American International Group Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 4, 2026

Key Takeaways

  • Positive Sentiment: AIG reported third-quarter adjusted EPS of $2.06, 8% net premiums written growth, and an 88.4% accident-year combined ratio excluding catastrophe losses. For the first nine months, premiums grew 11%, underwriting income exceeded $2 billion, and core operating ROE reached 11.4%.
  • Negative Sentiment: Management stepped back from its previously stated low-to-mid-teens premium growth expectation, citing worsening competition and pricing in some markets. It expects fourth-quarter conditions to be broadly similar to the third quarter and emphasized that it will prioritize underwriting returns over growth.
  • Negative Sentiment: Pricing pressure remains pronounced in North American property and parts of casualty, while elevated casualty loss trends and inflation continue to require rate increases. AIG is reducing exposure in less attractive areas, including large-account property and casualty in Lexington, and in parts of the U.K. and Asia Pacific.
  • Positive Sentiment: Investment income rose 5% year over year to $1.1 billion, supported by reinvestment at higher yields; management expects continued growth in core fixed-income income. AIG also returned $787 million to shareholders in the quarter and expects fourth-quarter buybacks at a similar level, subject to market conditions.
AI Generated. May Contain Errors.
Earnings Conference Call
American International Group Q3 2026
00:00 / 00:00

There are 12 speakers on the call.

Operator

Good day, and welcome to AIG's third quarter 2026 financial results conference call. This conference is being recorded. Now, at this time, I would like to turn the conference over to Quentin McMillan. Please go ahead.

Speaker 1

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 they 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. Finally, today's remarks related to net premiums written growth are presented on a constant dollar basis.

Speaker 1

Please refer to page 25 of the earnings presentation for reconciliation of such metrics. With that, I would now like to turn the call over to our President and CEO, Eric Andersen.

Speaker 2

Good morning, everyone. Thank you for joining us today. In the third quarter, AIG delivered strong profitability and premium growth, reflecting the benefits of our diverse global portfolio. As we enter the final months of the year with solid momentum, we continue to believe we are well-positioned to achieve the financial objectives we outlined at our 2025 Investor Day. On today's call, I will review our third quarter financial highlights, provide perspective on the current market and how we are deploying our strong balance sheet to advance our strategic priorities, share how we are further aligning AIG with the needs of our clients and partners, enabled by our deep bench of talent, discuss how we are managing AI as both an emerging risk and an opportunity, and outline our aspiration for AIG to be a top-performing company.

Speaker 2

Keith Walsh will then provide more detail on our financial performance, and Jon Hancock will join us for the Q&A. Turning to our third quarter financial results, adjusted after-tax income per diluted share was $2.06, and adjusted after-tax income was $1.1 billion. Core operating ROE was 11.1%. Underwriting income was $564 million. Accident year underwriting income ex-cat was $756 million. The accident year combined ratio ex-cat was 88.4%. The calendar year combined ratio was 91.3%. Net premiums written increased 8% from the prior year quarter, or 10% excluding North America property, reflecting growth across our Global Commercial and Global Personal Insurance businesses. Global Commercial Insurance net premiums written increased 7% from the prior year quarter. North America Commercial Insurance net premiums written increased 2% from the prior year quarter, driven by retail casualty and Financial Lines. Excluding property, net premiums written increased 6%.

Speaker 2

International Commercial Insurance net premiums written increased 13% from the prior year quarter, supported by broad-based geographic growth. Global Personal Insurance net premiums written increased 9% from the prior year quarter, driven by growth in our high net worth and A&H businesses. Net investment income on an adjusted pre-tax income basis was $1.1 billion, which Keith will discuss in further detail shortly. Finally, we returned $787 million in capital to our shareholders in the quarter, including $527 million in share repurchases and $260 million in dividends. Our third quarter performance rounds out an outstanding first nine months of 2026. We are growing profitably and building momentum across our global businesses. Through the first nine months of the year, compared to the same period last year, net premiums written grew 11%. Underwriting income exceeded $2 billion. Our calendar year combined ratio improved 140 basis points to 89.2%.

Speaker 2

The accident year combined ratio ex-cat improved 50 basis points to 87.7%, and our core operating ROE improved 50 basis points to 11.4%, and we returned $2.5 billion in capital to shareholders through share repurchases and dividends. Overall, this is excellent performance, driven by our talented colleagues and the continued successful execution of our strategy. Next, I'd like to spend a few minutes on the current market environment. Serving clients in more than 200 countries and jurisdictions gives us a unique view of just how dynamic the market is today. Conditions vary significantly from one line of business to the next and from one country to another. That's where our diversified global portfolio becomes a meaningful competitive advantage, giving us the flexibility to pursue profitable growth where conditions are favorable and seek to reduce exposure where pricing and terms no longer adequately reflect risk.

Speaker 2

Let me share a few examples of where we are becoming more selective, as well as where we are actively driving growth. In North America Commercial Insurance, as we have discussed in recent quarters, new entrants and excess capacity have intensified competition in our Lexington business, particularly in property and increasingly in casualty. We have been very proactive in our response since those trends began, directing growth in Lexington toward the middle market and small and medium enterprise segments while reducing our participation in property and casualty large accounts, which are facing the greatest pressure. Lexington is an important part of our portfolio, and we remain committed to the E&S channel. We are actively managing the business through the cycle, balancing targeted growth, focusing on renewals, and being very selective on new business. In North America Financial Lines, we are seeing rate stabilization and pricing that is essentially flat.

Speaker 2

We are closely watching the reps and warranties market, which over the last few years has seen a rise in claims related to the loosening of terms and conditions. We are proactively working with brokers and clients on appropriate solutions to align pricing, coverage, and risk. Reps and warranties insurance is a critical product for M&A transactions and for AIG, and we intend to remain a leading provider. In energy, our focus is on ensuring pricing keeps pace with risk. AIG is a global leader in energy with significant experience navigating market cycles. Today, the sector is volatile, with elevated loss activity and inflation continuing to drive loss costs higher, yet new capacity is pushing overall market rates lower.

Speaker 2

We are responding by deploying capacity where risk is priced appropriately and remain committed to leading the energy insurance sector on terms that are sustainable for the industry and for our clients. Being selective in these areas allows us to focus our capital and capabilities on opportunities with attractive risk-adjusted returns. For example, in Global Specialty, we are bringing together our teams from across AIG to support AI and digital infrastructure projects aligned with our risk appetite. For large, complex data centers, construction is often the first line of business we secure, opening the door for us to demonstrate our end-to-end capabilities and expand our business. This success has made construction one of our fastest-growing lines within the Global Specialty business. In addition to construction, AIG broadly offers one of the market's most comprehensive and integrated multi-line propositions for data centers, including marine cargo, cyber, property, and casualty insurance.

Speaker 2

Talbot adds specialist capability in areas such as political violence and terrorism. We are seeing a positive response from clients to our broad suite of services, which supports their needs across the full lifecycle of a data center. Turning to Global Personal, our accident and health team is successfully leveraging the scale of our global commercial business and multinational offering to reach more clients. Today, AIG serves nearly all S&P 500 companies, and we see significant potential to earn a greater share of their insurance business. Growing A&H by deepening our client relationships has been a highly successful strategy, leading to meaningful new business wins and contributing to our growth. What sets AIG apart is how we show up as one company with a broad range of capabilities. Our approach gives us a more complete view into each client's needs and helps us bring more innovative solutions to them.

Speaker 2

Alongside growing our existing client relationships, we are expanding our reach in strategic international markets. Our growth in Japan reflects continued strength in personal lines and expansion in commercial insurance, a market historically concentrated among a handful of well-established domestic insurers. We are building on an 80-year history in the country and our position as the market's largest foreign property casualty insurer. As Japan's insurance market evolves, we are leveraging our exceptional agency platform and global capabilities to support a wide range of clients, from individuals to small and middle market franchises, to large multinational corporations with complex needs. In Latin America, we are complementing our longstanding presence in Brazil and Mexico with targeted acquisitions to support long-term growth across one of the world's fastest-developing regional insurance markets.

Speaker 2

Our most recent transactions include the acquisition of Everest Chile, which was announced last week and expected to close in the first half of 2027, subject to regulatory approvals, and the acquisition of Everest Colombia, which we just closed. Colombia and Chile are the fourth and fifth largest corporate insurance markets in Latin America, respectively. Supported by teams with deep local knowledge, our expansion in these markets gives us a platform to accelerate growth and bring more of AIG's capabilities closer to clients and brokers in the region. Let me turn to our global casualty and property businesses. Across our casualty business worldwide, market dynamics vary by segment and geography, and we are growing the portfolio in areas with strong risk-adjusted returns. For example, in North America Retail Casualty, our breadth of capabilities is a meaningful differentiator.

Speaker 2

We serve clients across primary and excess, multiple market segments, and a broad range of account sizes with a comprehensive offering, supported by our commitment to underwriting excellence and our world-class claims organization. This business, which is over three times the size of wholesale casualty, delivered double-digit premium growth through targeted new business, disciplined pricing, and retention of 92%. Our high-quality portfolio benefits from long-term relationships that we are expanding as we continue to win new clients. In international casualty, we are pursuing attractive opportunities in markets such as Japan and certain countries in Europe. In contrast, competition continues to pressure pricing across the U.K. and much of Asia Pacific, where we are reducing our exposure until conditions improve. The diversity of our global casualty portfolio gives us the flexibility to direct capacity where we believe it can deliver the greatest value.

Speaker 2

In property, we see differences across markets, with international currently offering a more attractive environment than North America. As we noted last quarter, we are capitalizing on this favorable environment in international property to expand our portfolio. Like casualty, we benefit from having a diverse business, and we are seeing double-digit organic new business growth in international property overall. As we look ahead, I remain confident in the momentum across our global business. Through the first nine months of the year, we grew net premiums written 11% while maintaining strong underwriting margins. As I noted on our last call, we will not chase growth for growth's sake. Our focus is on maintaining our underwriting standards to ensure we are appropriately managing our risk, margins, and returns. With that in mind, it's important to recognize that certain pockets of the market continue to be under pressure.

Speaker 2

Therefore, we're making the choice to step back from the low to mid-teens net premiums written growth expectation we shared in February. We continue to expect an excellent year of growth for the full year of 2026, and we will use the strength and diversity of our global portfolio to drive our performance. That performance is directly tied to our people. One of AIG's greatest strengths is the depth of talent across every region and line of business. We have long been known as a talent incubator for the industry. Today, we are retaining more of that talent. Our employee retention is above 91% in 2026, and our colleagues are highly engaged. 95% report that they believe their work makes a difference for our clients, linking our purpose and values to the impact we deliver.

Speaker 2

We're building on this foundation by creating clearer pathways for our people to grow, with several leaders taking on broader roles this year to drive our next phase of growth. Alongside these internal promotions, we made select external hires who bring differentiated expertise and new perspectives. The strength of our reputation and global brand is drawing talent to us as well. Deeper in the organization, we have welcomed more than 2,100 new colleagues, and our award-winning early careers program drew more than 25,000 applicants worldwide, giving us access to a pool of highly qualified candidates as we grow. Going into 2027, we are streamlining our executive structure to better align our leadership with our strategy and strengthen connections across our global organization. The leaders of our business segments, underwriting, and global distribution will report to me.

Speaker 2

These direct reporting lines will accelerate decision-making, bring us closer to clients, and improve operating efficiency. We have taken the same connected approach to technology, uniting our technology, data, digital, and AI teams into one organization. Bringing these capabilities together will drive further innovation, accelerate our AI initiatives, and make it easier to work within AIG. We have an outstanding team, and the strength of our people, along with a more connected and streamlined structure, position us well to drive our business forward. Turning to AI, I want to comment on our approach to managing AI as an emerging risk and expanding its use within AIG. Our clients are building AI into the products they sell and the services people use, while embedding it into their own business operations.

Speaker 2

Our role is to help them understand, manage, and mitigate the risks related to AI while making sure insurance evolves alongside their deployment. We are actively studying the changing landscape and working to better understand these exposures, including regulatory risks and those associated with large language models and other technologies. As a market leader, our goal is to provide the clarity our clients are asking for across terms, conditions, pricing, and coverage. We're testing scenarios, working with external partners to enhance our modeling, and engaging in industry working groups to help shape the market's approach in this rapidly evolving risk. Inside AIG, we remain ambitious about using AI to change how we work, combining our expertise with trusted partnerships across the technology and AI ecosystem.

Speaker 2

We are advancing underwriting by AIG Assist and claims by AIG Assist, applying these solutions to enhance the experience and value we deliver to our clients, our partners, and colleagues. What we're seeing reinforces our strategy. Where deployed, our underwriters are reviewing more submissions and generating quotes faster. AI-powered insights are also giving us a sharper view of broker performance and distribution trends, enabling us to focus our underwriting on the most attractive risk-adjusted returns. In claims, AIG Assist is helping our adjusters cut through the complexity and respond faster when clients need us most. Together, these capabilities demonstrate the strategic value of applying AI at the core of our business. We remain focused on extending them to strengthen how we serve clients and position AIG to move decisively as the market evolves.

Speaker 2

As AI moves into wider everyday use, we are equally committed to using it safely and securely and strengthening our resilience as we expand adoption. Before I turn the call over to Keith, I want to talk about the tremendous work our team has done to build on AIG's strong foundation. We have an iconic brand, a rock-solid balance sheet, significant financial flexibility, global capabilities, and an exceptionally talented team. Our aspiration is for AIG to be a top-performing company, and we are focused on achieving that in three ways. First, we are growing our business profitably. As I discussed earlier, we have significant opportunities for organic growth across our diverse global portfolio, including strengthening our product capabilities, deepening our distribution relationships, and broadening our geographic presence. We are also open to inorganic opportunities that enhance our earnings potential and drive incremental ROE.

Speaker 2

Second, we are driving greater operating efficiency across AIG. We are maintaining expense discipline while improving end-to-end processes. We are also continuing to invest in technology and scale AI to improve decision-making and productivity across the company. Third, we are putting our capital to work effectively. We have made progress against our capital management strategy, and we are continuing to take a balanced approach. Our top priority remains deploying capital to support profitable growth where we see attractive returns. Nonetheless, we are continuing our practice of prudently returning excess capital to shareholders through share repurchases and dividends. Together, profitable growth, greater operating efficiency, and effective capital allocation support our objectives of growing AIG's earnings, book value, and ROE over time. We are seeing meaningful progress in our results.

Speaker 2

Since we announced our 2025 Investor Day targets, core operating ROE has improved 230 basis points, and adjusted book value per share has grown 10%. We will keep building on this momentum, and we see significant opportunities ahead. In closing, AIG is entering the final months of 2026 from a position of strength. We have an enviable global platform, deep underwriting expertise, a broad set of products and risk solutions, robust claims capabilities, and a team of outstanding colleagues centered on a shared purpose. We are building on our financial strength by deploying capital selectively towards attractive growth opportunities, organizing more closely around our clients, and investing in the exceptional talent and capabilities needed to serve them as a market leader and best-in-class global underwriting company. I'll now turn the call over to Keith to review our financial results in greater detail before we take questions.

Speaker 3

Thank you, Eric, and good morning. As Eric mentioned, we delivered a strong third quarter, and I'm going to expand on the financial highlights. Third-quarter adjusted pre-tax income was $1.4 billion, compared to $1.6 billion in the prior year quarter, primarily due to exceptionally light catastrophe losses in the prior year period, partially offset by higher accident year underwriting income ex-cat and strong net investment income growth. Accident year underwriting income ex-cat grew 6% year over year to $756 million, reflecting higher earned premiums and strong margins across all three segments. Moving to underwriting ratios. General insurance accident year combined ratio ex-cat was 88.4%, a modest increase of 10 basis points year over year. The expense ratio of 30.6% improved 30 basis points year over year, driven by the GOE ratio. The GOE ratio of 12.4% improved 50 basis points year over year, reflecting operating leverage and continued expense discipline.

Speaker 3

The acquisition ratio of 18.2% increased 20 basis points year-over-year, reflecting change in business mix as we lean into growth in global personal and other businesses that carry higher acquisition costs but offer attractive overall economics. As of September 30, 2026, the trailing 12-month expense ratio was 30.7%. Based on the progress we have made to date, subject to market conditions, we expect our full-year 2026 expense ratio to be approximately 30.5%. We remain on track to reduce the general insurance expense ratio below 30% for full-year 2027. The accident year loss ratio ex-cat of 57.8% increased 40 basis points from the prior year quarter. I'll provide more detail as I walk through each segment. Total catastrophe charges for the quarter were $283 million, a modest figure as compared to our historical norms.

Speaker 3

This quarter's losses were largely driven by severe convective storms in North America and included $40 million of additional development related to the Middle East conflict. Prior year development, net of reinsurance and prior year premiums, was $91 million favorable, compared to $180 million favorable in the prior year quarter and included $85 million of net favorable loss reserve development, $26 million of ADC amortization, and $20 million of prior year return premiums. We observed favorable loss development across all three of our segments. North America Commercial showed favorable development in the U.S. and Canada across multiple lines of business. International Commercial benefited from releases in European financial lines, and Global Personal had favorable development in U.S. high net worth and our international A&H and personal auto books.

Speaker 3

As a reminder, we carry out a review of our entire portfolio each quarter, looking at emerging claims trends, as well as monthly actual versus expected movements, and have a robust feedback loop between underwriting, claims, and actuarial. Our reserving philosophy remains to react to bad news quickly while allowing good news to develop over time. Overall, the general insurance calendar year combined ratio was 91.3%. Moving to segment results. North America Commercial accident year combined ratio ex-cat was 87.2%, an increase of 180 basis points over the prior year quarter. The accident year loss ratio ex-cat was 63.8%, an increase of 170 basis points year-over-year. This reflects changes in business mix as we reduced certain property exposures and earned in more casualty, as well as continued pricing pressure, mostly driven by property.

Speaker 3

The expense ratio was 23.4%, an increase of 10 basis points year-over-year, driven by the acquisition ratio, partially offset by improvement in the GOE ratio. Overall, the North America Commercial calendar year combined ratio was 92.9% and included 7.1 points of catastrophe losses and 1.4 points of favorable prior year reserve development. Turning to International Commercial. The accident year combined ratio ex-cat was 85.8%, an improvement of 20 basis points year-over-year. The accident year loss ratio ex-cat was 55.2%, an 80 basis point increase year-over-year, reflecting rate pressure partially mitigated by underwriting actions. The expense ratio improved 100 basis points to 30.6%, driven by the GOE ratio, which improved by 90 basis points, reflecting positive operating leverage. The International Commercial calendar year combined ratio was 88.3% and included 3.5 points of catastrophe losses and 1 point of favorable prior year development.

Speaker 3

Moving to Global Personal. Third quarter underwriting income of $114 million increased $35 million, or 44%, year-over-year. The accident year combined ratio ex-cat was 93.6%, a 190 basis point improvement year-over-year. The accident year loss ratio ex-cat improved 240 basis points to 52.9%, reflecting continued improvement in the U.S. high net worth business, combined with underwriting actions and business mix change. The expense ratio increased 50 basis points to 40.7%, entirely driven by the acquisition ratio, owing to changes in business mix, while the GOE ratio improved. The Global Personal calendar year combined ratio was 93.2% and included 2 points of catastrophe losses and 2.4 points of favorable prior year development. We are pleased with the progress we are making, as the actions we have taken to reposition the portfolio continue to earn through. Moving to pricing.

Speaker 3

Eric covered the market dynamic across many commercial lines in detail, so I will keep my comments at a high level. Starting with North America Commercial, the pricing environment remained largely consistent with last quarter, with the most pressure in property, particularly in the E&S lines. Excluding property, North America Commercial renewal pricing increased 5% year-over-year. In International Commercial, renewal pricing was down 3% compared to a 6% decline in the prior quarter, largely reflecting the mix of renewals by quarter and individual account pricing. As Eric mentioned, market conditions vary meaningfully by line and geography. That plays to the strength of our diversified portfolio and gives us the flexibility to lean into areas where we see attractive risk-adjusted returns and to be more selective where pricing does not adequately reflect risk. Moving to net investment income.

Speaker 3

Third quarter total net investment income on an APTI basis was $1.1 billion, up 5% year-over-year. General insurance net investment income was $1 billion, up 9% year-over-year, driven by the core fixed income portfolio as we continued to reinvest at higher yields. Since 2024, which is what our Investor Day targets were based on, we have grown general insurance NII by 19% to $3.6 billion on a trailing 12-month basis. This reflects the progress we've made and demonstrates the earnings power of the portfolio. Now, let me spend a minute on what's driving that growth. First, reinvestment at higher yields remains the largest contributor. We have proactively managed the portfolio, capitalizing on yield opportunities while maintaining the overall quality. Over the last two years, nearly 90% of our core fixed income portfolio has turned over, contributing over two-thirds of the growth in net investment income.

Speaker 3

We've also made significant progress improving yields across our international portfolios, particularly in lower-yielding markets such as Europe and Japan. Since 2024, the yield on our international core fixed income portfolio has increased by approximately 100 basis points. Alongside the improvement in yields, we are also growing our asset base. Since 2024, general insurance invested assets have increased 7%. We have also increased our allocation to core fixed income while reducing legacy asset classes such as real estate. Together, these actions have built a more stable and sustainable earnings base. Our focus remains on growing invested assets, optimizing yields across our global portfolio while maintaining strong credit quality and liquidity, and selectively deploying capital into private assets where risk-adjusted returns are attractive.

Speaker 3

Coming back to the third quarter, in our core fixed income portfolio, the average new money yield on our fixed maturity and loan portfolio was 5.6%, roughly 125 basis points higher than sales and maturities. The annualized yield on our global core fixed income portfolio was 4.86%, a 28 basis point improvement over the prior year quarter. Alternative investment income had an excellent quarter, generating $91 million, driven by strong private equity performance yielding 12.7%. Other investment income was also very strong at $75 million. As we look to the fourth quarter, we expect our core fixed income portfolio will continue to show growth, reflecting active management in the current interest rate environment. Alternatives should be closer to our long-term expected return, and other invested assets, which can be volatile quarter to quarter, should produce modest income, subject to market conditions. Moving to other operations.

Speaker 3

Third quarter adjusted pre-tax loss was $141 million versus a loss of $112 million in the prior year quarter. The difference was driven by lower net investment income and other of $45 million compared to $72 million in the prior year quarter, owing to the absence of Corebridge Financial dividends following the complete sale of our holdings. Turning to balance sheet metrics. Adjusted book value per share, which excludes net unrealized investment gains and losses, was $81.25 at September 30, 2026, up 5% from the prior year quarter, reflecting strong growth in net income offset by capital return to shareholders. Adjusted tangible book value per share was $73.37 at September 30, 2026, which also grew 5%. In September, we proactively accessed the debt markets, issuing approximately EUR 1.3 billion equivalent of euro-denominated senior notes to pre-fund a 2027 debt maturity.

Speaker 3

Following this issuance, we expect our quarterly interest expense to be approximately $112 million. We ended the quarter with $10.2 billion of debt outstanding and a total debt-to-adjusted capital ratio of 19.6%. Through the first nine months of the year, we returned $2.5 billion of capital to shareholders, including $764 million of dividends and $1.7 billion of share repurchases. We expect fourth quarter buybacks to be at a similar level to the third quarter, bringing full-year share repurchases to approximately $2.2 billion, subject to market conditions. As Eric stated, we have a strong balance sheet and significant financial flexibility. Our focus is to translate that strength to enable our strategic priorities and drive sustainable growth in earnings, book value, and ROE. We have made meaningful progress across these metrics.

Speaker 3

Since we announced our Investor Day targets, we have grown adjusted EPS more than 60% on a trailing 12-month basis, increased adjusted book value per share by 10%, grown core operating ROE and adjusted ROE by 230 basis points and 390 basis points respectively, and increased our quarterly dividend by 25%. These results demonstrate the progress we've made, and we have numerous levers to continue to build on that progress, including growing our premium base profitably, continuing to improve the global personal segment, driving further expense ratio improvement, growing our investment portfolio and NII, and returning capital to shareholders through dividends and share repurchases. These levers give us multiple paths to drive continued improvement in our metrics, which should deliver attractive long-term returns for shareholders. Overall, our third quarter results demonstrate strong execution across underwriting, investments, and capital management. With that, I will turn the call back over to Eric.

Speaker 2

Thanks for that, Keith. Michelle, we're ready for questions.

Operator

Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Yaron Kinar with Mizuho. Your line is open.

Speaker 4

Thank you. Good morning, everybody. I want to start with a question on the growth guide for premium. Pulling that low to mid-single teens premium growth guide for the full year, I think implies at most flat premium growth in the fourth quarter, which would be a further slowdown from the third quarter. I guess my question is, are there any one-offs that you expect in the fourth quarter? Otherwise, it would just seem like the headwinds that you called out this quarter are far more pronounced next quarter. I'm asking that not only in the context of the fourth quarter, but also to help us maybe level set into 2027.

Speaker 2

Sure, Yaron, and thanks for the question. Maybe I can help clarify it a bit. I'll start with- In the third quarter, we had great growth, right? I think 8% is a very solid number, and when you match it on the 11% net premium growth through the first nine months, I think we're off to a great start. When we step back on the teens, the mid-teens growth, it was really because we looked at the market from when we gave that initial assessment earlier in the year. It's continued to deteriorate in some parts. I think, as we said, we deliberately made the choice that we wanted to prioritize sustainable, profitable growth over just chasing a specific percentage. But there are great growth opportunities still out there for us, as we talked about in the written remarks and the prepared remarks.

Speaker 2

Global Specialty, A&H, to name a few. As we look at the fourth quarter, we continue to see a similar market as we saw in the third quarter. So, we expect that following at the end of the year, we're going to have a great year from a top-line perspective. Jon, maybe I'll ask you, any comments that you would bring in?

Speaker 5

Yeah. Okay. Thanks, Eric. Yeah, like Eric says, we've got a really diverse portfolio, so, and we talk about this a lot, gives us a lot of growth opportunities in different places, in different lines of business, at different stages of the cycle. We talked a lot in the prepared remarks about the general P&C business in North America and international. So, I'll give just a few comments on some other areas. Global Specialty, a really important book and a really strong book for us. We're still seeing really good growth there, and we expect to. We've called out construction especially in there. We're also seeing really good growth in marine, both in our Global Specialty book and our Talbot at Lloyd's book, driven in large part by the marine war premiums, which we have been seeing and we continue to expect to see for a while.

Speaker 5

The other place we've touched on, Global Personal. We've said on previous calls, we're making great progress accelerating A&H. We've had another high single-digit growth quarter in the third quarter, and we've got a very strong pipeline going into the rest of the year and into next year. Same on high net worth. We've been re-underwriting the book. We've got a lot of opportunity, especially in the non-admitted space. So, there's plenty of opportunities all over the place. We're being selective. As Eric said, we are not pursuing growth for growth's sake. Underwriting profitability is our North Star, but we do have these great opportunities all over the place.

Speaker 2

Thanks, Jon. Maybe, Yaron, just to hit at the two specific comments. One, there's nothing specific in the fourth quarter that gives rise to any concern. Two, we see the fourth quarter pretty similar to the third quarter. Now, it's not over till it's over, but it looks like it's trending very similar to what we did in the third quarter.

Speaker 4

Got it. That's helpful. So, maybe the removal of the guide is just the next level of conservatism with growth expected to be similar in the third. Then I guess my second question is, with the premium growth becoming more weighted to international and personal and less to the lower underlying combined ratio of North America Commercial, and in addition to that, with mix shift within each of the segments, should we still expect or should we expect mix pressuring underlying underwriting margins in 2027?

Speaker 2

So, maybe I'll kick that off, and then maybe, Keith, I'll ask you to say a couple of words too. But listen, I think we're fortunate enough to have a large and diverse global insurance portfolio, right? I think when you look at the General Insurance business through nine months, the 87.8% AYCR is a 50 basis point improvement. Obviously, Global Commercial holding up really well at 86.3 over nine months. But we're being pretty selective on risk. We're trying to hold pricing, terms and conditions, pulling back in markets where we don't see adequate risk-adjusted returns, and we're proactively managing the mix. So, that's very important to us as we think about the changing market and the global opportunities as we look to deploy capital across all of our businesses. But Keith, why don't you talk for a minute about that?

Speaker 3

Yeah. Thanks, Eric. I would just add, we manage the portfolio on a global basis, really the focus on the overall combined ratio. What we've been doing is really disciplined underwriting actions and portfolio management across all lines. We've seen significant improvement in several businesses, specifically in the Global Personal book. In addition to that, our expense ratio continues to get better. As Eric said, these actions, we're largely holding our margins overall, which are very, very strong. But this isn't a new story, right? Some of the things we've talked about, commercial lines, loss ratios are slightly ticking up. We're getting improvement in personal, and the expense ratio continues to improve, and that's how we're holding the margins. That's really the playbook. North America specifically in the quarter, you see the 170 basis points uptick.

Speaker 3

I would just kind of zoom back and point to the 90 basis points through the nine months. A couple other points I would give you. Third quarter last year was our lowest loss ratio within North America, right? So, the comparison was somewhat difficult, and there was a few items that benefited that number roughly around the 50 basis point mark, and so it created a bit of a headwind there. I would say when we look ahead to the fourth quarter, it should be largely similar, the loss ratio in North America to the third. In addition to that, what are the drivers of what is driving the increase overall? It's really mix is the biggest, primarily as we've continued to talk about. As we earn in more casualty business, which is highly profitable, we feel really good about it.

Speaker 3

It just has a higher loss ratio than property as we decline in that part of the market. Additionally, the rate impact on North America property, as rate declines earn through, it is really a combination of those things. But really, we are very, very pleased with overall margins, and they continue to be very strong.

Speaker 2

Thanks, Yaron. Michelle, next question.

Operator

Thank you. Our next question comes from Alejandro Zambado with BMO. Your line is open.

Speaker 6

Oh, great. Thanks. It is Mike Zaremski from BMO. Regarding top-line growth, Peter Zaffino placed a lot of emphasis on buying more reinsurance to hedge against volatility. Kind of curious if buying different levels or less reinsurance is a potential tool to increase top and bottom line growth in 2027.

Speaker 2

Sure. Thanks, Mike. It's a great question. The reinsurance program for us, we've always viewed as a very strategic and critical part of our growth strategy. We've been spending a lot of time on that question since coming out of Monte Carlo a couple of months ago, then following a bunch of other meetings that have been happening, working with our partners, both traditional and alternative, thinking through what our strategy is. I would say, listen, we like the program where it is. We are going to look at tweaks, obviously, to take advantage of either market pricing or areas where we think we can retain more risk. Ultimately, how we view reinsurance as a major supporter of how we look to grow and deploy capital hasn't fundamentally changed.

Speaker 6

Understood. My follow-up is on the loss cost environment. Eric, you gave some color in your prepared remarks as well. AIG's reserves have clearly been very stable. Kind of curious if you're seeing any slight changes in the loss cost environment in the recent quarter or trend lines changing. Thank you.

Speaker 2

We really have not. I think, especially in U.S. casualty, the loss trends, they're not abating. Social inflation, litigation finance, other factors still very present, and they're driving the need for rate increases. We continue to be able to get those rate increases, which ultimately tells us that the general market has a similar perspective on it as we do, and the clients do as well as they're supporting that. I wish I could give you a different answer, but I think the answer this quarter, similar to last quarter, is we're not seeing enough of a break to be able to pull back on pricing.

Speaker 6

Thank you.

Operator

Thank you. Our next question comes from Alex Scott with Barclays. Your line is open.

Speaker 7

Hi. Good morning. First one I had for you is just on the ROE progression. I know you've talked in the past about improving the ROE, and I think some of that was going to come from the growth. So, totally understand why you wouldn't want to commit to growth levels in this kind of environment. But are there still commitments on ROE that you'll make, and just the progress that you'll make towards relevering the business, even if it has to come from other means of relevering other than just growth?

Speaker 2

Yeah, sure. That's a great question. Listen, I think we've had exceptional performance and profitability in the third quarter and through the first nine months, and our ROE sitting, the strong core operating ROE at 11.4%, and we're looking to build on that momentum. I would say, and I think you're kind of alluding to it in your question, the ROE is a long-term journey for us. It's not a quantum leap, and it's about, how do we execute on our strategic priorities? How do we compound progress over time? Maybe, Keith, why don't you walk through the three or four levers, and then maybe I'll come back with a couple of comments.

Speaker 3

Yeah, thanks. Look, the levers we've talked about to grow the ROE is a clear focus for us, right? We talked about the 10-13 range at Investor Day. We're in that range, and we want to improve in that range and continue to well beyond the three-year guidance. Really what it is, there's a couple levers here. We want to grow our premium base profitably, right? We have a diversified global platform, strong capabilities. Eric's walked through that. We see attractive organic growth opportunities across the portfolio. The second, continue to improve our underwriting, and you clearly see that in the Global Personal segment specifically, and we have been growing our accident year underwriting earnings pretty strong over the last couple years, ex-cat. Further expense ratio improvement is a lever, right? Once we get to the sub-30, that is not the end of the journey, right?

Speaker 3

That's continuing through that journey over time as we want to continue to bring that ratio down over time to a best-in-class number. Investment income is a tailwind. That's a really good story for us now. You clearly see that in the results, and we think that will continue to improve. Of course, capital management, right? Us managing the denominator of that equation and really returning capital effectively and smartly and prudently is top of mind for us.

Speaker 2

I do think, Keith, just since Investor Day, we have been making significant progress. You talked a little bit about it in your script, but how we've grown adjusted EPS by more than 60%, book value by 10%, core operating ROE by 230 basis points. We're making progress on these goals, and like I said, it is a journey, not a quantum leap. We're going to continue to manage the business as effectively as we can in whatever market cycle is in front of us to make sure that we're growing book value and we're growing our earnings over time.

Speaker 7

Got it. That's all helpful. I guess related to that, the whole conversation is just, I think you expressed inorganic interest as well, and so just be interested in the kind of things you would look at, and is there a larger amount of capacity for you to go after something, or are we talking more bolt-ons?

Speaker 2

Listen, I would say right now, the top priority is to grow the company profitably by just expanding our premium base, doing our blocking and tackling every day, interacting with our clients, and really providing the right solutions with our existing team. That said, whether it was the acquisition of the Colombian business from Everest and the Chilean business we just announced are good examples of how we're leveraging our geographic footprint, how we're making incremental steps to expand our portfolio. Look, but ultimately, we've got some pretty high hurdles on what we would do to do something inorganically, but we want to remain nimble. I would say, we want all the options on the table from an ability to grow our existing business, whether it's to expand the footprint, whether it's to be able to do some bolt-ons like we've done.

Speaker 2

But the focus overwhelmingly is to drive our existing business with our team doing our thing every day.

Speaker 7

Thank you.

Operator

Thank you. Our next question comes from Meyer Shields with Keefe, Bruyette & Woods. Your line is open.

Speaker 8

Thanks. I was going to follow up on the M&A question. Obviously, you earned a lot more than the buybacks in the third quarter. Should we connect those? In other words, is there a reason to harbor some excess capital in anticipation of inorganic growth?

Speaker 2

That's a great question, Meyer, and I'll give you the easy answer, no. As I said before, we continue to drive our business forward. I love our strategy on what we're doing with getting closer to clients, on our product expertise, our claims capabilities. We feel like we've got a lot of opportunity in front of us with our existing portfolio globally, and that is our focus.

Speaker 8

Okay. That's very clear. Second question, on the investment portfolio, I get that there's still higher reinvestment rates. Is the step-up associated with active management, is that done?

Speaker 3

For the most part, Meyer, a lot of that has been done. We've turned over like 90% of the portfolio over the last two years, as you've seen. We do have some fairly significant runoff that naturally occurs, and as we reinvest at higher yields there, you'll continue to see a drift up. For example, our new money rates are roughly 5.6%, and you can see our overall yield's about 4.86, so we're getting some nice lift that will continue as we go forward.

Speaker 8

All right, perfect. Thank you.

Operator

Thank you. Our next question comes from Brian Meredith with UBS. Your line is open.

Speaker 9

Yeah, thanks. First one, Keith, I think it is more for you. If I think about the 30% and below expense target for 2027, how much of that is reliant on just improving operating leverage versus just driving cost saves? If we are looking at 0, 1, 2% premium growth next year, is it going to be really difficult for you to make that?

Speaker 3

Thanks, Brian. A couple things. We have not given a premium growth guide, first off, so that is your assumption right there. One thing I would note is what the premium earns in from the very strong written this year, we should have a nice lift in earned premium next year. Clearly, the operating leverage is a big factor within that, as we talked through. That is correct. Most of the gains will really come from the GOE ratio. As Eric Andersen mentioned, the mix of business changes. We have a little pressure on the acquisition side that we outlined a bit. Really, it will be focused on the GOE ratio, which is our core expenses, things we can control, and we feel really good about getting to the below 30 for next year. Thanks.

Speaker 2

Maybe, Keith, just to add a few things, just to reiterate on that. I think we laid out a target in Investor Day, and we are focused on achieving that target. It has some mixed issues, as Keith Walsh is talking about. Certainly, the GOE number, which are expenses that are really within our day-to-day control, we are focused on it through operational efficiency, expense management, process improvement, all that, including operating leverage. Then obviously, on the acquisition cost piece, growing in businesses that draw a higher acquisition cost but have great overall loss fundamentals is important to us, and we are going to do that. Balancing that growth in high net worth and warranty and A&H and things that draw a higher acquisition cost, measuring that against our own expenses is something we are working hard on to make sure we get to the overall target.

Speaker 2

Ultimately, I think as Keith said, it's a stop along the way. We want to be one of the top quartile overall expense ratio performers, but we also want to draw the right business into the organization that give us a great balance and mix. We're working on both those levers at the same time.

Speaker 9

Makes sense. Eric, I guess, pivot a little here. AIG, obviously a huge player in the E&S market. We're hearing a lot more about the competitive pressures in that marketplace on top of just business moving from E&S to the admitted markets. Is that true when it comes to your book and your portfolio, and how much of a headwind do you think that has been to growth this year, and do you anticipate that could be a continued headwind as we look into next year?

Speaker 2

We actually have not seen a migration at any significant way back from E&S into the admitted market. Obviously, as a player that does both, we're watching it pretty carefully. We've seen submissions increase, demand continues to increase. There's obviously some competition that is more significant in the E&S space, and we've talked a lot about property, and I mentioned in the prepared remarks a little about casualty too, starting to see. Some of that is who's competing in the marketplace. You end up seeing in the E&S space a lot more MGAs, sidecars, non-traditional players. We are a little worried that the alignment of insurer and MGA paper, or MGA and insurer paper, are not as aligned and managed as tightly as it should be, but we see it and we're reacting to it as best we can.

Speaker 2

I actually attended a conference we threw a couple days ago with our largest wholesale partners to just talk through that issue an opportunity to make sure that we're seeing the business that we want and being clear about our disciplined approach and where we see it. I do think the property topic tends to overwhelm the conversation when people are talking about E&S, but we are seeing growth in some key areas, whether it's industry-specific like life sciences or real estate or financial institutions or other specific areas. So, it is a question of there's a tsunami wave of property that everybody's been talking about, but the fundamentals underneath it, when you get to the other areas, are actually pretty solid, and we continue to be pretty optimistic about the attractiveness of that segment.

Speaker 9

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Speaker 10

Hi, thanks. My first question is on the property side, right? Obviously, low losses this year, and we are obviously hearing about continued price declines, right, when we go into the 1/1 reinsurance renewals. So, is your expectation, right, that we probably When do you expect we could get to a floor in terms of property pricing, or is it just very much dependent upon just seeing losses at some point, or when can you see us hitting a bottom there?

Speaker 2

Wow, I wish I had a crystal ball to give you a good answer on that. Listen, you are seeing it play all the way through from retail property, E&S property, into reinsurance property, and it has been really just the balance, as you know, Elyse, of a lack of significant losses and excess capital and new capital that is trying to get into the market. As we approach it, though, we are seeing pricing pressure across North America, as we talked about, and a little bit in international. International is currently a little bit better than North America, and we do see opportunities for growth in international.

Speaker 2

But the key in this will be how do you maintain the discipline underwriting and the rate adequacy and the terms and conditions and the attachments and the limit management, all the things that you know we've been working on over the last five years, really comes home as a critical function when you're in a market like this. Jon, maybe give a little bit of color on it, if you would, as well.

Speaker 5

Yeah, sure. I mean, I think it's true, North America. It's definitely true that North America property pricing generally is under pressure still. What I'd say is in retail property, our pricing in the third quarter was broadly the same as the year to date, so we've been a bit of stabilization there. The point you make, Elyse, what drives it, if we saw a lot more loss activity, we might see those markets start to moderate, but we're not acting like an index for the market anyway. I think we've been pretty clear on that. We'll keep making the right underwriting decisions. I'd say as well, as Eric says, wholesale and retail property, they're behaving similar but different. Eric's talked a lot about it already.

Speaker 5

What I would say is, again, we've started to see our rates in Lex property start to moderate, but we think that's probably a result of our own actions rather than the general market trend. Then just finally, to close it off with the point on international property, we quite rightly talk a lot about North America property because that's where we see the biggest swings. But we're seeing good growth opportunities, as Eric says, because we're seeing more favorable conditions across places such as the U.K., certainly European countries, in Latin America, in Japan as well. So, we'll keep coming back and out of the less favorable places. We've got lots of opportunity there as well, and I think we'll continue to see that.

Speaker 2

Maybe just to play it all the way through to the reinsurance side, Elyse, I do think we're going to see, as a buyer of reinsurance, I think we're going to see opportunities to either save money, and I think it'll give us some real tactical choices to make. I think strategically, as you look at our portfolio, it was built to manage our volatility. We were able to capture some savings in 2026 without having to make any real fundamental changes in terms of the risk profile, and I think that opportunity might be in front of us again as we work through the marketplace and the 1/1 renewals with our partners. So, I think we're going to get a good balance between some of the front-end pressure and some of the ability to save money on some of the reinsurance support.

Speaker 10

Thanks. My second question goes back to capital. AIG has lower premium to surplus levels relative to peers, and obviously, you guys could choose to grow into that lower surplus level, but it does sound like from putting all the commentary together, growth is tougher. So over time, if the environment remains competitive, could you guys potentially look to take more dividends out of your subs than the $3 billion that you guys outlined at Investor Day? Perhaps that could help fuel a little bit of incremental buyback relative to what you guys have outlined to the street?

Speaker 2

Sure, Elyse. I would say at a moment like this, we're actually pretty fortunate to have the rock-solid balance sheet that we have, and balanced and consistent capital management is our focus. We do want to grow with profitable growth into the balance sheet as best as we can, and we see opportunities as we've been talking about. Ultimately, how we return capital back through dividends and buybacks is something that we've been committed to. I think the catchword for us is we want to be nimble in this because we do think as the market gets under pressure, there'll be opportunities for us to either grow into certain areas or take advantage of some situations. Ultimately, looking at where we're trading, slightly above tangible book, buybacks is obviously a pretty strong use of capital for us as we sit here today.

Speaker 10

Thank you.

Speaker 2

I think we have time for one more.

Operator

Thank you. Our next question comes from Josh Shanker with Bank of America. Your line is open.

Speaker 2

Josh, you have to make it good because we are after the hour, so you got to make it a good question.

Speaker 11

I am a lucky boy. What can I say? Jon used the term index the market and saying AIG is not, and it is certainly not. But I want to understand the extent to which broker-led syndications are a part of AIG's book and what you think the future of that is for large case insurance as a source of business and what that means for AIG.

Speaker 2

That is a great question. I am glad we took it. Look, I think broker facilities and panels are going to continue to expand across the market as they have been growing over the last couple years, and I think they are changing, right? They have gone from filling gaps in capacity to some of the preferred mechanisms, especially in markets like Lloyd's and others where it is a sort of quota share type marketplace. Look, I think they can create competitive challenges, but they can also provide opportunities to attract specialty businesses or diverse portfolios or certain geographies where you want to grow more. But I will tell you, it is not a big deal for us in terms of participation, because our approach has been and will be to remain selective and disciplined, especially in this part of the market cycle. Underwriting quality, profitability, diversification, strategic fit, all that is important.

Speaker 2

I think of all of that, underwriting discipline is probably the most important. We are going to continue to evaluate them as they come to market. They are not all created equal, and they all have different aspects and things they are trying to get done. We have done one or two where we thought we could get access to a portfolio where we might be underweight. Generally speaking, it has to have a diverse book in order to make it work. We have got the skill set to evaluate them, which we do, and we will be pretty selective of where we dip in.

Speaker 11

Is it a de minimis amount of the premium at this point?

Speaker 2

I do not know your definition of de minimis. I would just say it is not a big deal.

Speaker 11

Okay, I will take that. Thank you.

Speaker 2

All right. Listen, I think I just want to say thank you all for joining us this morning. It was another great quarter, and I am really grateful for the AIG team to make it happen, and look forward to being with you again next quarter. Thank you.

Operator

Thank you for your participation. You may now disconnect. Good day.

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