Mark Lyons, Chief Financial Officer (CFO) and Peter Zaffino, President and Chief Executive Officer (CEO) of American International Group (AIG) have explained that the global re/insurer anticipates a margin expansion throughout 2021 and into 2022.
The margin expansion is the result of AIG’s favourable underwriting actions from favourable global market conditions, along with materially improved terms and conditions and a more profitable, less volatile business mix.
Lyons said: “I would like to reconfirm our outlook for a sub-90% accident year combined ratio, excluding cat by the end of 2022. Global commercial lines are very nearly at the sub-90% level now, and global personal lines is running at 96% for the first quarter.”
“Given our portfolio composition, the market conditions and our strategic repositioning of North America personal, we anticipate greater continued margin expansion within commercial lines than personal lines.”
He also expressed his confidence that AIG will achieve its sub-90% target and have put up several paths to lead there, some via mix, some via reasonable market conditions persisting and some via expense levers.
Zaffino added that AIG’s focus pivoted from remediation to driving profitable growth. These are a couple of concrete examples of how we have repositioned the global portfolio.
He said: “Gross limits in global commercial will reduce by over $650 billion. North America excess casualty removed over $10 billion in lead limits and increased writings in mid-excess layers in order to achieve a more balanced portfolio.
“In Lexington we repositioned this business to focus on wholesale distribution. The team grew the top line in 2020 for the first time in over a decade. The portfolio is now more balanced and the submission flow has increased over 100% the last couple of years.
“So there are multiple factors in terms of driving the sub-90 combined ratio, one is that we had a terrific start to the year, and so you can see we’re driving top line growth, driving margin, improving combined ratios. So with the momentum that we have, we’re going to focus on continuing on the underwriting side.”
He also noted that he’s aware of the company’s expense tailwinds in terms of what will be coming through with AIG 200.
Zaffino added that the company is being careful with normal expense management and being very disciplined on reinvestment and making sure that AIG is focused on ways in which it can improve what it’s doing and create its own investment capacity.