. Additionally, while I've not spoken in detail about AI in the past, we've been making substantial progress and I want to provide a high-level overview. AIG is advancing as data and digital strategy using artificial intelligence, large language models and data ingestion applications with the objective of increasing underwriting efficiency and augmenting execution capabilities. We've spent considerable time over the past 12 to 18 months, creating a blueprint for the future that we use each of these components together, where each one is integral and connected, and we redesign and refine the end-to-end underwriting workflow processes.
Our primary objective is to construct an AI-powered underwriting portfolio optimization capability that provides faster, more thorough, deeper analysis and improve customer service in quoting, binding and policy issuance by enabling increased underwriting productivity through the automation of manual processes. This will drive more accurate informed decisions by leveraging better data through foundational sources such as broker and agent submissions and supplemented with validated sources of additional third-party data. We will then combine this enhanced capability with advanced modeling and amplify compute capabilities. Underpinning this work is a robust governance framework designed to keep pace with the rapidly evolving global AI regulatory landscape.
I will discuss two areas of focus: Underwriting efficiency and underwriting management. With underwriting efficiency, we're developing a mechanism using large language models by which submissions are automatically filtered through real-time underwriting guidelines, allowing underwriters more capacity and the ability to assess many more submissions that meet our defined underwriting criteria, objectives and risk appetite. In underwriting management, we're dynamically managing the review of submission data with the disciplined application of underwriting guidelines and portfolio objectives, allowing underwriting leadership to more deeply and accurately analyze market conditions and enabling dynamic adjustments to underwriting guidelines, pricing and limit deployment.
As we build our agentic ecosystem, we're using a multi-vendor technology strategy with multiple partners that is designed to evolve over time. Our platform has been built for flexibility, configurability and adaptability to accommodate current and future technology. This includes the ability to support the expansion of generative AI capabilities for scalability globally across our platform, while keeping the underwriter at the center of decision-making. This is just a glimpse into the significant work we've been doing to use generative AI and large language models as part of our overall data and digital strategy. We'll continue to advance these efforts over the remainder of this year and as we enter 2025.
In summary, I'm very pleased with our performance in the second quarter and what we've accomplished not only during the quarter, but over the past several years to prepare AIG for a bright future.
With that, I'll turn the call over to Sabra.
