Q1 2026 Earnings Call Transcript

Good day, and welcome to AIG's First Quarter 2026 Financial Results Conference Call. This conference is being recorded. Now at this time, I'd like to turn the conference over to Quentin McMillan. Please go ahead.

Thanks very much, Michelle, and good morning. Today's remarks may include forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations. AIG's filings with the SEC provide details on important factors that could cause actual results or events to differ materially.

Except as required by applicable securities laws, AIG is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks may also refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on our website at aig.com. With that, I'd now like to turn the call over to our Chairman and CEO, Peter Zaffino.

Good morning, everyone. Thank you for joining us today to review our first quarter financial results. Following my remarks, Eric Andersen will provide his initial perspectives on AIG and share some commentary on the quarter. And then Keith Walsh will provide more detail on our financial performance.

Jon Hancock will join us for the Q&A portion of the call. We had a very strong start to 2026 and delivered an exceptional first quarter, the strongest first quarter that we've seen since I've been at AIG. During my remarks, I will share key first quarter highlights and discuss our outstanding progress towards our Investor Day objectives, provide a perspective on the Property market, since it's receiving a lot of attention this quarter, and outline the progress we're making on our AI and digital strategies. Before we get started, I'd like to take a moment to address the ongoing conflict in the Middle East and what it means for our people, our clients and the broader environment in which we operate.

We have a significant number of colleagues in the region, and their safety remains our top priority. From the outset, our teams quickly shifted to enable remote operations, and we remain in close contact to make sure our colleagues have the support and resources they need. The impact on our industry will continue to evolve, and we remain focused on managing risk in a complex global market. Demand for expertise in property and energy, trade credit, and political risk insurance is increasing as clients navigate heightened uncertainty related to shifting trade policies.

The direct impact on AIG is not material based on what we've seen to date, but we're not complacent. We're monitoring accumulation risk, adjusting underwriting guidelines where warranted, stress testing our investment portfolio and staying very close to our reinsurance partners. Just as important, we are continuing to stay close to our clients and brokers, helping them understand coverage, navigate claims issues and manage through this volatile environment. Now let me turn to our results.

We had an excellent start to the year and have been very focused on advancing our strategic investments and delivering on the ambitious 3-year guidance that we provided at Investor Day in 2025. In order to achieve these objectives, we intend to continue delivering balanced net premiums written growth with excellent accident year combined ratios to support earnings expansion across our core businesses, while also focusing on our nominal expense base. Net premiums earned growth is expected to benefit AIG in the back half of 2026 and as we enter 2027. In the first quarter, General Insurance net premiums written increased 18% year-over-year on a constant dollar basis, driven by our Global Commercial Insurance business, which increased 21% year-over-year and our Global Personal Insurance business, which increased 11% year-over-year.

All 3 business segments performed exceptionally well, supported by our recent strategic transactions, our differentiated reinsurance strategy and profitable organic growth that's in line with market peers. I want to provide a little bit more context on reinsurance. As I discussed during our fourth quarter call, AIG achieved enhanced terms and conditions and favorable pricing during the January 1 renewal cycle. We negotiated substantial year-over-year savings, which included the Everest portfolio, providing a meaningful tailwind to our net premiums written in the first quarter.

It's worth noting that AIG's property catastrophe placements have lower modeled attachment points and higher exhaust limits for each geography on a risk-adjusted basis. For AIG, our strategy of maintaining a consistent low net retention for natural catastrophes through the cycle means that we will benefit from more attractive reinsurance pricing as evident in the positive impact to our net premiums written. We've discussed our Global Personal Insurance business in prior quarters, and I want to recognize the significant improvement in the financial performance, which has been deliberate. We grew net premiums written 11% in the first quarter, benefiting from the restructuring of our related reinsurance treaties and organic growth along with meaningful improvement in the expense ratio, which decreased 410 basis points.

The accident year combined ratio as adjusted improved 570 basis points to 89.9%. The calendar year combined ratio was 89.4%, a strong improvement from 107.9% in the prior year. We continue to make outstanding progress in our Global Personal Insurance business. Shifting back to overall General Insurance financial results.

The expense ratio was 29.3%, an improvement of 120 basis points year-over-year. The accident year combined ratio as adjusted was 86.6%, an improvement of 120 basis points year-over-year. The calendar year combined ratio was 87.3%, an improvement of 850 basis points year-over-year. Adjusted after-tax income per diluted share was $2.11, an increase of 80% year-over-year.

Core operating ROE was 12.2%. Overall, we achieved very impressive financial results across the entire company, another exceptional quarter of execution from all of our AIG colleagues from around the world. Turning to capital management. During the quarter, we returned $760 million of capital to shareholders, including $519 million of share repurchases and $241 million of dividends.

As we announced yesterday, the AIG Board of Directors approved an 11% increase in our quarterly dividend to $0.50 per share starting in the second quarter of 2026. This marks the fourth consecutive year of double-digit percentage increases and reflects the Board's confidence in our strategy and AIG's long-term outlook. Our total debt to total adjusted capital ratio was 17.7% at quarter end. As we discussed on our last earnings call, we've continued to reduce our ownership of Corebridge Financial. At the end of the first quarter, our equity interest in Corebridge was approximately 5.6%.

We anticipate fully exiting our position by selling down our remaining stake in 2026, subject to market conditions. We expect the primary use of these proceeds will be for additional share repurchases. As we look ahead, AIG has tremendous financial strength and strategic optionality to execute against our objectives, profitability ambitions and our capital management priorities. Turning to the Property market.

On our second quarter call last year, we spent time discussing the market's competitive dynamics and providing detail on our portfolio. I wanted to provide a further update based on current market conditions and the pricing pressure we have seen across the market on the U.S. large account segment. As a reminder, we have multiple points of entry into the global property market where we deploy capital for the best risk-adjusted returns. First, our balanced and profitable International Property business represents approximately 40% of AIG's $6.5 billion gross premiums written Property portfolio.

I'm using gross premiums written because it's more accurate reflection of our performance without the impact of reinsurance. As a point of reference, the International Property portfolio's calendar year combined ratio was on average in the low 70s across 2024 and 2025. The International Property market rate environment is very different from the U.S. International pricing was down 4% in the quarter. And this was only the second quarter of rate reductions that we have had in the last 5 years.

In the U.S., we have a strong performing Retail Property portfolio, which is majority shared and layered, and had calendar year combined ratios in the 70s in 2024 and 2025. In Excess & Surplus Lines, the Lexington middle market portfolio has performed exceptionally well. This has been one of the fastest-growing segments in Property and continues to deliver one of the best combined ratios in our Global Property portfolio. We've been deliberate in our growth and believe our AI implementation, which I will discuss later in more detail, will further enable this. The Lexington large account shared and layered business in Excess & Surplus Lines, which is less than 10% of our Global Property portfolio, has been under significant pricing pressure over the last year, and that's a different story.

Given continued pressure on rate on a policy year basis and our general observations, we have been contracting our Lexington large account portfolio, and you should expect that to continue throughout the year if the current market environment persists. We have been and will continue to be more selective on new business within the portfolio, which decreased 19% year-over-year. Across the portfolio, we are willing to non-renew accounts that no longer meet our expected risk-adjusted returns. As part of this disciplined approach to underwriting, we're able to quickly redeploy capacity to areas of the market that provide more attractive opportunities for profitable growth.

Now I want to discuss the progress that we continue to make on AI and digital. After years of extensive work exploring how to embed AI into our underwriting workflow, we outlined our blueprint at our Investor Day in 2025. That work reinforced our conviction that AI has the potential to materially improve performance and drive better solutions for our clients and for AIG. Our approach to using AI has been focused on 3 important components. First, you have to have an understanding of the technology and capabilities of large language models.

Second, you have to have pattern recognition in order to know how to apply AI to your business. And third, you have to have a culture and a track record of execution in order to effectively deploy AI within an organization. While we expect the technology would develop meaningfully over time, we could not have predicted the rapid pace of advancement over the last 9 months or the breadth of AI's potential application. We started our AI journey at the core of our business in underwriting, where we felt the impact will be most profound.

At the time, large language models could handle discrete tasks like answering a question or reviewing documents with limited autonomous time. In 2025, we launched Underwriting by AIG Assist to help our underwriters review our submissions with more and higher-quality information in a fraction of the time. After a successful launch, we began to deploy AIG Assist across 8 lines of business. We're very encouraged by the impact on underwriting metrics and improved data quality.

In Lexington middle market property, which is an area we have targeted for growth, AIG Assist has helped deliver a 30% improvement on quoting more submissions, reduced time to quote for the underwriters by 55% and increased binding of submissions by approximately 40%. Now with advancements in reasoning models, AI agents can review, challenge and eventually recommend underwriting observations so that our underwriters can make more informed decisions and provide more robust insights to supplement their experience and underwriting judgment. We're advancing our business model and AI implementation programs to leverage this potential.

To illustrate the magnitude of recent advancements in AI, when we began our work with Claude 2.0, AI agents could operate autonomously for less than an hour. Today, they can run autonomously for as long as 30 hours. This quarter, in close partnership with Palantir and Anthropic, we've begun the next phase of agentic AI at AIG that builds on early successes of AIG Assist. Using Palantir's Foundry platform, we expanded our ontology, a digital map of our business that included our underwriting processes, workflows and data relationships.

This ontology, coupled with orchestration, will enable us to deploy multiple AI agent teams to integrate with our core systems, which will improve decision-making and reduce costs over time. As the logical next step in our AI deployment, we're creating a multi-agentic solution with a strong orchestration layer that coordinates specialized and trained AI agents to seamlessly supplement our underwriters' analysis and should further augment our underwriters' ability to assess risks and rate and provide coverage with real-time alignment. In this phase, we expect each AI agent to be purpose-built for a specific underwriting function.

For example, one agent may handle submission ingestion and data extraction, another may perform risk evaluation against our underwriting guidelines and another could benchmark pricing against our portfolio targets, all with a collaboration agent to synthesize input from other agent large language models. These agents will communicate and handoff work to each other to augment our underwriters just like a well-functioning underwriting team, but operating at machine speed and with inherent consistency. To illustrate an example of how quickly agents can learn a business, I want to outline a beta test that was recently conducted by Anthropic.

As part of a closed evaluation, Anthropic hired a professional claims adjuster to review 100 claims, ranked each as fraudulent or legitimate, and document the reasoning. Claude was then used to assess the same 100 claims. Claude's determination aligned with the adjusters 88% of the time, a very strong baseline for an out-of-the-box model with no claim-specific tuning. Fast forward to today, the latest version of Claude can elevate the performance of an entire claims team, surfacing patterns across submissions that are easy to miss when reviewing files one at a time, making our most experienced adjusters even more effective.

Large language models can now hold a full file of claims information in context, every endorsement, every loss run, every guideline and reason across it with an audit trail. Examples of what Claude routinely flags include time line inconsistencies, geolocation mismatches, linguistic fingerprints, prior claim patterns, document tampering signals and coverage gaps. The intuitive nature of the large language models and its ability to learn all of the information the claims expert had access to demonstrates the potential of large language models to work alongside our underwriting and claims professionals to drive improved data, decision-making, more timely responses and more accurate outcomes.

Importantly, we will be able to see what every agent is doing and can intervene in real time, if needed. Human oversight is and will continue to be essential to our underwriting processes. Overall, we're very pleased with the progress we're making, and we are beta testing the use of multi-agentic solution to enhance our team's productivity, efficiency and learning and development. AIG entered 2026 with significant momentum, and our performance in the first quarter was outstanding.

We achieved impressive results in a complex operating environment, and have a very good foundation to accelerate our strategic progress. Finally, as I discussed last quarter, Eric Andersen joined AIG in February and will officially become our next CEO on June 1. Building on his decades of experience in the industry, Eric has hit the ground running, developing a detailed understanding of AIG, our business and our functions, and engaging with key stakeholders, including the AIG Board, colleagues, rating agencies, regulators and our clients, brokers and partners. We look forward to Eric's impact on leadership in 2026 and for years to come.

Now let me turn the call over to Eric.

Thank you, Peter. Good morning, everyone. I'm excited to join you today, and I'm honored to be part of AIG's leadership team at this pivotal juncture in the company's journey. I will begin by sharing my perspectives on AIG over the last 90 days since joining the firm.

As you know, I served for decades as one of AIG's largest trading partners, and AIG has played an important part in my 3-decade-long career in insurance. In that time, I came to know the company extremely well, and gained deep appreciation for the valuable role it plays in the Global Property and Casualty Insurance market. Like many in the industry, I was impressed by the successful execution of the organization's transformation under Peter's leadership over the last several years. The company's balance sheet strength, improved underwriting, balanced portfolio, and ambitious strategic direction and powerful momentum were clearly evident.

The time I have spent over the last several months meeting with colleagues, clients, distribution partners and other stakeholders have been invaluable and validated my earlier observations. AIG has demonstrated its ability to drive sustained profitability while balancing disciplined capital management with financial flexibility and building for the long term. This flexibility has enabled the execution of our recent transactions, which are already proving to be accretive to AIG's 2026 earnings. Our culture of underwriting excellence is firmly embedded across the company and is a defining attribute in which our team has great pride.

Deep expertise, coupled with our commitment to prudent risk-taking, solidify AIG as a market leader, well-positioned to advise and serve clients in today's complex environment while utilizing reinsurance strategically to control volatility. As Peter has shared in depth, we are implementing a leading AI strategy designed to rapidly evolve alongside other advances in technology to deliver growth, data insights and quality decision-making. We expect our strategy to enable our businesses to be more effective over time. We have outstanding leaders.

Our colleagues are highly engaged and the company is well aligned to deliver on our ambitious strategy and objectives. Before joining AIG, I thoroughly reviewed the strategy and how the company's plans for the future were outlined in our 2025 Investor Day. I believed in the strategy then and today, I want to reaffirm my commitment to the strategy and delivering on our Investor Day financial guidance, which includes: delivering operating EPS compound annual growth of over 20% over the 3 years ending 2027; driving core operating ROE of 10% to 13% through 2027; improving General Insurance's expense ratio to less than 30% by 2027; supporting the increase in our dividend by 10% in 2026; and achieving improvement in Global Personal Insurance combined ratio to 94% by 2027. I am encouraged by the strength of our results and I'm even more encouraged by the opportunities ahead.

Our ability to grow is supported by our unique global platform, diversity of our products and distribution channels, risk expertise, complex claims capabilities, leadership across admitted and non-admitted markets, Gen AI capabilities and our spirit of innovation. I'm also committed to maintaining our underwriting discipline and culture. One of my personal priorities will be to work very closely with our clients and distribution partners to provide tailored solutions that address the rapidly changing risk landscape. As one of the largest U.S.-domiciled global insurers, we are proud to leverage our deep expertise in marine and war insurance and have joined other U.S. insurers in supporting the U.S.

International Development Finance Corporation's Maritime Reinsurance plan to help restore confidence to the markets and support the flow of commerce in one of the world's busiest trade routes. This initiative builds on AIG's history of playing a central role in both public and private industry-led initiatives to deliver critical insurance solutions to respond to complex situations. Turning to our first quarter financial results. Let me provide an overview of our performance in General Insurance.

First quarter net premiums written growth was superb and representative of our intent to position our business favorably regardless of challenges in the market environment and to capitalize on our recent strategic actions. North America Commercial net premiums written increased 36% year-over-year, with the growth largely driven by reinsurance changes and the Everest renewals in our Retail business. We continue to achieve double-digit growth in our Retail Casualty portfolio as the market conditions are largely disciplined in liability lines. Retail and Lexington property benefited from our successful January 1 reinsurance renewals.

However, as Peter discussed, the U.S. Property market environment remains very competitive, and our teams are continuing to take a highly disciplined approach to the layers in which we participate and how we deploy line sizes as we continue to navigate the current rate environment. In Financial Lines, our team successfully continued to recalibrate in competitive D&O market segments where we are focusing on the value proposition of our differentiated offering and industry leadership. Western World, Glatfelter and Programs each had solid growth, which has been deliberate and Programs benefited from our new special purpose vehicle with Amwins.

International Commercial net premiums written increased 12% year-over-year with the majority of growth coming from the Convex whole account quota share, Everest renewals and reinsurance changes, as the team prioritized organic growth discipline in a generally challenging rate environment. Global Commercial retention remained very strong at 88%. North America Commercial retention was 88%. And International Commercial retention was 89%.

Global Commercial new business was $1.6 billion, including Everest renewals, an increase of 42% year-over-year. Our team has continued to make very good progress with the conversion of the Everest portfolio. Retention is performing within our expected range, reflecting strong support from our clients and broker partners who are intentionally choosing to work with AIG in a competitive market. The collaboration between our team and Everest has been extremely productive, delivering mutually-beneficial outcomes for both organizations.

As Peter mentioned, Global Personal Insurance had a very strong quarter with underlying growth initiatives beginning to gain traction. The team has done significant work to improve profitability and growth over the past year, and we believe we should see continued progress in these areas. Before I close, I want to recognize the efforts of our team across the globe. They are doing an exceptional job navigating a dynamic market, prioritizing business with the highest risk-adjusted returns and collaborating with our clients and broker partners to identify optimal risk solutions.

I'm looking forward to getting out on the road to meet more of our colleagues, clients, partners and investors around the world in the coming weeks and months. Our first quarter results were outstanding and reflect robust progress on our strategy, substantial growth and sustained underwriting excellence. This has been an incredible way to start the year from which we will continue to build on our tremendous position of strength. In closing, I am very excited to work with my fellow AIG colleagues to lead this remarkable company into the future.

I want to thank Peter for the extraordinary accomplishments under his leadership to position us for success, and I look forward to continuing to work together as we capitalize on our strong foundation, disciplined capital management and sustained momentum. I'll now turn the call over to Keith.

Thank you, Eric, and good morning. As Peter and Eric mentioned, we had a great first quarter, and I'm going to provide some additional detail. Adjusted pretax income was $1.5 billion, an increase of 65% from the prior year quarter. Underwriting income more than tripled to $774 million year-over-year, driven by lower catastrophe losses, improved accident year underwriting results and higher favorable prior year reserve development.

Accident year underwriting income adjusted for catastrophes, rose 17%. This reflects transaction and organic growth while improving our underwriting margins, an excellent result in the current environment. On a constant dollar basis, General Insurance gross premiums written of $10 billion increased 7% year-over-year. Net premiums written of $5.6 billion increased 18%, reflecting strong growth across all 3 segments.

For full year 2026, we continue to expect low to mid-teens net premium written growth in General Insurance. Net premiums earned were $6.1 billion, up 5% year-over-year. Moving to our underwriting ratios. General Insurance accident year combined ratio as adjusted was 86.6%, an improvement of 120 basis points from the prior year quarter.

This improvement was driven by a lower expense ratio of 29.3%, reflecting increased operating leverage and expense discipline. Over the past several years, we have made significant progress in reducing our cost structure and improving the expense ratio while investing for the future. As individual quarters may reflect seasonal variability when thinking about the expense ratio run rate, it's better to look at the trailing 12-month trends and to model any improvement on a year-over-year basis rather than sequentially. The accident year loss ratio as adjusted of 57.3% was flat year-over-year.

Total catastrophe losses for the quarter were approximately $180 million, with the largest losses attributable to winter storms. Prior year development, net of reinsurance and prior year premium, was $132 million favorable and included $127 million of favorable loss reserve development, $26 million of ADC amortization and roughly $21 million of reinstatement premiums. The favorable development was driven primarily by continued favorable loss experience, most notably in U.S. Property and Financial Lines.

Overall, the General Insurance calendar year combined ratio was 87.3%, an 850 basis point improvement year-over-year. Moving to segment results. North America Commercial accident year combined ratio, as adjusted, was 85.5%, an increase of 120 basis points over the prior year quarter. This was primarily driven by a 90 basis point increase in the accident year loss ratio as adjusted due to changes in business mix as we reduced certain Property Lines and earned in more Casualty business.

North America Commercial calendar year combined ratio was 85.5%, an outstanding result and an improvement of 840 basis points from the prior year. International Commercial accident year combined ratio as adjusted was 85.1%, an improvement of 30 basis points, driven by a 50 basis point improvement in the expense ratio. The International Commercial calendar year combined ratio of 87.3% improved 90 basis points year-over-year and was the 12th consecutive quarter of sub-90% combined ratio, underscoring the strength and consistency of the portfolio. Peter described the performance in Global Personal, and I'm going to add some highlights.

We continue to improve underlying profitability and delivered strong performance across both net premiums written and underwriting income growth. Accident year combined ratio as adjusted was 89.9%, a 570 basis point improvement compared to the prior year quarter. The calendar year combined ratio improved over 18 percentage points year-over-year to 89.4%. We are encouraged by the progress we're making as actions we have taken to reposition the portfolio continue to earn in.

Moving to pricing. We continue to take a disciplined approach to underwriting and pricing, prioritizing lines and accounts where we see attractive risk-adjusted returns. Starting with North America Commercial. Excluding the Property business, our North America Commercial renewal pricing increase was 7%, largely in line with loss cost trend.

In North America Casualty, the overall pricing environment remains favorable with pricing in retail Excess Casualty up 14% and Lexington Casualty up 8%. In U.S. Financial Lines, pricing was flat, reflecting continued moderation of price reductions aligned with our team's strategy to drive rate in targeted D&O segments. In North America Property, overall pricing decreased 11%.

The market remains competitive, as Peter described in his remarks. In International Commercial, overall pricing was down 1% and was slightly positive, excluding Financial Lines in the first quarter. Casualty pricing improved in the quarter, up 5%, benefiting from positive rate change on auto. Property pricing was down 4%, with modest variation by region while Japan continues to deliver both positive rate and pricing.

Global Specialty pricing was down 1% and Financial Lines pricing was down 4%, a continuation of trends from the fourth quarter for both of these lines. Moving to Other Operations. First quarter adjusted pretax loss was $125 million versus the prior year quarter loss of $66 million. The difference was driven by lower net investment income and other of $54 million compared to $110 million in the prior year quarter, owing to lower parent liquidity levels in addition to lower Corebridge dividends.

Given current short-term interest rate levels, we expect the second quarter Other Operations net investment income and other line to be in the range of $30 million to $40 million, subject to market conditions. Moving to General Insurance net investment income. First quarter General Insurance net investment income was $864 million, up 17% year-over-year. The increase was driven by our core fixed income portfolio, which grew net investment income by nearly 20% over the prior year quarter.

This reflects the benefit of our proactive strategy to reposition the public fixed income portfolio. During the first quarter, we continued to reinvest at higher yields with the average new money yield on our core fixed income portfolio roughly 80 basis points higher than sales and maturities. The annualized yield was 4.61%, a 51 basis point improvement over the prior year quarter. The strong growth in our core fixed income portfolio was partially offset by lower alternative investment income, which was $6 million compared to $43 million in the prior year quarter.

Private equity returns yielded 1.6% in the quarter, below our long-term expectation. It's worth noting that the private equity results are generally reported on a 1 quarter lag. Given the market volatility experienced in public markets throughout the first quarter, we expect second quarter alternative returns to remain below our expectations. Next, I want to spend a few minutes on our private credit portfolio, as we've slowed our deployment in this asset class given market conditions.

We define private credit very broadly, as in everything that is not a public security. It includes commercial mortgage loans, investment-grade private placements, asset-backed finance and direct lending. Our direct lending exposure is about $1.2 billion, less than 1.5% of the General Insurance investment portfolio. It is a diversified portfolio of middle market loans with an average loan size of about $6 million.

We hold all direct lending on our balance sheet, not through business development companies, and the software exposure is approximately $130 million or just 16 basis points of the General Insurance portfolio. We will continue to deploy funds in a wide variety of assets with key managers, including our new partners, CVC and Onex. Book value per share at March 31, 2026, was $75.82, up 6% from the prior year quarter, reflecting strong growth in net income as well as the favorable impact of lower interest rates, partially offset by capital return to shareholders through dividends and share repurchases.

Adjusted tangible book value per share was $70.85, up 4% from the prior year quarter. In summary, we delivered a strong first quarter with excellent underwriting results. With that, I will turn the call back over to Peter.

Thank you, Keith. Michelle, we're ready for questions.

[Operator Instructions] Our first question comes from Meyer Shields with KBW.

Peter, I just want to start by saying, I've seen you take two companies from death's door to top tier, so congratulations on a phenomenal career. The big picture question that we're just trying to figure out now is that as leading carriers and brokers, both successfully adopt AI, how does that impact what the carriers pay to the brokers? And since you've been on both sides of that desk, I was hoping you could talk about how you expect that to play out.

Yes. Look, thanks for the question. And how we interact with the brokers, I think, is going to be more of how we all get so much more efficient in exchanging data and information on submissions. I mean, look between me and Eric, you've got two people here that have a lot of broker experience.

And they do a lot more than gather data and do placement. They're giving massive advisory to industry groups across the globe. I think scale will matter over time. And as we look at the way in which data is being ingested through the mechanisms of a variety of large language models, I think we will be able to augment information that we get in submissions to be able to make better underwriting decisions.

And what I was trying to give in that claims example in my prepared remarks is that not only are large language models sort of out of the box, not tuned, very capable and can give insight, but as they start to get trained a bit through experts, everybody benefits. And so the large language model gets more proficient, but also so does the underwriter, so does the claims executive in terms of what they learned in that calibration. So I think in the future, as enterprise becomes a much bigger part of large insurance companies and large insurance brokers, the ability to collaborate will get even stronger.

Okay. That's very helpful. And then this is probably a smaller scope question. But I was hoping for any insight in terms of the impact of pricing on the Everest business. I know there's a mix of Property and Casualty. But I'm wondering how AIG's current pricing is impacting the gross premium volumes that you're bringing over from Everest?

Yes. Let me make a couple of comments, and then I'll ask Jon to maybe give a little bit of detail as he's been so intimately involved. Look, we looked at the portfolio in its entirety. We've been working very closely with Everest in the conversion.

We've actually brought a lot of employees from Everest to AIG, and they've been doing a tremendous job. So they know the book. It's not as though you're handing off a portfolio from Everest to AIG without any insight. We have people here, terrific executives.

Adam Clifford is running a lot of our International Commercial, doing just a fantastic job. And this has been a book that has been coveted by a lot. I mean we talk to brokers, there's a lot of inquiries about the portfolio. I don't want to go back to AI.

But when we worked with Palantir on the ontology, we were able to get a look at the portfolio within a week about every upcoming month as to what the submission activity is going to be and what we like for pricing and what we thought we needed to restructure. And so we got ahead of that with the underwriters. And as Eric said in his prepared remarks, the conversion has just been outstanding, which just means that our broker partners want the conversion to go from Everest to AIG and the clients want that. And so I think that is really what I would want to take away and that the expectations in terms of loss ratio and combined ratio will be in line with what AIG's business has performed.

But Jon, maybe you want to give a couple of examples.

Yes. Thanks, Peter. I won't repeat things that you've said, but we're really pleased with this transaction. Everybody knows it's a renewal rights deal on business that we really like and complements our own portfolio.

And I agree with Peter here. The biggest compliment I can give this book is that everyone else is chasing for it. And if you don't believe Peter, if you don't believe me, go ask the brokers because everybody is chasing for this business, so we take that as good. And when we talked about it last quarter, every indication we gave there still holds true.

Now that the retention and the conversion is really strong, the ratios actually are just as we expected. We're 5 months into converting business, but obviously, we're a lot longer into that to understanding the portfolio through our underwriters, through our actuaries, through our partnership with Palantir and the way we did that. And we knew there were places in the portfolio where we'd want to reprice, restructure, play on different parts of the programs. And we're doing that.

But there's also some other benefits here. We're collaborating really well with Everest. That's helped get that real support from our broker partners, that real will from our clients, they want to come to AIG. But it's also meant that we've been able to combine layers, everything's within risk appetite, take lead positions from follow positions.

And as Peter said, we picked up -- we've been targeted. We picked up some real good talent on the way. That's great for our ongoing business, but it's great for helping us manage the Everest portfolio as well.

Our next question comes from Brian Meredith with UBS.

First, Peter, I just want to congratulate you also on this incredible transformation that you've led here in your tenure at AIG. It's really been impressive and wonderful to follow as an analyst. Yes. I guess the first question I have, I want to dive a little more into Lexington and the E&S markets here.

Not only are the Property market is incredibly competitive, which you've been talking about here. But we've also heard from some companies, you're starting to see some cracks in Casualty, maybe some moderation in pricing rates, heard about terms and conditions softening up as well as maybe business moving back to the middle market from the E&S market. I'd love to get your perspective on that. Do you agree with it?

And then what is the potential implications for AIG's growth in margins as we look forward here over the next, call it, 12 to 18 months on that?

Okay. Thank you. Let me try to unpack how you like -- approach like Lexington, and I think it's important to differentiate between sort of the large accounts, shared and layered, and then some of the middle-market business. I don't want to repeat what I said in my prepared remarks, but we see in the shared and layered in E&S and Property, rate decreases far and away cutting into margin and we're going to need to shrink the portfolio in the current environment.

Just the one thing I would say is that we have a tendency as an industry to lock everything at the moment. We're coming into wind season. We're coming into an environment where there has been a lot of delegated authority, a lot of MGA writings and when there's CAT, sometimes it clears out, and there's opportunities. So we want to be positioned to take advantage of that.

I would say the middle market, I outlined it in the Property sort of section, it has performed exceptionally well. There is a little bit more of a competitive rate environment, certainly in the middle market. But we see significant submissions, we see opportunities. They're selective.

But I think as we start to get AI more embedded into Lexington, it's not because we see massive growth opportunities because the market is there. We see opportunities because we're not able to service the incredible submission flow, which has still been very strong. So I think there's going to be pockets of opportunities in the mid-market on E&S. And don't forget, like in the way in which wholesale brokers position themselves, I always put it into 3 buckets.

One was pure E&S. The other was they became placement mechanisms for the 40,000 independent agents that exist within the United States that wanted more market and then they had the delegated authority MGA. So we're really kind of focusing on the middle bucket in terms of where we look at middle market, Property and Casualty. I do think the Casualty has become a little bit more under pressure from rates.

I still think that we have very good returns, and we'll just watch that very carefully as we go into the back half of the year, but it's not in the same bucket as the way the property has been performing.

Got you. Got you. And in terms and conditions, anything you can say there?

I think that's, like, on the ground, Brian. Like it depends on the industry group. It depends on the size and the class. I think, look, there -- in these markets, there tends to be a little bit more in terms of conditions. But what we're seeing is nothing that is concerning or a trend across the portfolio.

Great. And then a follow-up, maybe more for Eric. Eric, so you're coming to a company now with significantly improved operationally, profitability, et cetera, et cetera, but also has a tremendous amount of excess capital. I'm just curious on kind of your thoughts on deploying that excess capital, thoughts on M&A and maybe how to increase the operating leverage here at AIG?

That's a great question and thanks. It's great to be here. And just -- I know you said it, but I'll say it, too. The work that Peter and the team has done has just been outstanding in terms of organizing the firm.

Listen, I think the opportunity is in front of us today with the plan that we've laid out right now in terms of how do we drive our organic growth, how do we continue to execute on the transactions that have been done, how do we evolve our offerings to meet our clients' needs in this risky environment. There's an awful lot to do over the next 12 to 24 months, just building on the strategy that we've laid out and really look forward to working with the team to make that happen.

That's great. And I would say, Brian, having been here for almost 9 years. We worked really hard to build that capital position, gave us the option value to do Everest, gave us the option value to assume risk for Convex. Eric and the team will be looking at opportunities.

As the market gets more complicated, I think that comes with opportunity. And so like we have really worked hard on ROE. We know we have capital that we can grow into and we wanted just to provide AIG with as much option value as possible.

Our next question comes from Bob Huang with Morgan Stanley.

Also I just want to echo what Meyer and Brian said. Peter, as a former librarian, if you write a book, we'll definitely read it. So just to put it out there.

Thank you, Bob. But I'm not writing a book.

Okay. No, totally understandable. So my questions are all on AI. I know there's a lot of emphasis on AI.

So my question is a bit theoretical. So apologies in advance. When you talk about multi-agent collaboration and build out in underwriting functions, departmental level capabilities and then also the orchestration layer governing on top of it, it doesn't sound like a simple efficiency gain, but much more of a broader organizational and structural integration around AI. So is it fair to say 5 years down the road, 10 years down the road, there should be global-wide capability around that integration and coordination.

And then there is a future state where your underwriting and your understanding of risk would be much more uniform globally. Does that sound right? I mean, is there like a future where the functions and then the coordinations will be globally across departments in underwriting? And then that's essentially where the differentiation between you and other more regional underwriters should be?

Is that the right way to think about it as we think about AI integration going forward?

Well, 5 to 10 years, we couldn't predict a year out. I mean when we did Investor Day, that's why I wanted to highlight some of the significant changes in AI deployment and AI capability. I do think there's great opportunities to learn from different parts of the world and to be able to apply the ingestion, the large language model learning, multi-agent orchestration in terms of helping decision-making. Look, I think the most complicated part of the world is going to be Europe just because of GDPR and the use of data.

It's very hard. And we've talked to a lot of our stakeholders there. It's very hard to beta test or roll something out in Europe without it being tested somewhere else just because of the complexity of how you're allowed to use data. So I think that -- look, there's a lot of differences across the world.

A lot of Asia is very digitally enabled and very tech-oriented and believe that rollout and implementation, you have like different businesses that you need to customize. We're doing that in our Japan business. But I absolutely think in a 5-year period that the global capabilities in terms of the AI orchestration across an organization, just not in underwriting but across from front to back office will be profound. And I don't -- look, we're a large company, so I'm going to be biased, but I think you need to have size, scale and ability to beta test and try to work through this in order to get the most out of it.

Okay. Really appreciate that. Second question is around the AI expense costs. You talked about implementing Claude 2.0. Claude 2.0 has a lot of more token ingestions and inputs and things of that nature.

As we think about just AI being much more of a variable cost rather than a fixed cost, when we think about your expense as we think about expense going forward, right? Can you maybe help us think about how that factors into your ROE considerations and things of that nature?

I think as we get into like '27, '28, not to punt to the poor, Eric, but like I think you'll start to get a lot more clarity in terms of what the expense components are of how we deploy it and what the benefits are on the revenue side. We've just begun. There's a lot of opportunities on the expense side. And why I haven't really spoke a lot about it is one is our first case was to go to the heart of the company, which is underwriting and then to go to claims.

That's what we do. We're underwriters, and then in moments that our clients need us, we have to be able to deliver the best claims organization in the world, which under Julie Chalmers' leadership we're doing. So as we continue to move forward with the implementation of that, you're going to start to see benefits and efficiencies. What we're starting to work through now is more enterprise and how you actually can take the orchestration of agents.

And we've moved more from Gen AI to agentic and now, we are going to look at how do you use autonomous with a lot of guardrails and supervision to work through reengineering our workflow. And with that, there's going to be a multi-agent orchestration. I can't give you a time frame. It could be '27, it could be '28. But I think there's going to be a lot of efficiencies that will create the bandwidth to reinvest in the business.

And so how we're thinking about it at AIG is more capabilities, more insight, more benefit for brokers and clients, create our own bandwidth for investment by reengineering process and having the ability in certain markets to be able to grow exponentially when there's opportunities.

Our next question comes from Michael Zaremski with BMO.

Great. Just a question on the loss ratio, which has been excellent. But I just wanted to -- it's one of the main questions we get from clients. You've done a great job explaining why the reinsurance helps ameliorate some of the downward pricing impacts.

Your reserves look even healthier year-over-year. But ultimately, you're still living in a soft market. So I just wanted to make sure we heard that there's some core loss ratio impact as you mix into Casualty. But beyond that, should we just be -- just a little bit of kind of pressure from the soft market?

Or I just want to make sure we don't get too maybe complacent or comfortable with just how excellent the loss ratio has been.

Yes. Thanks for the question. I think we saw in the first quarter evidence of the shift in mix of business with the accident year loss ratio increasing slightly by 50 basis points. Now the reinsurance did benefit that, meaning there's more net premium written and then there's a little bit earned in the first quarters, which will help us as we get into the second, third and fourth.

But yes, as we look to grow organically more in casualty because we think that the pricing environment and the risk-adjusted returns are above loss cost and want to continue to do that, and we are doing that organically. And then the conversion of Everest on a Casualty basis as well as Financial Lines will change the mix a bit. And then the Property, it's hard to predict. I mean, I would expect that, that will, in the E&S, start to decrease how much we'll see where the market is, but we ought to expect E&S in the sort of shared and layered to decrease.

But I tried to break out the overall Property portfolio, which has performed exceptionally well, and we got a 40% International business that is very predictable rate environment is not the same. And the other thing I would note, Mike, is that when the market was really in our favor a couple of years ago, and we were getting significant cumulative rate increases, we didn't always recognize that just in the loss ratio. We continue to build margin. We continue to put more into the overall loss ratio to make sure what we're seeing was going to be accurate.

And as it emerged, it was better than we expected. So I think when you look at the loss ratios, why I broke down the reinsurance is that the reinsurance benefits because if you just say, look at our cost of goods sold, we buy a lot of property per risk, a lot of CAT, we're taking no more risk. I mean, so that's the other thing I just want to make sure I'm emphasizing is that when you look at the reinsurance and the savings, that's on same-store sales. Same attachment points, modeling goes up, it helps on the risk-adjusted basis.

AALs, like there was no compromise there. We have a property per risk cover that's very comprehensive that we got benefits from. Every excess of loss treaty that we placed at 1/1 was at or better in terms of terms and conditions and pricing. And so that will benefit us.

And then, yes, could there be some deterioration in the Property attritional loss ratios, which were exceptional? There could be. And so that will have a mix where the loss ratio could go up based on that mix over time. But we're highly confident that we can offset that with expense discipline, earned premium growth and the expense ratio will go down.

Keith, he's already getting nervous, I can see him, that I'm going to give too much guidance. But I think when you look at what we put out in terms of the trailing 12 months, we're really getting after expenses. On a nominal basis, company has been incredibly disciplined and always performs exceptionally well. And then you have earned premium coming in.

So I would expect the expense ratio to benefit the loss ratio, will reflect the mix, and we're going to watch the margins and make sure that our accident year loss ratios reflect our observations on the business performance.

That's thoughtful and helpful. And just lastly, as my follow-up for Eric. Congrats, we're looking forward to working with you. I mean, I don't expect you to kind of be able to specifically preview any changes you might make when you're officially in your seat.

But just curious, you've been there for a bit now. Would you say there are some major changes or major projects you feel strongly about starting once you're in your seat based on what you've seen at AIG so far?

No, that's a great question and I appreciate it. Listen, I would say other than -- let me maybe go back and tell you what I've been doing over the last 90 days and give you a little bit of context. So other than the onboarding process, in terms of digging deep into the firm itself, I've had a chance to meet with a lot of colleagues, a lot of clients, all of our distribution partners, and really excited about the vision and the strategy and where we are as a firm. And as always, it's always about execution, right?

Can we continue to work with our clients and partners and develop those deep relationships? Can we continue to build a great business that obviously, you've all been recognizing today over the next journey? And listen, I think the strategy that we laid out on Investor Day, how we actually want to deploy capital, how we want to position the company to help our clients. I love where we are.

I was excited about it coming in. And 90 days in, I feel even more strongly about where we are today. So I would expect, as you look at the rest of the year, I would say we are going to drive hard on the existing strategy and look to perform.

Thanks, Eric. And I want to thank everybody for joining us today. There's a few thank yous that I want to say before we leave. One is, I want to thank the sell side very much because it's been 9 years of complexity and your ability to dive in, try to be constructive, help learn so you can educate a variety of stakeholders has been hugely beneficial, and I'm very grateful for all that you did to allow us and enable us to make the progress that we did.

I want to thank our employees. They did an incredible job. I've only worked in big companies for the 35 years that I've worked after college. And so I have a perspective.

And in great companies, a lot of times, the positions matter. You need very talented people to be in those positions, but it's the positions and the people. At AIG, it's the opposite. It's the people that made a massive difference and the positions ended up becoming a big part of how we structure the company, but the will to win here is like nothing I've ever seen.

And they've done an incredible job. They accomplished an incredible amount and just keep it going because like the best days are ahead for this company, and there's no doubt about it. And I just want to wish Eric the best of luck. As I said, the company is in great hands.

Eric's been a student of the business and a practitioner for 3-plus decades, and this company is going to go from strength to strength. So I just want to thank everybody, and have a great day.

Thank you for your participation. You may now disconnect. Everyone, have a good day.