Over much of the past three decades, i have been an investor. The highest calling of mankind, ive often thought, was private equity. And then, i started interviewing. I watched your interview, so i know how to do some interviews. Ive learned from doing my interviews how leaders make it to the top. Jeff i asked how much he wanted, he said 250, and i did no due diligence. David i have something i want to sell. And how they stay there. You dont feel inadequate being only the second wealthiest man in the world, is that right . For many years, the most successful Insurance Company in the world was aig, then the Great Recession came. Aig required a 183 billion bailout from the u. S. Government. That bailout has now been repaid with interest, and aig has reshaped into a smaller but very successful Insurance Company being led by peter zaffino. I had a chance to sit down with peter in his office in new york to talk about the new aig. For those who arent familiar with the property and casualty insurers, what do they do . Peter we ensure businesses. Small, medium, Large Businesses for their property insurance, auto or financial lines, which is directors and officers. We also have a business that does harder to place business, such as contractors or businesses that may not find its way into the conventional business. We also have a lloyds syndicate, and we are a big part of lloyds as well. David as i understand the Insurance Business, there are really two parts to it. One is the part of assessing the risk and charging premiums that , hopefully, from the insurers point of view, cover the risk. The second is taking the premiums and investing it, hopefully getting a good rate of return. Lets talk about the first part. In the first part of assessing a risk, is it harder today because inflation is so high to assess the risk you might have in insuring someones home or property . Peter the Property Casualty company is more complicated to get the underwriting right than it is the investment side. Youre right. With inflation, complexity of cyber risk today, and other factors such as global warming, catastrophes, the dynamic of what happened after the pandemic , with density and peak zone areas such as florida, california. So understanding your Balance Sheet and your aggregates with what you are underwriting is complicated. You need people with a lot of experience and a lot of good judgment in terms of making underwriting choices. David so, if somebody says Climate Change is not really here, they havent talked to a property and casual insurer. Is that right . Peter that is correct. That is true. Five out of the last six years weve had 100 billion of Natural Disaster losses. That has never happened before. David what about Artificial Intelligence . Is Artificial Intelligence going to enable you and others to say , we have enough information to know what something will be worth in terms of ensuring it or not . Peter Artificial Intelligence is finding its way into the business in a variety of factors. The first piece is getting much better insight into data that allows us to make better decisions on underwriting. Its also a great opportunity to serve businesses better in terms of call centers and different ways of using robotics and ai would be very helpful. But it is an emerging practice within the industry and one that is evolving very quickly. So its also going to present risks that other companies, how they use it and how they use Large Language Models and making sure the decisionmaking is very sound. So its complicated but it is definitely benefiting the business today. David the Insurance Industry has a reputation, maybe undeserved, for, lets say, somebody has a claim, their house burned down, and the insurance adjuster says, it really wasnt worth as much as you think or the damages arent as great. Is that a big problem anymore or is that an unfair image . Peter i think its an unfair image. I think it probably perhaps was true years ago. But today, the contracts are much more clear. Paying claims, thats what we do in underwriting risks, but we have to show up in moments that matter what we have to pay claims and the amount of disputes are very small with the percentage of our overall portfolio. I dont think thats a fair assessment. David when you make a judgment that you will charge a certain premium, you would probably make a little or some profit on the premium, are you doing that now . That has not been aigs past. In 2009 to 2019, it lost over 30 billion in underwriting. I arrived in 2017 with a great team that followed me here, and we began that underwriting journey. Now we do make underwriting profits. For every dollar we underwrite risks, we make . 12 profit without Investment Income. David lets talk about the Investment Income. You bring in these premiums, and all insurers invest it, and you get great people, i assume, to invest for you. What kind of return are you looking for on your investment portfolio . Peter 75 of the portfolio is fixed income. In this new Interest Rate environment, the Investment Income is going up. The remaining portion will be a form of alternative investment, such as private equity or commercial real estate. That is done very conservatively. We really are not going to win on just the Investment Income. You need to make an underwriting profit. We balance both very well. David i should say private equity, my own firm has a relationship with aig. You cant put too much money in private equity, right . Your investment professionals cannot put too much money in that area, right . Peter absolutely, they do a great job. David in terms of investment returns, are all insurers making money both on investment return and on premium underwriting . Is that basically the core of the business . Peter i think generally the business is making underwriting profit, and its on the investment side. David its often said lloyds of london would insure almost anything. Are there things you wont ensure . If somebody says, im worried about my wedding being rained out, or Something Like that . Is there any kind of insurance you wont provide . Peter we are specific in terms of what we want to underwrite. It has to be where we have a skill and can deploy capital and get a fair return. We dont reflect the way lloyds can insure almost anything. Its much more a traditional Specialty Company that would have real strong expertise and scale in the areas that we underwrite. David Housing Insurance is a big part of your business, i assume. What is the biggest risk for you in providing insurance for peoples homes . Peter well, the complexity has been the density built up in areas that have significant exposure. You think about the southeast of the United States for wind or wildfire in california. What happened as an effect of the pandemic was, people moved into those areas and, ill make it up, but a 2. 5 million house cost 5 million during the pandemic and people knocked it down and put up a tent. All of a sudden you had all this density in areas that were already challenged to have enough insurance to be able to respond to the individual homeowners. I think it has become more complex. Add in more frequency of hurricanes and wildfires, and you have a market that is under a little bit of stress. David property and casualty is separate than automobile insurance. Peter auto would go into david do you do automobile insurance . Is that a Risky Business to be in these days . Are drivers Getting Better or what about people who dont have cars, that dont have drivers, are you worried about that . Peter i am worried about that. Driverless vehicles are a big exposure, but with ai, quality of vehicles, its more predictable than it was in the past. David for your own home, who provides Home Insurance for you . Peter aig. David if you have a claim, do you have a problem getting it paid . Peter i havent had to have a claim. I dont think i would. David lets talk about how you got into the Insurance Business. Your father was in the business. Did he say, peter, when you grow up, you should go in the Insurance Business . Is that what happened . Peter it didnt. And the myth of him reading the insurance books at night is not true. He encouraged me to pursue what i wanted. I went to boston college, graduated. The reason why wanted to enter the Insurance Industry was because i wanted to stay in boston, and a Company Called the hartford, owned by itt, it did offer me a job. I thought would do training elsewhere to come back to boston, thats why i took the job. David some people might say that insurance is a boring business. It does not attract people the way private equity does. Is that not the case or you found it would be interesting out of college . Peter i found it interesting. You arent doing the same thing every time when you start in the industry. You learn to build relationships. You understand the quantitative nature of how to underwrite. The qualitative nature. I liked it because it had a balance of doing Different Things at once. David what did you do after your first job in boston . Peter ironically, i never made it back to boston. I stayed in new york. Early on in my career, i did not think i could work in new york city, which has been a predominant portion of my career. So i have always been at Big Companies. I worked at itt, then i worked at general electric. Marshall mclennan after that. Marsh mclennan after that. David you were working at Marsh Mclennan on september 11, 2001. Where were you on that morning . Peter that was my sixth day of work at Marsh Mclennan. I was on the 53rd floor of tower two that day to work. David what happened . Peter the first plane went into tower one. I had seen it and colleagues and i started to evacuate. Nothing urgent, but to the stairwell to make our way down. We made it to about the 40th floor when the second plane went into the building. Which i didnt know what it was at the time. I figured tower one had tipped over or Something Else that come into the building. We had a sense of urgency of getting out. David was there a mass rush down the stairwell . Peter there was. It was orderly but it started to get panicky to get out of the building and rush our way down the stairwell. David you got out of the building. How much before the building collapsed . Peter i was probably 20 minutes north of the building when it collapsed. I was never in danger of having soot or other things on me once the building collapsed. David as soon as you got out of the building, you didnt look up there, you ran somewhere . Peter i met a friend and we happened to we walked north to 125th street to get out of the city. David how many of your colleagues died . Peter almost 300 that day. David 300 colleagues died from Marsh Mclennan. Peter yes. David you did not say, ive had enough of wall street and insurance, i will go into Something Else . Peter the unique part of our business is in major disasters or things that happen like that, our clients need us. It was immediately calibrating, focusing on helping. I was in the reInsurance Business at that time, so helping Insurance Companies get back into business and helping raise capital and helping them assess what they needed to do going forward. David today, aig over the years has been a gigantic company. Maybe the largest at one time market cap insurers in the world. But then during the Great Recession, it had some problems. Ultimately, the government had to come with a bailout, a 180 billion guaranteed loan or bailout. Have you paid that back yet . Peter yes, that has been paid back, well before i arrived at the company. David did the government make a profit . Peter yes. They made a profit. There was interest and a profit. David what caused that was too much insurance on highrisk mortgages . Peter it was a Financial Products product that was credit related and that created an impact on liquidity. David peter, when you took over as the ceo of this company, it wasnt in as good a shape as it appears to be now, so what did you do to turnachieved in your s ceo so far . Peter well, the thing im proud of the most is the number of people that came to aig and people that stayed to come together as an organization to actually try to improve our underwriting, operation capabilities, and Financial Performance. We had to shed relative to our Balance Sheet 1. 4 trillion of exposure since we started. That was a dramatic change. We had to do 10 operational programs at once to get the Foundation Stability for the company for the future. I actually think that part of the pandemic benefited us, because we compressed that transformation and did it very fast and made dramatic improvements for the company. Then the Financial Performance started to manifest itself from the efforts that we made on the underwriting side and the operations side. Its been a tremendous effort. David you are now pretty much in the p c business, property and casualty. You are getting out of life insurance. Explain why the life Insurance Business wouldnt be a better business. You know people will die, its predictable. Actuaries tell you when they will die. Why is that business not as good as the property and casualty business . Peter it is a very good business. They have so many assets. Its a spread business and one that has really different dynamics to drive its outcomes. David i see lots of ads for insurance, Home Insurance, but i dont see a lot of aig ads. Are you appealing to people like me who are watching television, or are you going to institutional market . Peter we have a distribution of agents and brokers that are we are really a business to business. We source our business through that distribution channel. So less advertising to the end consumer, has limited value in the products that we actually underwrite. David today, the Insurance Business in the United States, would you say its a Healthy Business today . Peter i would. Balance is strong, returns are good, and there is positive momentum. David you see a lot about whats going on in the economy, because you underwrite activities. What is your biggest worry about the Economy Today . Are you worried about recession, inflation, high Interest Rates . Peter i worry about it all. But for insurance, i mean, certainly inflation is one. We carry reserves for many years on our Balance Sheet. And what the effect is of inflation as we pay claims over the long term. The investment rates, as i said, with fixed income, that is strong for us in terms of reinvestment rates. It allows us to do very well on the investment side. I do worry about the global economy. Gdp has been holding up. But certainly in the United States, a big part of gdp is health care and tech. So seeing Consumer Spending and driving sales through retail is something we watch frequently. David what percentage of your business is overseas and what percent is in the United States . Peter its about 5050. David what are the number of employees do you have now . Peter we have a little over 30,000 at aig and 20,000 employee equivalents in terms of what we outsource through back office or through technology. David today your market capitalization is 45 billion . Something like that. Peter yes. David do you spend any time in washington, d. C. Saying to regulators, you are not doing a good job regulating us, or do members of congress do a better job taking care of the Debt Repayment . Do you spend time in washington . Peter i do spend time in washington with lawmakers. The complexity of insurance is that we are state regulated. Spending time with various state regulators and fca and fsa in the u. K. And japan, respectively, is where i spend more of my time. David do you find when you meet with members of congress is it an uplifting experience . [laughter] peter getting compromise and talking through specific issues is more challenging than it has been in the past. But we are trying to make progress. David you go to a lot of ceo gatherings. I assume you are members of things like the Business Roundtable or the Business Council and things like that. When you talk to other ceos, not just in your industry, what are they worried about today . Political divisiveness in washington, the inflation, high Interest Rates, what are people most worried about . Peter i think those three always come up. The geopolitical environment, i also think state sponsored cyber attacks, and what does that do to a company . All of that i