david: this is my kitchen table and it's also my filing system. over much of the past three decades i have been an investor.

the highest calling of mankind i've often thought was private equity. and then, i started interviewing. i watched your interview so i know how to do some interviews. i've learned from doing my interviews how leaders make it to the top. >> 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 don't 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 $183 billion bailout from the u.s. government. that bailout has now been repaid with interest. 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 to talk about the new aig. for those who aren't familiar with the property and casual -- casualty insurers, what do they

do? peter: we ensure businesses. small, medium, large businesses for 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 lloyd's syndicate and we are a big part of lloyd's as well. david: as i understand the insurance business there are two parts to it. one is the part of assessing the risk and charging premiums that hopefully, from the insurer's point of view, cover the risk. the second is taking the premiums and investing it, hopefully getting a good rate of return. let's 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 someone's home or property? peter: the property company is more complicated to get the underwriting right than the investment side. you're 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: somebody says climate change is not really here. they haven't talked to a property and casual insurer. is that right question mark peter: that is correct. that is true. five out of the last six years we've 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. it's also a great opportunity to serve businesses better in terms of call centers in 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 it's also going to present risks that other companies, how they use it and how they use large language models and making sure the decision-making is very sound. so it's complicated but it is definitely benefiting the business. david: the insurance industry has a reputation, maybe undeserved -- let's say, somebody has a claim, their house burned down on the insurance adjuster says, it really wasn't worth as much as you think are the damages and as great. is that a big problem anymore or is that an unfair image? peter: i think it's an unfair image. i think it probably perhaps was true years ago. but today, the contracts are much more clear. paying claims, that's 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 don't think that's 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? peter: yes. that has not been aig's 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: let's talk about investment income. you bring in these premiums and all insurers invest and you get great people 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 on very conservatively. we are not going to win 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 can't put too much money in private equity, right? your investment professionals cannot put too much money in that area, right question mark 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? peter: the business is making underwriting profit and it's on the investment side. david: it's often said lloyd's of london would insure almost anything. are there things you won't ensure if somebody says i'm worried about my wedding being

rained out or something like that? is there any kind of insurance you won't 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 don't reflect the way lloyd's can insure almost anything. it's 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 people's homes? peter: complexity has been the density built up in areas with 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 make it up, $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 and 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. do you do automobile insurance? is that a risky business to be in these days? are drivers getting better or what about people who don't have cars that don't 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, it's 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 haven't had to have a claim. i don't think i would. ♪

david: let's 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 eye would happen? peter: it didn't. 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 at a coming called the hartford owned by itt. it did offer me a job. i thought would do training elsewhere to come back to boston, that's 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 aren't 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 do not think i could work in new york city, which is 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. 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 didn't 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 didn't 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 i've 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 the 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: that was paid back well before i arrived. 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 high-risk 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 wasn't in as good a shape as it appears to be now, so what did you do to turn it around and what are you most proud of having achieved in your time as ceo so far? peter: the thing i'm 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. the financial performance started to manifest itself from the efforts that we made on the underwriting side and the operation side. it's been a tremendous effort. david: you are now pretty much in the pnc business, property and casualty. you are getting out of life insurance, explain why the life insurance business wouldn't be a better business. you know people will die, it's predictable. actuaries tell you when they will die. why is that business not as good as the property and casualty business? peter: it's 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 don't 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 really business to business. we source our business through that distribution channel. so less advertising to the end consumer has limited value in the products we underwrite. david: today, the insurance business in the united states, would you say it's a healthy business? peter: i would. balance is strong, returns are good and there is positive momentum. david: you see a lot about what's 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 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 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's health care and tech. so seeing consumer spending and driving sales through retail is something we watch frequently. david: what percentage of your business are overseas and what percent is in the united states? peter: it's about 50-50. david: what are the number of employees are have now question mark 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? these spend time in washington? peter: i 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? 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. 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 d.c., the inflation, high interest rates, what are people most worried about? peter: i think those three always come up. the geopolitical environment, state sponsored cyber attacks, what does that do to a company? all of that is getting a lot of attention.

it doesn't matter the industry. it has this impact. i think also global expansion. resistance for acquisitions and support for companies to be able to acquire big businesses outside of the united states gets challenging as well. david: why should someone come in the insurance business? what makes it exciting? peter: i think it's an industry that does not get its full credit for all that it does. we show up in moments that are really critical for our customers and clients. ♪

david: as we talk today there are lots of problems around the world. one of them is what's going on in israel, another is ukraine. how do you assess those risks? did you ever provide insurance to people in ukraine? peter: we had a business in russia prior to the

russia-ukraine conflict. we do not have a big business in ukraine. but through lloyds, we did have exposure to some classes of business through the war. assessing that is very complicated. one that you need to manage how much you are going to underwrite a specific class that could have political violence or a war or terrorism. david: let's suppose i own a big factory, semiconductor chip factory in taiwan and i say to you, i want to get some insurance against the possibility that china might invade and destroy or take over my plant. is that the kind of thing you would do or is that too risky? peter: that would be too risky. there are some portions of what we call political violence coverage, but in areas where we know there is an exposure, it gets very hard to underwrite that. and so we would have very limited capacity to do something like that. david: you don't provide war

insurance then, pretty much. peter: no. david: do you provide flood insurance? i have a home in nantucket, i'm always worried of when the flood will come. is it hard to get? peter: it's hard to get but we do provide flood insurance. as does the government. david: what's the fastest growing area of insurance? what are people most interested in, home insurance? peter: home insurance is a more complicated one across the united states. i think one of the biggest growing areas is what we call excess and surplus lines, it's a market that sits alongside the regulated market. that has been growing significantly across the industry, as well as for aig. david: what has been the biggest challenge for the insurance industry over the last five or 10 years? peter: i think it's understanding the unpredictable risks of whether it was the pandemic, understanding what could happen with potential war break out. but also climate change. as i said before, having that

type of hurricane activity -- we've had 100 natural disasters reported through nine months of this year. that just hasn't happened in the past. david: so if i'm trying to learn the insurance business, what's the most important thing to assess if an industry is a good industry to invest in? what should people like me look at? peter: i always think depending on how sophisticated the person is looking at it, is the strength of the balance sheet, the consistency of performance is really important. because if you get surprises from catastrophes or other variables, it's very hard to predict what will happen with that insurance company in the future. then i look at the leadership in terms of the track record and developing business that have sustainable long-term profitability. david: the insurance business has been historically a strong one in the united states. are we still the leader in global insurance or are there companies outside the united states that are more significant now? peter: very big companies in china. very big in japan market and big companies market cap-wise in

europe. i think those of the four areas, including the united states, that have very large market cap multinational insurance companies. david: today in aig, what is the biggest challenge you face as the ceo of aig? what are you most worried about? peter: well, all of what is happening geopolitically. we have just come out of the pandemic. the complexities across the world and the fragility of what might happen in the future is what i worry about the most. there are things -- if you told me five years ago you are going to come in and be the ceo and deal with a global pandemic, two wars, potential political tension across the world, and also dealing with financial challenges, that is a lot. and so making sure that we focus and deliver on what we can do as an insurance company and adapt to all the changes going on around us. david: for young professionals who might be watching and say,

i'm looking for a job, maybe i should get in the insurance business, what makes it so exciting? peter: i think our purpose and what we do for a living is very meaningful. we keep businesses, societies, cities moving after natural disasters or moving claims and allowing companies to build. a lot of times, in order to lend you need to have insurance. and so i think it's an industry that does not get its full credit for all that it does. and i think our purpose is incredibly meaningful and we show up in moments that are really critical for our customers and clients. david: you have done a good job of dealing with a complicated situation because aig has been at a turnaround around ever since the government bailout. i guess i would call it a bailout. today, you would say it's financial shape is pretty good? peter: i think it's very good. the progress that we've made again with having so many tremendous people here that have had a single purpose of putting

aig back to being an industry leader, that we've strengthened every component of the company, the balance sheet, underwriting capabilities, our investment portfolio is simpler, the company is simpler, operations are streamlined. so i think we've made enormous progress and i feel like we have a lot to do still. ♪

leena: you always look different because you are the first woman, first brown person, the first asian, the first first indian, the first person of color to lead a luxury brand. you're always the first and you are always underestimated. people do not know what to