Company Reports

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We think some poor management decisions in the years following the crisis extended the company's issues, but results have changed for the better in recent years as the company found competent management. We are encouraged by the progress the company has made in improving underwriting margins, and management's efforts to reduce costs have been another material step. With AIG's stake in its former life insurance operations now eliminated, we think the progress the company has made on the P&C side is clearer.

Overall, AIG's second-quarter results showed a bit of a stall on its path toward better returns, but results were well within the level of quarterly variation we've come to expect.

The first quarter saw AIG continue to inch its way toward better returns. Underwriting results improved, and the company got more aggressive in terms of growth.

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We think some poor management decisions in the years following the crisis extended the company's issues, but results have changed for the better under recent management. We are encouraged by the progress the company has made in improving underwriting margins, and management's efforts to reduce costs have been another material step. With AIG's stake in its former life insurance operations reduced to a point where those operations were deconsolidated from its results, we think the progress the company has made on the P&C side is clearer.

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We think some poor management decisions in the years following the crisis extended the company's issues, but results have changed for the better under recent management. We are encouraged by the progress the company has made in improving underwriting margins, and management's efforts to reduce costs have been another material step. With AIG's stake in its former life insurance operations reduced to a point where those operations were deconsolidated from its results, we think the progress the company has made on the P&C side are more clear.

American International Group's fourth-quarter results were solid, with an annualized adjusted return on equity of 12%, leading to a full-year return level of 11%.

AIG announced that Peter Zaffino will step down as CEO by midyear.

AIG has seen its results improve in 2025 and that remained the case in the third quarter, with lower catastrophe losses providing an additional boost to ongoing industry tailwinds.

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We think some poor management decisions in the years following the crisis extended the company's issues, but results have changed for the better under currrent management. We are encouraged by the progress in terms of improving underwriting margins, and management's efforts to reduce costs have been another material step. With AIG's stake in its former life insurance operations reduced to a point where those operations were deconsolidated from its results, we think the progress the company has made on the P&C side should become clearer.

AIG bounced back in the second quarter to deliver a relatively strong return.

Higher catastrophe losses lowered underwriting profits, but underlying results remain favorable, in our view.

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We think some poor management decisions in the years following the crisis extended the company's issues, but results have changed for the better under currrent management. We are encouraged by the recent progress in terms of improving underwriting margins, and management's efforts to reduce costs have been another material step.

AIG largely maintained its recent path in the fourth quarter. The annualized core operating return on equity was 9% in the quarter, in line with the result for the full year. While we are pleased to see the company show an ability to consistently generate an acceptable return, we would like to see AIG start to generate stronger returns amid very favorable market conditions. We will maintain our $75 fair value estimate for the no-moat company and see shares as about fairly valued at the moment.

Loss estimates from the fires in the Los Angeles area appear to be increasing. Morningstar DBRS previously estimated over $8 billion in insured losses, but we have seen larger estimates rolling in as the fires have remained largely uncontained. Early loss estimates from natural disasters are often imprecise, but it seems clear that this will be a meaningful loss event for the industry. Still, it appears losses will be manageable and will fall short of the losses the industry sees from large hurricanes. For context, Hurricane Katrina led to about $100 billion in insured losses in today’s dollars, according to Aon.

In recent quarters, American International Group has pushed itself to the point where it is earning an acceptable return and the recent deconsolidation of its Corebridge stake provides a clearer view of the state of its P&C operations. The core annualized ROE for the third quarter was 9%, in line with recent results. Overall, we are pleased with the company’s recent improvement but would like to see AIG now take advantage of current industry tailwinds to push past just an acceptable return. We will maintain our $75 fair value estimate for the no-moat company and see shares as about fairly valued at the moment.

The years since the financial crisis have shown that American International Group would have destroyed substantial value even if it had never written a single credit default swap. The business had noncore businesses it needed to shed and had material issues in its core operations that it needed to fix. We've been encouraged, however, by the recent progress in terms of improving underwriting margins, and management's efforts to reduce costs have been another material step.

Over the past year, AIG has demonstrated its ability to start earning acceptable returns. The core annualized ROE for the second quarter came in at 9%, which is a slight step back from recent results, but still acceptable, in our view. We hesitate to make too much of a moderate quarterly deviation, and the metrics we are focused on stayed strong in the quarter. We will maintain our $72 per share fair value estimate and see shares as about fairly valued at the moment.

AIG announced that it will sell its personal travel insurance business to Zurich Insurance Group for $600 million, plus an earn-out provision. While we don’t hold a negative view of the travel insurance business, we think AIG’s P&C operations are overly diversified and view efforts to focus the business positively. AIG has made major strides in improving its underwriting performance in recent years and has largely closed the gap between its peers. But as currently constructed, we think it would be difficult for AIG to develop a moat. We believe the best chance of this would be to focus on specialty commercial lines, and reducing the size of personal line operations would be a step in this direction. The deal is too small to have a material impact on our $72 fair value estimate, which we will maintain. We see shares as roughly fairly valued at the moment.

Higher interest rates have boosted investment income and have had a material positive impact on overall returns for our domestic property-casualty insurance coverage. While insurers with low fixed-income duration have seen the largest impact, the effect has flowed through our coverage. Interest rates and investment income are only part of the story for insurers, but the outlook for underwriting is strong as well, in our view. Following a few years of solid price increases, commercial insurers have seen underwriting margins stabilize at an attractive level. Personal auto insurers have endured some difficulties recently, but strong pricing increases have improved combined ratios. With both sides of the profit picture already strong or improving, we expect our P&C insurers to generate unusually attractive results in the near term. However, we believe the market has overreacted to these tailwinds, and we see our coverage as generally overvalued. Investigating historical underwriting results for a P&C insurance peer group strongly suggests that underwriting results adjust over time to changes in interest rates, and underwriting margins have improved over the past few decades as interest rates fell. If interest rates stay high, we expect underwriting margins will compress, and returns will normalize. Our fair value estimates hinge on the idea that returns for our coverage will ultimately return to a level roughly in line with historical averages. If the industry does mean-revert over the next few years, investors will pay an overly rich price today for most of our coverage.

American International Group announced that it has reached an agreement to sell a 20% stake in Corebridge, its life insurance operations, to Nippon Life. The aggregate price will be $3.8 billion, in line with the current market price for Corebridge’s shares. AIG had previously said that it expected to reduce its ownership to a point where it could deconsolidate the life segment in 2024, but this transaction is not expected to close until the first quarter of 2025, so possibly further share sales will be completed this year. Including this sale, AIG would hold a little over a 30% stake in Corebridge. We would like to see AIG deconsolidate Corebridge as quickly as possible in order to simplify the company’s reporting and increase transparency. While we are encouraged by the sale, one of the terms of the deal is that AIG will maintain a 9.9% stake in Corebridge for at least two years. We would like to see AIG fully divest from Corebridge and see this commitment as a negative. We will maintain our $72 fair value estimate for the no-moat company and see the shares as modestly overvalued.