American International Group, Inc. New · NYSE:AIG
American International Group, Inc. New — American International Group — Investor Day (November 2016)
81 slides from American International Group, Inc. New's investor day presentation, Nov 18, 2016
Slide 1: Investor Day November 18, 2016
Investor Day NOVEMBER 18, 2016 © Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward Looking Information
Cautionary Statement Regarding Forward Looking Information This document and the remarks made within this presentation may include, and officers and representatives of American International Group, Inc. (AIG) may from time to time make, projections, goals, assumptions and statements that may constit
Slide 3: Agenda
Agenda Time Content Management 8:00 – 8:30 Registration 8:30 – 8:45 Overview & Outlook Peter D. Hancock, President & Chief Executive Officer 8:45 – 9:05 Financial Outlook Sid Sankaran, Executive Vice President & Chief Financial Officer 9:05 – 9:55 Commercial Insurance Robert S. Schimek, Executive Vi
Slide 4: Overview & Outlook
Overview & Outlook Peter D. Hancock President and Chief Executive Officer ©
Slide 5: Industry Leadership, Value Creation, Execution
Industry Leadership Value Creation Execution
Slide 6: Hierarchy of Goals
Hierarchy of Goals Primary focus is growth in intrinsic value Intrinsic Value Return On Equity Growth In Book Value Efficiency Capital Management Risk Margin Risk: Credit Quality Equity Beta Investment Income
Slide 7: Consistent Accomplishments
Consistent Accomplishments Completed or announced 16 divestitures and equity sales transactions valued at over $12B Improved Normalized Return On Equity by 150 bps since FY’15 Reduced run-rate General Operating Expense, Operating Basis, by over $1B since end of 2014 Returned $25B of capital to share
Slide 8: Financial Outlook
Financial Outlook Sid Sankaran Executive Vice President & Chief Financial Officer ©
Slide 9: Financial Targets
AIG Normalized ROE Operating Portfolio Normalized ROE1 Book Value Per Share Growth2 (ex. AOCI and DTA ) Commercial AYLR, As Adjusted Capital Return ($bn) GOE Reduction, Operating Basis7 Target: $1.4bn (Net of Reinvestment) Normalized ROE excluding AOCI & DTA, adjusted for allocation of Corporate GOE
Slide 10: AIG Best Valued in Three Main Parts
AIG Best Valued in Three Main Parts DTA (Utilize) Operating Portfolio (Improve & Grow) ~77% Legacy (Shrink) ~23% Illustration purposes only: Based on $70.4B GAAP equity ex. AOCI and DTA at YE’15.
Slide 11: Operating Portfolio: Normalized Return On Equity Expansion
Note: For illustrative purposes only. Normalized ROE excluding AOCI & DTA, adjusted for allocation of Corporate GOE and Parent debt. Preliminary estimate based on current attribution of businesses to Operating and Legacy Portfolio together with current assumption of internal leverage which could cha
Slide 12: Legacy Portfolio
Legacy Portfolio Excludes AOCI & DTA, adjusted for allocation of Corporate GOE and Parent debt. Preliminary estimate based on current attribution of businesses to Operating and Legacy Portfolio together with current assumption of internal leverage which could change over time. Shrinking Legacy has r
Slide 13: General Operating Expenses, Operating Basis
On a constant dollar basis. Adjusted for sale of AIG Advisor Group and sale of UGC. Expect to exceed two year target To Be Executed Achieved, To be Earned Achieved and Earned Professional Service Fees1 GOE Reduction, Operating Basis1 Target: $1.4bn (Net of Reinvestment) Compensation & Benefit Expens
Slide 14: Divestiture Transactions
Transaction Counterparty Status Announced Date Closing Date / [Anticipated Close] Estimated Net Gain (Loss) After-Tax1 Completed AIG’s consumer business in Taiwan Nan Shan Life Closed 6/11/15 9/1/16 NM AIG Advisor Group Lightyear Capital / PSP Investments Closed 1/26/16 5/6/16 $155M NSM Insurance Gr
Slide 15: On track to reach $25B capital return target
On track to reach $25B capital return target Capital Return Includes additional $1.8 billion of share and warrant repurchases from October 1, 2016 through November 17, 2016. Does not include declared shareholder dividend for 4Q16. 1 $25 Dividends and Tax-Sharing Payments: $5-7B Divestitures: $4-5B L
Slide 16: Book Value Per Share Growth
Growth reflects earnings, DTA utilization and accretive share and warrant repurchases Book Value Per Share Growth +5% Excluding AOCI +5% As Reported +13% Excluding AOCI & DTA, Including Dividend Growth
Slide 17: Improving Risk Profile, Controls and Transparency
Improving Risk Profile, Controls and Transparency Note: Reserve risk is expected to decrease as a result of the actions described above, but risk variation is an inherent characteristic of our business. 17 Reserve Risk Reduction Eaglestone Environmental XS WC Other 2010 2016 Q/S Reinsurance NPW Limi
Slide 18: P&C Reserves and Loss Ratio Uncertainty
NPW Distribution P&C Reserves Uncertainty in AY LR Estimates by Development Age LR Points Loss Reserve Distribution (21%) (21%) Development Year * Net reserve balances reflect subsequent PYD of approximately $5BN for YE 2011 and $9 BN for YE 2006. Consumer Property & Special Risks Financial Lines US
Slide 19: Modularity
Modularity Modular units enhance transparency and accountability, driving improvement and flexibility over time Note: New operating segments to be in effect beginning in 4Q16. Geography United States Europe Japan Segment Operating Portfolio Commercial Property and Special Risks Liability and Financi
Slide 20: Commercial Insurance
Commercial Insurance Robert S. Schimek Executive Vice President & Chief Executive Officer of Commercial ©
Slide 21: A Market Leading Commercial Insurer
Offering a range of simple to highly customized insurance solutions and services tailored to specific client needs A Market Leading Commercial Insurer Property & Special Risks 45% Liability & Financial Lines1 55% Product Geography Client2 US Casualty Int’l Cas. Financial Lines Property Special Risks
Slide 22: Competitive Advantages | Market Leadership
Competitive Advantages | Market Leadership Best Overall Carrier & #1 in 13 out of 20 lines of business in National Underwriter’s 2016 Risk Manager Choice Awards Becoming Our Clients’ Most Valued Insurer Strong Distribution Relationships Thought leadership lowering our clients’ overall cost of risk O
Slide 23: Competitive Advantages | Collaborative Innovation
Co-founder of Together for Safer Roads and telematics pilots with Europcar to promote smoother driving Competitive Advantages | Collaborative Innovation Building supercomputing capabilities Over 600 engineers and 250 analysts & modelers providing enhanced risk solutions Technology based SME joint ve
Slide 24: Competitive Advantages | Multinational Capabilities
24 Competitive Advantages | Multinational Capabilities As of November 18, 2016 (Figures in thousands) AIG Global Network spanning over 200 Countries Supported by 500 dedicated multinational employees Issuing over 40,000 local policies The AIG Global Network1 Our Clients’ Local In-Country Operations
Slide 25: Competitive Advantages | Data and Claims
Competitive Advantages | Data and Claims 2015 Advisen Claims Satisfaction Survey. By Insurance Post. Fraud Investigators in 30 countries Medical Management Services that protect clients and reduce claims costs Global Recovery Services reducing the cost of paid losses Drone inspections for loss contr
Slide 26: Strategic Actions Enhancing Shareholder Value
Strategic Actions Enhancing Shareholder Value Portfolio “Exits” Client Focus Risk Selection / Account Level Actions Strategic Use of Reinsurance Innovation for Growth Exit unprofitable lines of business Exit non-core (Ascot) or unprofitable business (select U.S. Programs) Refine our focus on client
Slide 27: Accident Year Combined Ratio, as Adjusted Trend
Accident Year Combined Ratio, as Adjusted Trend Expense Ratio Accident Year Loss Ratio as Adj.1 Note: Excludes the benefit from the UGC quota share agreement. Accident Year Loss Ratio has been adjusted with 4Q’15 Prior Year Development push-back to each Accident Year. AY CR as Adjusted -12 points fr
Slide 28: Business Mix Shift
Grow & Maintain Business Mix Shift -3% Improve & Remediate -33% 53% AYLR 57% Excludes the benefit from the UGC quota share agreement. * Accident Year Loss Ratio is on adjusted basis. 79% 73% AYLR FY'15 15% 41% 54% 35% 59% 35% 73% 79% 15% 91% Set NPE AYLR Product Set# 1 (Grow) Product Set# 2A (Mainta
Slide 29: Accident Year Loss Ratio, as Adjusted
Accident Year Loss Ratio, as Adjusted On track to achieve 4Q17 exit run rate target as the benefits from strategic actions are reflected in earnings Excludes the benefit from the UGC quota share agreement. On Track Executed Ascot NSM Fairfax Post 9M16 Impact Casualty (Exits, Reinsurance, Risk Select
Slide 30: Programs Portfolio Optimization
Programs Portfolio Optimization Value-based decision making across the portfolio Illustration Purposes only: Based on relative capital consumption at YE’15. Divesture New Initiative New Maintain Grow Reduce Liability Financial Lines Property Special Risks Marine Commercial Professional Indemnity Fin
Slide 31: US/Canada Excess Casualty - Limit Profile
US/Canada Excess Casualty - Limit Profile Aggregated Limit Attachment Point Band Portfolio Optimization | Liability & Financial Lines AY LR as adjusted1 Rate Change Accident Year Loss Ratio has been adjusted to reflect 4Q15 prior year development pushed back to each accident year. Amounts subject to
Slide 32: Portfolio Optimization | Global Property
Portfolio Optimization | Global Property Rate Change Accident Year Loss Ratio has been adjusted to reflect 4Q15 prior year development pushed back to each accident year. Amounts subject to change pending finalization of the reporting modules. On a constant dollar basis. Other includes Energy & Engin
Slide 33: Well Positioned for the Future
Well Positioned for the Future Value creation driven by a comprehensive mix of business, focus and tools Holistic Client-Centric View Optimize Portfolio Compelling Value Proposition Pricing & Risk Tools Client Risk Solutions Talent Development Optimizing portfolio to balance profitability, growth an
Slide 34: Consumer Insurance
Consumer Insurance Kevin Hogan Executive Vice President & Chief Executive Officer of Consumer ©
Slide 35: Consumer: Operating Portfolio of Client-Centric Businesses
Consumer: Operating Portfolio of Client-Centric Businesses Note: Reflects segmentation as of September 30, 2016 which includes both Operating and Legacy. PTOI is not normalized for items such as the difference between actual and expected catastrophe losses, alternative investment returns, update of
Slide 36: Personal Insurance: Core Products and Targeted Segments
Personal Insurance: Core Products and Targeted Segments Business complements Commercial and provides valuable differentiation Note: Year-to-date Net Premiums Written as of September 30, 2016 36 Short tail with stable cash flows Low reserve volatility Nominal exposure to capital markets Less prone to
Slide 37: Personal Insurance: Margin Expansion Through Increased Focus
Personal Insurance: Margin Expansion Through Increased Focus Management actions are driving combined ratio improvement 2010A 2016E 2017E Individual 71 33 15 Group 81 54 35 PI Accident Year Combined Ratio As Adjusted Number of Countries Selling Personal Insurance 102% 100% 100% 95% 92-94% 99% 37 Coun
Slide 38: Personal Insurance: Investing In Private Client Group
Significant new business momentum Targeted risk selection and pricing using advanced analytics Innovative multinational capabilities Strategic partnerships in key international markets Personal Insurance: Investing In Private Client Group Building off of strong U.S. position in attractive $30B custo
Slide 39: Japan: Largest Foreign Property Casualty Insurer
Japan: Largest Foreign Property Casualty Insurer in Japan with History Dating Back to 1946 Leading positions in distinctive customer segments Note: Market positions based on AIG internal analysis. 39 Major / Corporate Accounts Complements SME segment Focus on non-keiretsu companies Growth in Manufac
Slide 40: Japan: Transformation of Fuji Fire and Marine
Japan: Transformation of Fuji Fire and Marine Increased professionalism, technical skills and capabilities 40 Enhanced portfolio management analytics and underwriting discipline Improved pricing / producer segmentation Upgraded agency network and support systems Substantial expense reduction efforts
Slide 41: Retirement and Life: Broad Product and Distribution Capabilities
Retirement and Life: Broad Product and Distribution Capabilities Agile Distribution Banks Broker-Dealers Wirehouses Independent Marketing Organizations General Agencies PPGA VALIC Financial Advisors AIG Direct Top 5 market position across major product lines 9M’16 Premiums & Deposits Individual Reti
Slide 42: Individual Retirement: Comprehensive Risk Management
Individual Retirement: Comprehensive Risk Management 1) De-risked benefits include features on contracts issued since 2010 (VIX indexing/volatility control fund in 2012) and pre-2010 partially de-risked benefits due to actual policyholder election of extension offers to-date. 42 Product Design Capit
Slide 43: Group Retirement: Competitive Positioning
Group Retirement: Competitive Positioning Trusted advisors paired with powerful tools 43 Asset Ranking #2 #3 #4 K-12 Higher Ed Healthcare Transforming the plan sponsor and participant experience ~1,200 financial advisors serving ~23,000 employer groups and ~2 million participants Unique service prop
Slide 44: Life: Continued Focus on ROE Enhancement
Life: Continued Focus on ROE Enhancement Rationalize product portfolio Emphasize independent distribution and AIG Direct Consolidated systems with state-of-the-art platform Innovative underwriting enhancements Last twelve months as of September 30, 2016. 44 Results beginning to reflect improvement p
Slide 45: Consumer: Well Positioned for the Future
Consumer: Well Positioned for the Future Executing strategic plan creates value 45 On path toward achieving efficiency goals and exceeding cost of capital by the end of 2017 Balanced portfolio of at-scale businesses Disciplined focus on risk management Industry leader in target markets
Slide 46: Legacy
Legacy Charlie Shamieh Chief Executive Officer, Legacy ©
Slide 47: AIG Legacy Progress to Date
AIG Legacy Progress to Date Achieved $6.3B out of $9.0B Release Target Represents Dividends and Tax Sharing Payments. $6.3B Achieved to September 30, 2016 1
Slide 48: Composition of AIG Legacy Portfolio
Composition of AIG Legacy Portfolio Legacy Portfolios (~$17B1 of Equity as of Dec 31, 2015): generally comprised of Non-Strategic Businesses2 that AIG has or intends to exit, Legacy Assets and Gains Harvesting Portfolios3 Shareholders' Equity, excluding AOCI and DTA, adjusted for allocation of Corpo
Slide 49: Case Study – Eaglestone Reinsurance Company
Case Study – Eaglestone Reinsurance Company Actively Managing Run-Off of AIG’s Standalone Excess Workers’ Compensation Portfolio Run-Off Strategy Deployed Since AIG’s Acquisition of Run-Off Talent AIG’s Run-Off Team – Seasoned Industry Experts Since the book was reinsured to Eaglestone in 2011, AIG
Slide 50: Legacy Portfolios: Challenges
Legacy Portfolios: Challenges Future quarterly performance can be volatile. Normalized ROE excluding AOCI & DTA, adjusted for allocation of Corporate GOE and Parent debt. Preliminary estimate based on current attribution of businesses to Operating and Legacy Portfolio together with current assumptio
Slide 51: Key Takeaways
Key Takeaways 51 We are executing our strategy to reduce Legacy capital The promises we made to our policyholders and insureds are at the forefront Reducing risk and releasing capital trapped in low yielding books can come with book value impairments We have the talent to execute and are building ca
Slide 52: Investments
Investments Douglas A. Dachille Executive Vice President & Chief Investment Officer ©
Slide 53: Key Messages and Strategic Priorities
Hone asset-liability management Optimize product design and pricing Exert greater internal control over investments and related risks Manage reinvestment risk and associated earnings pressure Free up capital to return to shareholders Pursue excess risk-adjusted returns efficiently Key Messages Low a
Slide 54: Core Investment Capabilities
AIG possesses significant investment capabilities across asset classes and sectors, and in portfolio design, analytics and asset-liability management Core Capabilities As of September 30, 2016. Investment Expertise Asset Management Commercial & Consumer Portfolio Management Investment Analytics Key
Slide 55: Key Initiatives – Direct Investments
Market AIG life cos. AIG non-life cos. Structuring direct investments in residential and commercial mortgages and other whole loans leverages AIG’s core strengths and provides significant benefits Key Initiatives – Direct Investments Originate whole loans in scale Securitize internally with efficien
Slide 56: Key Initiatives – Residential Mortgage Exposure
Exposure to residential mortgage risk declines with: Sale of UGC Run-off of quota share written on 2014-2016 business Monetization of stake in Arch Capital Group Annual PTOI from residential mortgage insurance is expected to decline significantly $544mm in the twelve months ended September 30, 2016
Slide 57: Key Initiatives – External Managers
Limiting use of external managers to areas where we lack scale and expertise is expected to improve transparency, control, ALM, capital consumption and excess risk-adjusted returns Key Initiatives – External Managers As of 12/31/15. Scaled internal platform to invest through external managers over p
Slide 58: Key Takeaways
Key Takeaways Low and uncertain interest-rate environment leaves less room for performance deviations Resultant areas of heightened focus include: ALM, product design and pricing, internal control of investments and related risks, capital consumption, and efficient pursuit of excess risk-adjusted re
Slide 59: Q&A and Closing Remarks
AIG]. Q&A and Closing Remarks
Slide 60: Industry Leadership, Value Creation, Execution
Industry Leadership Value Creation Execution
Slide 61: Appendix
AIG]. Appendix —
Slide 62: Strong Capital Position
Strong Capital Position Notes (1) Includes AIG notes, bonds, loans and mortgages payable, and AIG Life Holdings, Inc. (AIGLH) notes and bonds payable, and junior subordinated debt. (2) The inclusion of RBC measures is intended solely for the information of investors and is not intended for the purpo
Slide 63: Large Financials' Risk Metrics
Large Financials’ Risk Metrics Notional Derivatives(1) (as of September 30, 2016) Leverage Ratio(2) (as of September 30, 2016) Source: Company filings. Notes: (1) Gross notional derivatives includes derivatives for portfolio hedging purposes, and excludes notional amounts for embedded derivatives fo
Slide 64: Large Insurers' Financial Metrics
Large Insurers’ Financial Metrics Source: Company filings. Notes: Figures as of September 30, 2016 unless otherwise noted. (1) Total debt includes securities lending payable and repurchase agreements. (2) Calculated as Total Assets excluding Separate Account Assets / Shareholders’ Equity. (3) Data f
Slide 65: AIG Balance Sheet Since the Financial Crisis
AIG Balance Sheet Since the Financial Crisis Source: Company filings. Notes: 2007 and 2012 figures are as of December 31 and 3Q 2016 figures are as of September 30, unless otherwise stated. (1) Does not include securities lending payable and repurchase agreements. Total Debt (1) (in US$ billions, un
Slide 66: AIG Balance Sheet Since the Financial Crisis (Cont'd)
AIG Balance Sheet Since the Financial Crisis (Cont’d) (in US$ billions, unless otherwise stated) Short-Term Debt Ratio (3) –89% –80% Debt-to-Equity Ratio (1) –52% Leverage Ratio (2) Securities Sold Under Agreement to Repurchase –75% Commercial Paper and Extendible Commercial Notes –100% Shareholders
Slide 67: US & Canada Programs
US & Canada Programs 2016 Product Mix1 Net Premiums Written AY Loss Ratio (as adjusted) Improve Terminate Accretive 89% 73% 55% $0.7BN Franchise $1.1BN 70% Segmentation strategy to improve profitability through focus on accretive programs The entire Programs business is reported in Property and Spec
Slide 68: Sale of AIG Fuji Life Insurance Company
Sale of AIG Fuji Life Insurance Company 1) Based on 2015 NPW. Compulsory Auto Liability Insurance On November 14th, AIG announced the agreement to sell AIG Fuji Life (“AFLI”) to FWD Group (“FWD”) The transaction will allow AIG to focus on its non-life insurance franchise in Japan As a young, growing
Slide 69: Speaker Biographies
AIG]. Speaker Biographies
Slide 70: Speakers' Biographies (1/2)
Speakers’ Biographies (1/2) Peter D. Hancock Peter D. Hancock was named President and Chief Executive Officer of AIG in September 2014, when he was also elected to the AIG Board of Directors. Previously, Mr. Hancock served as CEO of AIG Property Casualty. He joined AIG in 2010 as Executive Vice Pres
Slide 71: Speakers' Biographies (2/2)
Speakers’ Biographies (2/2) Robert S. Schimek Robert S. Schimek is Executive Vice President and CEO of Commercial, overseeing AIG’s commercial insurance businesses worldwide. He is responsible for the company’s global property, casualty, financial lines and specialty products and services, including
Slide 72: Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations
Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations ©
Slide 73: Glossary of Non-GAAP Financial Measures
Glossary of Non-GAAP Financial Measures We use certain of our operating performance measures, as discussed beginning in the next paragraph below, to define our forward-looking financial targets. Our financial targets are provided based on management’s estimates. The most directly comparable GAAP fin
Slide 74: Glossary of Non-GAAP Financial Measures (Continued)
Glossary of Non-GAAP Financial Measures (Continued) Return on Equity – After-tax Operating Income Excluding AOCI and Return on Equity – After-tax Operating Income Excluding AOCI and DTA are used to show the rate of return on shareholders’ equity. We believe these measures are useful to investors bec
Slide 75: Glossary of Non-GAAP Financial Measures (Continued)
Glossary of Non-GAAP Financial Measures (Continued) Pre-tax operating income and loss is derived by excluding the following items from pre-tax income and loss: loss on extinguishment of debt net realized capital gains and losses changes in benefit reserves and DAC, VOBA and SIA related to net realiz
Slide 76: Non-GAAP Reconciliations – Normalized Return On Equity, Ex. AOCI and DTA
Non-GAAP Reconciliations – Normalized Return On Equity, Ex. AOCI and DTA Note: Normalized ROE excluding AOCI & DTA, adjusted for allocation of Corporate GOE and Parent debt. Preliminary estimate based on current attribution of businesses to Operating and Legacy Portfolio together with current assump
Slide 77: Non-GAAP Reconciliations – General Operating Expenses, Operating Basis
Non-GAAP Reconciliations – General Operating Expenses, Operating Basis
Slide 78: Non-GAAP Reconciliations – Accident Year Combined Ratio, As Adjusted
Non-GAAP Reconciliations – Accident Year Combined Ratio, As Adjusted Note: Liability & Financial Lines and Global Property amounts subject to change pending finalization of the reporting modules.
Slide 79: Non-GAAP Reconciliations – Book Value Per Share
Non-GAAP Reconciliations – Book Value Per Share * Represents U.S. tax attributes related to net operating loss carryforwards and foreign tax credits.
Slide 80: Non-GAAP Reconciliations – Premiums and Deposits
Non-GAAP Reconciliations – Premiums and Deposits
Slide 81: For Further Information
For Further Information Investor Relations Elizabeth Werner (212) 770-7074 Fernando Melon (212) 770-4630 Susan Davidson (212) 770-6387 Matthew Rohrmann (212) 770-6884 Artemio Novilla (212) 770-4294 Call Us Visit Us or Follow Us
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