AIG delivered an outstanding end to 2025, reporting Q4 adjusted EPS of $1.96 (up 51% YoY) and full-year adjusted EPS of $7.09 (up 43% YoY). The company achieved a core operating ROE of 11.1%, a 200-basis point improvement and its first above 10% in over a decade, driven by a record $2.3 billion in underwriting income. Strategic execution was highlighted by the successful conversion of the Everest renewal rights portfolio (75% retention in Jan), a transformative investment in Convex Group, and continued GenAI deployment driving efficiency. Management guided for low-to-mid teens net premiums written growth in General Insurance for 2026 and maintained a disciplined capital return strategy, returning $6.8 billion in 2025 with plans for at least $1 billion in repurchases in 2026 plus proceeds from the remaining Corebridge stake sale.
| Metric | Value | Change |
|---|---|---|
| Q4 Adjusted EPS | $1.96 | +51% YoY |
| FY 2025 Adjusted EPS | $7.09 | +43% YoY |
| Q4 Underwriting Income | $670 million | +48% YoY |
| FY 2025 Underwriting Income | $2.3 billion | +22% YoY |
| Core Operating ROE | 11.1% | +200 bps YoY |
| Q4 Accident Year Combined Ratio | 88.9% | Sub-90% for 17th quarter |
| FY 2025 Calendar Year Combined Ratio | 90.1% | -170 bps YoY |
| Book Value per Share | $76.44 | +9% YoY |
| Total Capital Return (FY 2025) | $6.8 billion | $5.8B buybacks + $1B dividends |
| General Insurance NPW Growth (FY 2025) | 2% | Organic + Adjusted |
AIG is aggressively leveraging third-party capital and strategic partnerships to drive growth without straining its balance sheet. The investment in Convex Group (35% equity stake) and the associated quota share arrangement (starting at 7.5% and rising to 12.5%) provides immediate earnings accretion and capacity expansion. Similarly, the launch of Syndicate 2479 with Amwins and Blackstone ($300M capacity) demonstrates a differentiated model for portfolio underwriting. These deals are expected to be more accretive in 2026 and 2027 than standard share repurchases, signaling a shift toward capital-efficient external growth vehicles.
The integration of GenAI has moved beyond experimentation to become a core operational driver. Management highlighted the deployment of 'Underwriting by AIG Assist' and 'Claims by AIG Assist,' which contributed to a 26% increase in submission count in the Lexington business. The development of an 'orchestration layer' to coordinate AI agents represents a significant technological moat, allowing AIG to process higher volumes (370k submissions vs 500k target) without proportional headcount increases. This technology was also critical in the rapid integration of the Everest portfolio.
The January 1, 2026 reinsurance renewals resulted in a highly favorable environment for AIG, with property catastrophe rates decreasing by over 15% while maintaining attachment points. This 'buying low' strategy allows AIG to retain more profit on the primary side. The successful renewal of the Everest quota share and the integration of that portfolio into AIG's reinsurance treaties at a lower cost demonstrate the company's ability to use its scale to negotiate superior terms compared to smaller competitors.
Management is executing a disciplined capital management strategy that prioritizes shareholder returns while de-risking the legacy portfolio. The waiver of the 9.9% retention requirement by Nippon Life allows AIG to monetize its remaining 10.1% stake in Corebridge in 2026, with proceeds expected to be largely deployed to share repurchases. With $6.8 billion returned in 2025 and a dividend increased by 12.5%, AIG is balancing aggressive buybacks with investments in high-growth, high-ROE initiatives like the Convex partnership.
The North America property market is experiencing significant softening, with retail property pricing down 10% and excess and surplus lines down 13% for the full year. While management maintains discipline, this competitive pressure led to an 8% contraction in North America retail property premiums. If this softening persists or spreads to other lines, it could pressure future top-line growth and combined ratios, particularly if competitors sacrifice underwriting standards for market share.
Management explicitly noted the addition of 'extra margin' to casualty loss picks due to macro uncertainties like social inflation and rising litigation costs. While this conservatism is prudent now, it indicates underlying concerns about long-tail reserve adequacy. The accident year loss ratio increased 100 basis points in North America Commercial, partly driven by this increased prudence and a shift in business mix toward higher-loss-ratio casualty business.
The transition in the CEO role, with Peter Zaffino moving to Executive Chairman and Eric Anderson (ex-Aon) joining as CEO-elect, introduces execution risk. While Zaffino will remain involved, a change in leadership at a company undergoing a complex technological and strategic transformation could lead to shifts in strategic priorities or operational tempo. Investors will be watching closely to ensure the momentum on GenAI and expense reduction continues unabated.
The expense ratio ended the year at 31.1%, and while management is confident in reaching the sub-30% target by 2027, the Q4 expense ratio was elevated (32.1%) due to the absorption of corporate parent expenses. The 'lean parent' initiative is complete, but the company must now demonstrate sustainable expense reduction through operational efficiencies (AI) rather than just cost reallocation to meet its aggressive targets.
Overall: Management exhibited a high degree of confidence and authority throughout the call, frequently characterizing results as 'excellent,' 'outstanding,' and 'exceptional.' Peter Zaffino was particularly emphatic about the company's strategic positioning and technological advancements, while Keith Walsh provided detailed, data-driven support for the financial improvements. The tone shifted slightly to a more defensive yet assured posture regarding the softening property market, emphasizing discipline over volume. The leadership transition announcement was handled with a focus on continuity and strength.
Confidence: HIGH
Low to mid-teens growth in General Insurance
At least $1 billion, plus majority of Corebridge monetization proceeds
Sub-30% by 2027 (currently 31.1%)
Purchase price adjusted to ~$270M; 75% retention achieved in Jan
Expected to be accretive to earnings within 2026
Hedging & Uncertainty: Management generally used direct and assertive language ('We delivered,' 'We achieved'), but employed hedging when discussing forward-looking guidance and market volatility. Phrases like 'subject to market conditions,' 'we expect,' and 'we believe' were used to frame the 2026 outlook for Corebridge sales and premium growth. However, regarding operational execution, hedging was minimal; for instance, Zaffino stated, 'We will get there' regarding the expense ratio target. The use of 'conservative' regarding loss picks serves as a linguistic hedge against future reserve deterioration, framing prudence as a current strength.
"2025 was the first year since 2008 that we delivered greater than $2 billion in underwriting income... an important milestone." - Peter Zaffino, Chairman and CEO
"We're being conservative in our accident year picks, putting extra margin in for our longer tail lines." - Keith Walsh, CFO
"For the full year 2026, we expect low to mid-teens net premiums written growth in general insurance." - Peter Zaffino, Chairman and CEO
"We are not an index for the market. If I saw our risk-adjusted returns exactly the same as the market... I'd be very disappointed." - Jon Hancock, CEO of International Commercial
"I think the acceleration and the opportunity is greater than I thought at Investor Day." - Peter Zaffino, Chairman and CEO
Analyst Sentiment: Analysts were highly engaged, focusing heavily on the sustainability of the strong underwriting performance, the mechanics of the expense ratio reduction, and the practical implementation of the GenAI strategy. Questions were generally constructive, probing for details on the 'low to mid-teens' growth guidance and the mix of organic versus inorganic drivers.
Management Responses: Management responses were detailed and confident, particularly from Peter Zaffino and Keith Walsh. They deflected specific requests for granular guidance breakdowns (e.g., organic vs. inorganic growth mix) but provided strong qualitative support for their targets. The team used the Q&A to reinforce the discipline being applied amidst the softening property market.
Expense Ratio Trajectory: Analysts sought clarity on the path to the sub-30% target. Management emphasized that 2026 comparisons would be favorable as the 'lean parent' expense push is complete, and AI efficiencies will kick in.
AI Implementation: Questions focused on the orchestration layer and tangible benefits. Management highlighted 'force multipliers' and specific productivity gains (e.g., 26% increase in submissions in Lexington).
Reserve Adequacy: Analysts asked about 'additional margin' in casualty. Management clarified this was a conservative hedge against social inflation, not a reaction to specific portfolio deterioration.
Capital Deployment: Clarification that the $1B buyback guidance is a floor, and Corebridge proceeds will likely augment this number significantly.
AIG has successfully completed its multi-year turnaround, transforming into a lean, disciplined underwriter with a double-digit ROE (11.1%). The investment thesis is driven by three core pillars: 1) Operational Excellence, evidenced by 17 consecutive quarters of sub-90% combined ratios and a clear path to a sub-30% expense ratio via GenAI; 2) Strategic Capital Deployment, utilizing the Corebridge monetization to fund buybacks and high-ROE acquisitions like the Convex partnership; and 3) Technological Differentiation, where the 'Underwriting by AIG Assist' platform is driving submission growth and efficiency gains that competitors will struggle to replicate quickly. While the softening property market presents a headwind, AIG's disciplined risk appetite and strength in casualty and specialty lines position it to outperform. The leadership transition to Eric Anderson is a wildcard, but the handover appears structured to maintain strategic momentum. We view the current valuation as attractive given the double-digit EPS growth and aggressive capital return profile.
The reinsurance market saw increased capacity due to benign cat losses in H2 2025, leading to a 'favorable renewal environment' with rate decreases of >15% on property catastrophe while maintaining attachment points.
North America property pricing is softening significantly (-10% to -13%), driven by abundant capacity and competition. However, casualty pricing remains favorable (+6% to +15%), creating a divergent market landscape.
Management cited 'macro uncertainties' specifically regarding social inflation and rising litigation costs, necessitating additional margin in casualty loss picks despite no current deterioration in the specific portfolio.