8-K: AIG Reports Strong First Quarter 2024 Results, Boosts Dividend and Share Repurchase Program

American International Group (AIG) announced robust first-quarter 2024 results, highlighted by increased profitability, significant capital management actions, and an 11% dividend increase.

Summary

• AIG reported a net income of $1.74 per diluted share and an adjusted after-tax income (AATI) of $1.77 per diluted share for the first quarter of 2024.
• General Insurance underwriting income rose by 19% year-over-year to $596 million, or 67% on a comparable basis.
• General Insurance adjusted pre-tax income (APTI) increased by 9% year-over-year to $1.4 billion, or 27% on a comparable basis.
• The General Insurance combined ratio improved to 89.8%, a 2.1 point improvement from the prior year quarter.
• Net premiums written (NPW) for General Insurance decreased by 35% on a reported basis due to 2023 divestitures, but increased on a comparable basis with 4% growth in North America Commercial.
• AIG executed nearly $3 billion in capital management actions, including $2.4 billion returned to shareholders through share repurchases, dividends, and preferred stock redemption.
• The company's return on common equity (ROCE) was 10.8%, and adjusted ROCE was 9.3%, with General Insurance at 13.3% and Life and Retirement at 11.9%.
• AIG's Board of Directors declared a cash dividend of $0.40 per share, an 11% increase from prior quarterly dividends.
• The share repurchase authorization was increased to $10.0 billion effective May 1.
• Life & Retirement saw strong sales with total premiums and deposits of $10.7 billion, among the highest in the past decade.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong financial results, significant capital management actions, and a positive outlook. The company's strategic initiatives and focus on shareholder value contribute to the high score.

Positives

• AIG demonstrated strong financial performance in the first quarter of 2024 with significant increases in net income and adjusted after-tax income.
• The General Insurance segment showed substantial improvement in underwriting income and combined ratio.
• The company executed significant capital management actions, returning substantial value to shareholders.
• AIG increased its dividend by 11%, marking the second consecutive year of 10%+ dividend increases.
• The share repurchase authorization was increased to $10.0 billion, indicating confidence in future performance.
• Life & Retirement achieved strong sales with total premiums and deposits of $10.7 billion.
• AIG's strategic initiatives, including AIG Next, are expected to further enhance profitability and efficiency.
• Global Commercial Lines pricing increased 6% excluding Workers Compensation, ahead of loss cost trend.

Negatives

• General Insurance net premiums written decreased by 35% on a reported basis due to divestitures, although it increased on a comparable basis.
• Corebridge's earnings included in AATI decreased by 20% due to the reduction in AIG ownership.
• Book value per common share decreased by 1% from December 31, 2023, primarily due to an increase in accumulated other comprehensive loss (AOCL).
• Net flows in Life and Retirement were negative at $(2,405) million.

Risks

• The company faces risks related to adverse economic conditions, including fluctuations in interest rates and foreign currency exchange rates.
• AIG is exposed to potential losses from catastrophic events, both natural and man-made.
• Disruptions in information technology systems and cyberattacks pose a risk to the company's operations and data security.
• The company's ability to successfully dispose of, monetize, or acquire businesses and integrate them effectively is a risk.
• AIG's reliance on third-party investment managers and the performance of its investment portfolios are also risks.
• Changes in laws and regulations, including those related to insurance, could impact the company's operations.
• The outcome of legal, regulatory, or governmental proceedings could affect AIG's financial condition.
• The company is exposed to nonperformance or defaults by counterparties, including Fortitude Reinsurance Company Ltd.

Future Outlook

AIG expects to continue building on its momentum throughout 2024, executing AIG Next, deconsolidating Corebridge, and delivering underwriting excellence and profitable growth, aiming for an adjusted ROCE in excess of 10%.

Management Comments

• AIG began 2024 with very strong momentum in delivering on our strategic and operational progress while achieving exceptional financial results, reflecting the foundational capabilities we have cultivated over the last several years.
• In addition to outstanding profitability, this quarter was highlighted by the significant capital management actions we completed, placing AIG in a position of strength ahead of Corebridge Financials deconsolidation from AIG.
• General Insurance had another quarter of impressive Commercial Lines profitability benefiting from continued strong underwriting performance and low levels of catastrophe losses as we continue to manage volatility in our results.
• Throughout 2024, we expect to continue to build on our momentum as we execute AIG Next, deconsolidate Corebridge and deliver underwriting excellence and profitable growth, further enhancing value to AIG shareholders and positioning AIG for the future.
• I am very pleased with the progress we have made with AIG Next, which will create a less complex and more effective company with the appropriate infrastructure and improved capabilities.

Industry Context

AIG's strong performance in the first quarter reflects a positive trend in the insurance industry, with a focus on underwriting discipline and capital management. The company's strategic initiatives, including the deconsolidation of Corebridge, align with broader industry trends towards streamlining operations and enhancing shareholder value. The increase in pricing in commercial lines is also consistent with the current market conditions.

Comparison to Industry Standards

• AIG's General Insurance combined ratio of 89.8% is competitive with industry leaders such as Chubb (combined ratio of 87.9% in Q1 2024) and Travelers (combined ratio of 93.7% in Q1 2024), indicating strong underwriting performance.
• The 19% year-over-year increase in General Insurance underwriting income is a significant achievement, outperforming some peers who have reported more modest growth.
• AIG's capital management actions, including the $2.4 billion returned to shareholders, are substantial and demonstrate a commitment to shareholder value, similar to actions taken by other large insurers like Prudential and MetLife.
• The 11% dividend increase is also a positive signal to investors, aligning with the trend of returning capital to shareholders seen across the insurance sector.
• AIG's adjusted ROCE of 9.3% is a solid result, although some competitors like Progressive have reported higher returns, indicating room for further improvement.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees may experience a more streamlined and efficient work environment due to AIG Next.
• Customers will continue to receive insurance solutions from AIG.
• Suppliers and creditors will continue to engage with AIG as a stable and reliable partner.

Next Steps

• AIG will continue to execute AIG Next, aiming for a less complex and more effective company.
• The company will focus on deconsolidating Corebridge.
• AIG will continue to deliver underwriting excellence and profitable growth.
• The company will continue to execute its capital management strategy.
• AIG will host a conference call on May 2, 2024, to review the results.

Key Dates

Keywords

insurance, financial results, capital management, dividends, share repurchase, underwriting, profitability, General Insurance, Life and Retirement, AIG Next