American International Group, Inc. (NYSE:AIG.WS) Q4 2016 Earnings Conference Call - Final Transcript

Feb 15, 2017 • 08:00 am ET


American International Group, Inc. (NYSE:AIG.WS) Q4 2016 Earnings Conference Call - Final Transcript


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Good day, and welcome to AIG's Fourth Quarter Financial Results Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Liz Werner. Please go ahead, ma'am.

Elizabeth Werner

Thank you. Before we get started this morning, I'd like to remind you that today's representation may contain forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Any forward-looking statements are not guarantees of future performance or events. Actual performance and events may differ possibly materially from such forward-looking statements. Factors that could cause this include the factors described in our first, second, and third Form 10-Q, and our 2015 Form 10-K and 2016's 10-K to be released under Management's Discussion and Analysis of Financial Conditions and Results of Operations and under Risk Factors.

AIG is not under any obligation and expressly disclaims any obligation to update any forward-looking statements whether as a result of new information future events or otherwise. Today's presentation may contain non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP measures are included in the slides for today's presentation and in our financial supplement, both of which are available on our website. The format for today's call will follow prior quarters.

There'll be one question and one follow-up during our Q&A period. We will extend the Q&A period today so that we can answer as many of your questions as possible. This morning, you'll get to hear from our leadership team and in particular will lead with our CEO, Peter Hancock; Sid Sankaran, our CFO; Rob Schimek, CEO of Commercial; and Kevin Hogan, CEO of Consumer.

And with that, I would like to turn the call over to Peter.

Peter Hancock

Thank you, Liz, and good morning, everyone. Today, I will review our 2016 accomplishments and provide an updated outlook for 2017. But first, I'll speak to our recent announcement of an adverse development cover with Berkshire Hathaway and our Q4 reserve strengthening.

Let me begin by providing some historical perspective on the adverse development cover. We've evaluated ADCs from time to time and followed our 2015 reserve addition. We felt it was a strategic imperative to radically reduce reserve risk and improve earnings sustainability. At that time, Doug, Rob and Sid were new to their roles, and I'd asked them to carefully evaluate our business in force, new business underwriting and sources of alternative capital. As we've stated, reinsurance is a key component of our strategy, and one outcome of their work was the agreement with Berkshire, which reinsures the vast majority of our U.S. Casualty reserves and, more importantly, exposures going back more than 40 years.

While adverse development covers are not new to the industry, an agreement of this scope and scale is redefining. Berkshire is a knowledgeable partner with investment expertise and balance sheet strength, which are well matched with AIG's claims capabilities. The economics and the reduction in risk associated with this agreement will provide