Executive Summary / Key Takeaways

• AIG's seven-year transformation into a focused General Insurance pure-play has fundamentally altered its risk/reward profile, delivering 16 consecutive quarters of sub-90% accident year combined ratios and a core operating ROE that reached 13.6% in Q3 2025—430 basis points higher than the prior year.

• The Corebridge deconsolidation in June 2024 was a watershed moment that streamlined operations and unlocked capital, enabling over $5.3 billion in share repurchases through Q3 2025 while maintaining parent liquidity of $8.3 billion, demonstrating a disciplined capital structure that can now be redeployed into accretive growth.

• GenAI is not experimental theater but a deployed margin accelerator: Underwriter Assist processes 100% of submissions in North America Financial Lines, increasing submit-to-buy ratios, while Claims Assist reduces cycle times from days to hours, directly addressing the expense ratio challenge that has historically plagued the industry.

• Strategic investments in Convex Group (35% stake) and Everest renewal rights ($2B premium portfolio) represent a new playbook—using the fortress balance sheet to acquire underwriting capabilities and market access at attractive returns, with management explicitly stating these will be earnings and ROE accretive in year one.

• The critical swing factor is execution: while North America Commercial and International Commercial are firing on all cylinders, Global Personal still operates above a 100% combined ratio, and the 94% combined ratio target over three years will determine whether AIG achieves its 20%+ EPS CAGR ambition or remains a laggard in personal lines.

Setting the Scene: The New AIG

American International Group, founded in 1919 in Shanghai and now headquartered in New York, has spent the past seven years dismantling the complexity that nearly destroyed it during the financial crisis. What emerged is not the sprawling financial conglomerate of old, but a disciplined General Insurance pure-play with three focused segments: North America Commercial, International Commercial, and Global Personal. This transforms AIG from a black box of financial engineering into a transparent underwriting machine where investors can actually track risk-adjusted returns by line of business.

The company makes money through two primary levers: underwriting profit (premiums collected minus claims and expenses) and investment income on its $85 billion fixed maturity and loan portfolio. The magic happens when both levers pull in the same direction. In Q3 2025, underwriting income surged 81% year-over-year to $793 million while net investment income rose 15% to $1 billion, creating a combined adjusted pre-tax income of $1.7 billion—up 44% from the prior year. This dual-engine acceleration is the direct result of strategic choices made years ago, choices that are only now showing up in the financial statements.

AIG sits in an industry structure defined by capital intensity and cyclical pricing power. The global commercial P&C market exceeds $800 billion in premiums, with specialty lines growing at mid-single digits and personal lines facing pressure from insurtech disruption. AIG's positioning is unique: it competes with Chubb and Travelers in U.S. commercial, but maintains a broader international footprint that captures emerging market growth through ventures like Tata AIG in India. The key differentiator is AIG's ability to underwrite complex, volatile risks—property catastrophe, excess casualty, financial lines—while using reinsurance to smooth earnings volatility. This creates a moat that pure-play domestic insurers cannot easily replicate.

History with Purpose: From Complexity to Clarity

The Corebridge deconsolidation was not merely a divestiture; it was a strategic amputation that saved the patient. Beginning with the 9.9% sale to Blackstone in 2021 and culminating in the Nippon Life transaction in Q4 2024, this multi-year journey removed a capital-intensive life insurance business that obscured AIG's true earnings power. The June 9, 2024 deconsolidation date matters because it marks the moment AIG's financial statements became legible again—no more opaque reserve movements or interest rate sensitivity masking underwriting performance.

This simplification enabled the AIG Next initiative, launched in late 2023, which delivered over $530 million in annual run-rate expense savings by Q2 2025—ahead of schedule. Why does this matter? Because it proves management can execute operational turnarounds while simultaneously improving underwriting results. The expense ratio fell to 30.9% in Q3 2025, a 100 basis point improvement year-over-year, demonstrating that leaner operations don't require sacrificing growth. The reorganization into three distinct business segments created accountability: each segment leader now owns their combined ratio, capital allocation, and growth trajectory.

The historical context of AIG's near-collapse during the financial crisis still shadows investor perception, but it also created the urgency for today's discipline. The company that once bet its balance sheet on credit default swaps now maintains excess of loss attachment points that are 280% higher than a decade ago, retaining more risk but in a controlled, modeled manner. This transformation from risk-taker to risk-manager is the single most important legacy of the past 15 years—it means the volatility that historically made AIG uninvestable has been engineered out of the business.

Technology and Strategic Differentiation: The Underwriting-Technology Flywheel

AIG's GenAI strategy is not a side project; it's a core underwriting weapon. Underwriter Assist, deployed in North America Financial Lines and Lexington middle market, processes 100% of applicable submissions and measurably increases the submit-to-buy ratio. This directly attacks the industry's biggest cost center: underwriting labor. In a market where experienced underwriters are retiring and talent is scarce, AI that can read submissions, extract structured data from unstructured text, and pre-qualify risks is not just efficient—it's existential.

The patent-pending "Auto Extract" capability uses large language models to pull specific information from multiple formats, websites, and conversations. Combined with the ability to ingest Schedule P data for over 225 U.S. insurers, AIG can now benchmark its loss ratios and reserve development against the entire market in real-time. This creates an information asymmetry that competitors cannot match. When AIG sees a line of business where competitors are under-reserving, it can pull back; when it sees margin expansion opportunities, it can deploy capital aggressively. This data advantage is the modern equivalent of Lloyd's coffeehouse intelligence network.

The reinsurance strategy amplifies this technological edge. By maintaining lower excess of loss attachment points and meaningful aggregate coverage , AIG protects itself from frequency risk while retaining the most profitable layers of risk. The launch of Reinsurance Syndicate 2478 at Lloyd's with Blackstone (BX), which began underwriting on January 1, 2025, provides a long-term partner and additional fee income. This transformation of reinsurance from a cost center into a strategic asset gives AIG capacity to write more business in hard markets while competitors are capacity-constrained.

Financial Performance: The Numbers Tell a Story of Execution

North America Commercial is the crown jewel, delivering $384 million in underwriting income in Q3 2025—up 300% year-over-year—with a combined ratio of 82.6%. The flat net premiums written (down 0.4%) is misleading; adjusting for a prior-year casualty closeout, growth was actually 3%, driven by Programs (+27%), Western World (+11%), and Excess Casualty (+8%). This mix shift is significant because these are high-margin, non-commoditized lines where AIG's expertise commands pricing power. The 10% decline in Retail Property and 8% drop in Lexington Property due to rate pressure is not a weakness—it's discipline. AIG is walking away from underpriced risk, a behavior that would have been unthinkable in the old growth-at-any-cost culture.

International Commercial posted more modest results: $330 million in underwriting income (up 3%) with a combined ratio of 84.9% that deteriorated 60 basis points. However, the new business story is compelling—Specialty up 17% year-over-year, Marine up 35%, Energy up 30%. Jon Hancock's comment that International Property combined ratios are "some of the best I've seen in my career" signals that this segment is performing at peak levels. The 1% NPW growth masks a portfolio being actively rebalanced toward better risks, a strategy that will pay dividends when the market turns.

Global Personal remains the problem child, with NPW down 11% in Q3 and a combined ratio of 95.2% (though improved 360 basis points). The high-net-worth quota share treaty entered January 1, 2025, improved profitability but hurt premium growth—a deliberate trade-off. Peter Zaffino's target of a 94% combined ratio over three years is the single most important operational metric to watch. If AIG can fix Global Personal and achieve this target, the earnings leverage is enormous; if it can't, the segment will continue to be a drag on ROE.

The investment portfolio is quietly delivering. The average new money yield was 95 basis points higher than sales and maturities, with an annualized yield of 4.58%—a 69 basis point improvement. Alternative investment income jumped to $137 million (13.6% yield) from $43 million (4.3% yield) prior year. This demonstrates that AIG is not just an underwriting story; the $85 billion portfolio is becoming a meaningful earnings driver as rates remain elevated. Management's plan to increase private credit allocation from 8% to 12-15% over time suggests further yield enhancement is coming.

Outlook, Guidance, and Execution Risk

Management's guidance is unusually specific and ambitious: 20%+ EPS CAGR over three years, Corebridge earnings fully replaced by 2026, and a General Insurance expense ratio below 30% by 2027. The company is "well on track" to achieve 10%+ core operating ROE for full-year 2025, with year-to-date ROE of 10.9% already within the 10-13% Investor Day range. This indicates management is not sandbagging—they're confident enough to set public targets they intend to beat.

The strategic investments in Convex Group and Onex (ONEX) are projected to be earnings, EPS, and ROE accretive in the first year post-closing. The Convex whole account quota share, starting at 7.5% and rising to 12.5% by 2028, gives AIG access to a best-in-class specialty underwriting platform without the integration risk of a full acquisition. The Everest renewal rights, representing $2 billion in gross premiums with no legacy liabilities, is a classic AIG move—acquiring distribution and talent without balance sheet baggage. These deals show capital deployment discipline that was absent in the pre-crisis era.

The execution risk is real. Global Personal's combined ratio target requires flawless underwriting actions, rate adequacy, and reinsurance restructuring. The California wildfire exposure, while mitigated by reduced exposure and effective reinsurance, demonstrates that even the best models can't eliminate catastrophe risk. And the strategic investments, while accretive on paper, require integration of new teams and cultures—a process that has tripped up many insurers.

Risks and Asymmetries: What Can Break the Thesis

Social inflation in casualty lines is not a theoretical risk—it's a long-term margin pressure that AIG acknowledges requires constant vigilance. The company's excess casualty and retail casualty businesses grew 19% in Q2 2025, but these are long-tail lines where reserves can develop adversely for years. The fact that AIG's casualty reinsurance structure provides "significant protection for severity" is crucial, but if social inflation accelerates beyond modeled expectations, net losses could surprise.

The property market's rate pressure is another asymmetry. While AIG's disciplined underwriting has transformed property into "one of its most profitable lines," the 10-15% rate reductions on upper catastrophe layers in reinsurance renewals signal a softening market. AIG's ability to "pivot quickly when market conditions warrant" is tested in soft markets—history shows many insurers chase premium volume at the expense of margin. The next 12 months will prove whether AIG's discipline is structural or cyclical.

Technology execution risk is underappreciated. While Underwriter Assist is deployed and working, the accelerated rollout across all commercial lines by mid-2026 is aggressive. If the AI models produce errors or miss risks, the submit-to-buy ratio gains could reverse, and underwriters may lose trust in the system. The patent-pending "Auto Extract" capability is promising, but it's still patent-pending—competitors are racing to build similar tools.

Competitive Context: AIG's Position in the Pecking Order

Against Chubb , AIG is the scrappy challenger. Chubb's Q3 2025 combined ratio of 81.8% and core operating ROTE of 24.5% set the gold standard. AIG's 86.8% combined ratio and 13.6% ROE are respectable but not elite. However, AIG's 77% EPS growth in Q3 versus Chubb's 30.9% suggests AIG is on a steeper trajectory. The key difference: Chubb has scale and efficiency, while AIG has momentum and a cleaner post-transformation story. For investors, this means AIG offers more torque in a hard market but less defensibility in a soft one.

Travelers presents a different comparison. With core ROE of 22.6% and a focus on U.S. middle-market commercial, Travelers is the disciplined incumbent AIG aspires to match in North America. AIG's international diversification is its advantage—when U.S. property rates soften, AIG can pivot to Japan (where property rates were up 16%) or Marine (growing 35%). Travelers lacks this flexibility, making AIG a better play on global specialty market cycles.

The life insurers (Prudential and MetLife ) are less direct competitors but useful benchmarks. AIG's 13.6% core ROE matches MetLife's (MET) 12.8% and trails Prudential's (PRU) >15%, but AIG's 77% EPS growth dramatically outpaces both. The key insight: AIG has replaced the stable but low-growth earnings from life insurance with volatile but high-growth underwriting profits, creating a more cyclical but higher-return business model.

Valuation Context: Pricing the Transformation

At $76.16 per share, AIG trades at 1.01x book value of $75.46 and 13.7x trailing earnings. This suggests the market is pricing AIG as a mediocre insurer despite evidence of fundamental improvement. The forward P/E of 11.35 implies skepticism about earnings sustainability, while the 2.36% dividend yield with a 30.58% payout ratio shows capital return discipline.

The valuation gap with peers is instructive. Chubb (CB) trades at 1.63x book and 12.4x earnings despite slower growth. Travelers (TRV) commands 2.07x book and 11.5x earnings with higher ROE. AIG's discount reflects its history—the market remembers the crisis and demands proof that the transformation is permanent. For investors, this creates asymmetry: if AIG hits its 20%+ EPS CAGR and sustains sub-90% combined ratios, multiple expansion could add 50% to returns beyond earnings growth.

The balance sheet supports this optimism. Debt-to-equity of 0.22 is conservative, and the 18% debt-to-total-capital ratio gives AIG firepower for acquisitions or buybacks. The $8.3 billion parent liquidity means the company can weather multiple quarters of elevated cat losses without tapping markets—a flexibility that was absent in prior cycles.

Conclusion: The Focus Premium

AIG's story is no longer about survival or complexity—it's about execution of a focused strategy. The deconsolidation of Corebridge, completion of AIG Next, and deployment of GenAI have created a General Insurance pure-play with 16 consecutive quarters of underwriting excellence and a clear path to 20%+ EPS growth. The strategic investments in Convex Group and Everest (RE) signal management's confidence in deploying capital at attractive returns, while the fortress balance sheet provides downside protection.

The investment thesis hinges on two variables: Global Personal's turnaround and the durability of commercial lines pricing. If AIG delivers the 94% combined ratio target in Global Personal and maintains discipline in softening property markets, the stock's 1.01x book valuation will look like a bargain. If not, the transformation remains incomplete. For investors willing to bet on execution, AIG offers a rare combination of margin momentum, capital return, and valuation support in an industry where most players are fully valued. The next 18 months will determine whether AIG earns the focus premium it believes it deserves.