AMERICAN INTERNATIONAL GROUP INC

LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)

The following table presents the components of our gross and net loss reserves by segment and major lines of business(a):

(a)Includes net loss reserve discount of $1.2 billion and $1.2 billion at December 31, 2024 and 2023, respectively. For information regarding loss reserve discount, see Note 13 to the Consolidated Financial Statements.

(b)Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $2.7 billion and $2.9 billion at December 31, 2024 and 2023, respectively.

Prior Year Development

The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment and major lines of business:

*Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $136 million, $164 million and $167 million for the years ended December 31, 2024, 2023 and 2022, respectively. Consistent with our definition of APTI, the amount excludes the portion of (favorable)/unfavorable prior year reserve development for which we have ceded the risk under the NICO reinsurance agreements of $289 million, $(158) million and $(174) million for the years ended December 31, 2024, 2023 and 2022, respectively. Also excludes the related changes in amortization of the deferred gain, which were $268 million, $(83) million and $85 million over those same periods.

Net Loss Development – 2024

In the year ended December 31, 2024, we recognized favorable prior year loss reserve development of $367 million. The key components of this development were:

•Favorable development on our U.S. Workers' Compensation reflecting continued favorable loss experience.

•Adverse development on U.S. Excess Casualty driven by a large settlement of a legacy mass tort claim with the gross loss in accident years covered under the Adverse Development Cover and increased reserves related to claims emergence.

•Adverse development on U.S. Property and Special Risks reflecting development on prior year catastrophes offset by favorable loss experience in Retail and Wholesale Property.

•Favorable development on U.S. Financial Lines, reflecting favorable experience across most reserving classes, offset by unfavorable development in M&A and High Excess classes.

•Favorable development on U.S. Other Casualty, reflecting favorability across numerous Casualty reserving classes, partially offset by unfavorable development on Commercial Auto and Wholesale Primary General Liability.

•Favorable development on Other Product Lines, primarily driven by Global Specialty which saw favorable development across multiple lines.

•Adverse development on UK/Europe Casualty and Financial Lines driven by unfavorable development in UK Financial Lines partially offset by favorable development in EMEA Financial Lines, and unfavorable development in European Excess Casualty driven by claim-specific emergence on accident year 2016.

•Favorable development on UK/Europe Property and Special Risks reflecting favorable development across most segments and geographies.

•Favorable development on UK/Europe and Japan Personal Insurance primarily driven by Japan A&H and Auto, partially offset by unfavorable development in Personal Auto in EMEA.

•Favorable development in U.S. Personal Insurance and Other Product Lines due to favorable development on prior year catastrophes across several events, primarily in the 2019-2023 accident years.

Our analyses and conclusions about prior year reserves also help inform our judgments about the current accident year loss and loss adjustment expense ratios we selected.

For additional information on prior year development by line of business, see Note 13 to the Consolidated Financial Statements. For information regarding actuarial methods employed for major classes of business, see Critical Accounting Estimates.

Net Loss Development – 2023

In the year ended December 31, 2023, we recognized favorable prior year loss reserve development of $398 million. The key components of this development were:

•Favorable development on U.S. Workers' Compensation business reflecting a continuation of favorable loss cost trends in guaranteed cost and excess segments across most accident years.

•Favorable development in U.S. Excess Casualty driven by favorable development on the Excess Construction Runoff Portfolio.

•Favorable development in U.S. Other Casualty reflecting favorable experience in construction defect and construction wraps as well as guaranteed cost auto and general liability.

•Favorable development in U.S. Property and Special risks reflecting favorable development on prior year catastrophes in the 2017-2021 accident years, offset by adverse development on prior year catastrophes in the 2022 accident year.

•Unfavorable development in U.S. Financial Lines due to unfavorable development on High Attaching Excess D&O, M&A, Primary National D&O, Cyber data privacy claims, and Architects & Engineers, partially offset by favorable development on Primary Private Not for Profit D&O and Financial Institutions D&O.

•Unfavorable development in UK/Europe Casualty and Financial Lines reflecting unfavorable development in auto liability in Europe and UK and in UK D&O and Commercial Professional Indemnity business, partially offset by favorable development in Financial Institutions Professional Indemnity and D&O in Europe and UK and Cyber and Commercial Personal Indemnity in Europe.

•Unfavorable development in UK/Europe Property and Special Risks driven by unfavorable development on prior year catastrophes.

•Favorable development in Other product lines driven primarily by Global Specialty.

•Favorable development, primarily in U.S. Personal Insurance, due to favorable development on prior year catastrophes across several events, primarily in the 2017-2020 accident years.

•Favorable development on Japan Personal Insurance driven by personal auto and A&H business.

Net Loss Development – 2022

In the year ended December 31, 2022, we recognized favorable prior year loss reserve development of $523 million. The key components of this development were:

•Favorable development in U.S Workers' Compensation reflecting continued favorable loss experience across most accident years particularly for excess and guaranteed cost segments.

•Favorable development in U.S. Excess Casualty particularly in lead and mid-excess retail segments.

•Favorable development in U.S. Other Casualty in the Commercial Auto, General Liability and Construction Wraps business.

•Unfavorable development driven by U.S. Financial Lines driven by unfavorable severity trends in Excess and Primary D&O and Excess and Financial Institutions Errors and Omissions (E&O), partially offset by favorable results in Employment Practices Liability Insurance (EPLI).

•Favorable development on Global Specialty across all products in all regions.

•Unfavorable development in Casualty in Europe Excess Casualty and French Auto as well as large loss experience in the UK, partially offset by favorable experience in Asia Pacific Casualty.

•Unfavorable development in Financial Lines primarily in the UK for M&A, Commercial PI and Commercial D&O.

•Favorable development in International Personal Lines, particularly with Auto and A&H coverages in Japan, as well as favorable experience recognized in Europe and the UK.

•Favorable development, primarily in U.S. Personal Insurance, due to favorable development on prior year catastrophes across several events, primarily in the 2017-2019 accident years.

We note that for certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us.

Significant Reinsurance Agreements

In the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.

For a description of AIG’s catastrophe reinsurance protection for 2024, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Natural Catastrophe Risk.

The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement, the effect of discounting of loss reserves and amortization of the deferred gain.

(a)The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries.

(b)Excluded from APTI.

The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:

(a)Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP.

(b)Represents amortization of the deferred gain recognized in APTI.

(c)Excluded from APTI.

The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of both favorable and unfavorable prior year development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time.

Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our insurance run-off lines into a single legal entity. As of December 31, 2024, $3.4 billion of reserves related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.