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AMERICAN INTERNATIONAL GROUP, INC. (AIG)·Q2 2025 Earnings Summary

Executive Summary

  • Adjusted EPS (AATI/diluted) of $1.81 beat S&P Global consensus of $1.60 by ~13%, with GAAP diluted EPS of $1.98; General Insurance combined ratio improved to 89.3% from 95.8% in Q1 on lower CATs, favorable PYD, and higher underwriting income . EPS consensus: $1.60*; revenue beat as well: $7.06B actual vs $6.85B estimate*.
  • Underwriting income rose 46% YoY to $626M and GI APTI increased 27% YoY; CAT losses were $170M (2.9 pts) vs $330M (5.7 pts) in Q2’24, driving the ratio improvement .
  • Capital return remained aggressive: $2.0B in Q2 ($1.8B buybacks, $254M dividends); debt-to-total capital 17.9%, parent liquidity $4.8B; Board declared a $0.45 dividend, marking a 12.5% increase vs prior quarterly rate .
  • Management expects to be at the high end of its $5–$6B 2025 repurchase range and reaffirmed 10%+ Core Operating ROE for FY25; ratings of key insurance subs were upgraded by S&P (to AA-) and Moody’s (to A1) during the quarter—potential stock catalysts alongside sustained underwriting profitability .

What Went Well and What Went Wrong

  • What Went Well
    • Strong underwriting and lower CATs: GI combined ratio 89.3% (vs 92.5% Q2’24) with underwriting income up 46% YoY to $626M; favorable PYD of $112M supported results . CEO: “AIG delivered an outstanding second quarter… higher underwriting income of $626 million… and disciplined capital management.”
    • Investment income and capital flexibility: Total NII up 48% YoY to $1.5B; on APTI basis $955M (+9% YoY). Parent liquidity $4.8B with debt/capital 17.9% enabling $2.0B Q2 capital return .
    • Execution on efficiency/strategy and AI: AIG Next delivered >$500M run-rate savings ahead of schedule; early GenAI deployment shows 4x submission ingestion and +20% submit-to-bind in pilot; scaling to more lines in H2’25 and 2026 .
  • What Went Wrong
    • Accident-year underlying tightened: AYCR rose to 88.4% (vs 87.6% Q2’24), with CFO noting casualty mix, added conservatism, and “lean parent” expense reapportionment lifting AY loss/expense ratios in NA and International Commercial .
    • Property pricing pressure (US large account) required tempered growth despite strong retention; management highlighted reliance on shared/layered placements and reinsurance to protect profitability .
    • Global Personal still near break-even: CR 98.5% (improved YoY), but NPW down 11% reported (-3% comparable) due to HNW quota share; progress continues but profitability remains less robust than Commercial .

Financial Results

Headline results vs prior quarters and consensus

MetricQ4 2024Q1 2025Q2 2025
Adjusted EPS (AATI/diluted)$1.30 $1.17 $1.81
Adjusted EPS Consensus Mean$1.23*$0.99*$1.60*
GAAP EPS (diluted)$1.43 $1.16 $1.98
Revenue ($B)$7.10*$6.55*$7.06*
Revenue Consensus Mean ($B)$6.74*$6.89*$6.85*
GI Combined Ratio (%)92.5 95.8 89.3
GI Accident-Year CR, as adj. (%)88.6 87.8 88.4
Core Operating ROE (%)9.1 7.7 11.7

Segment performance (Q2 YoY)

Segment KPIQ2 2024Q2 2025
General Insurance NPW ($B)$6.93 $6.88
Underwriting income ($M)$430 $626
Combined ratio (%)92.5 89.3
North America Commercial NPW ($B)$2.75 $2.86
Underwriting income ($M)$191 $301
CR (%) / AYCR (%)90.2 / 84.7 85.9 / 86.2
International Commercial NPW ($B)$2.28 $2.33
Underwriting income ($M)$230 $300
CR (%) / AYCR (%)88.6 / 82.1 85.9 / 85.0
Global Personal NPW ($B)$1.90 $1.69
Underwriting income ($M)$9 $25
CR (%) / AYCR (%)99.4 / 96.8 98.5 / 96.1

Key operating and balance sheet KPIs (Q2 2025)

  • Net investment income: $1.5B total; $955M on APTI basis .
  • CAT losses: $170M (2.9 pts) vs $330M (5.7 pts) in Q2’24 .
  • Favorable PYD: $112M in press; CFO cited $128M favorable including $31M ADC amortization (97M reserve development + 31M ADC) .
  • Capital returned: $2.0B ($1.8B buybacks; $254M dividends); debt/capital 17.9%; parent liquidity $4.8B .
  • Book value per share: $74.14; Adjusted tangible BVPS: $69.81 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Operating ROEFY 202510%+ target reiterated (Q1) “On track” to 10%+ in 2025 Maintained
Share repurchasesFY 2025$5–$6B framework (prior commentary)“At the high end” of $5–$6B, subject to markets Upward bias within range
Quarterly dividendOngoing$0.40 (through Q1’25) $0.45 declared for Q2’25 and payable Sep 30 Raised 12.5%
Parent expense run-rateFY 2025~$350M target On track; GOE pushdown largely complete Maintained/Executing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Property market & reinsuranceQ4: heavy CATs; reinsurance program enhancements incl. new Lloyd’s syndicate 2478 . Q1: elevated CATs (CA wildfires); AYCR best Q1 since crisis .US large-account property pricing down; tempered growth but profitability guarded by shared/layer placements and reinsurance; risk-adjusted reinsurance price decreases offset primary softening .Mixed rates; profitability protected
Casualty/social inflationQ4: NA Commercial growth led by Casualty . Q1: NA Commercial +14% NPW; casualty momentum .NA casualty pricing firming (excess +17%, primary +12%); client “flight to quality” amid social inflation .Improving pricing backdrop
Expense discipline (AIG Next)Ongoing restructuring; parent lean transformation .>$500M run-rate savings realized; expense pushdown into GI, ratio improvement expected to normalize H2 .Executing/benefiting
Ratings/capital2024: leverage down; strong liquidity .S&P to AA-; Moody’s to A1 upgrades of insurance subs; buybacks high end of guide .Positive
AI/technologyInvestor Day setup; no detailed Q1 metrics in PR.GenAI: Underwriter Assist pilot 4x ingestion, +20% submit-to-bind; Claims Assist reduces process cycle times; scaling in H2’25/2026 .Accelerating
Legal/regulatory (Russia aviation)—UK High Court war-peril ruling; AIG’s reserved estimates in line with outcomes; operator-policy claims face hurdles .Clarity improving

Management Commentary

  • “Adjusted after-tax income per diluted share was $1.81… driven by higher underwriting income of $626 million, higher net investment income… and disciplined capital management.” — Peter Zaffino, CEO .
  • “Our US property portfolio… remains highly profitable… we benefit from risk‑adjusted pricing decreases on our reinsurance, limiting headwinds from primary pricing.” — CEO .
  • “AIG Next… achieved our objectives ahead of schedule… over $530 million of annual run‑rate savings actioned, with >$500 million realized through Q2.” — CEO .
  • “We anticipate being at the high end of our 2025 share repurchase guidance range of $5–$6 billion… we ended the quarter with ~17.9% debt to total capital.” — Keith Walsh, CFO .

Q&A Highlights

  • Property underwriting/combined ratio path: Reinsurance price decreases have matched or exceeded primary decreases, limiting net headwind; combined ratios could move from 70s to low‑80s in some property lines yet remain very attractive; growth tempered through wind season .
  • Capital allocation if growth slows: Will return excess to shareholders over the medium term; see multiple growth levers beyond property (casualty, specialty, Lexington middle market) .
  • Reserve/uncertainty provision: Reapportionment into newer accident years is prudent given litigation trends; no deterioration observed; zero-sum redeployment of previously established provision .
  • Pricing trends: Ex‑property NA Commercial pricing +6% (~in line with loss trend); excess casualty +17%, primary casualty +12%; Intl pricing modestly down overall (specialty -6%) .
  • E&S submissions: Lexington submissions +28% YoY; not seeing a shift back to retail dampening submission flow; still growth opportunities .

Estimates Context

  • Q2 2025: Adjusted EPS $1.81 vs $1.60 consensus (beat); revenue $7.06B vs $6.85B consensus (beat). Q1 2025: $1.17 vs $0.99 (beat). Q4 2024: $1.30 vs $1.23 (beat). Drivers: lower CATs, favorable PYD, higher GI NII, expense progress offset by casualty mix and lean parent effects . EPS and revenue consensus values from S&P Global.*
PeriodAdjusted EPS (AATI/diluted)EPS ConsensusRevenue ($B)Revenue Consensus ($B)
Q4 2024$1.30 $1.23*$7.10*$6.74*
Q1 2025$1.17 $0.99*$6.55*$6.89*
Q2 2025$1.81 $1.60*$7.06*$6.85*

Where estimates may adjust:

  • Upward revisions to FY25 AATI/EPS likely as underwriting momentum, favorable reinsurance economics in property, and GI NII run-rate sustain, while expense ratio normalization in H2 tempers some of the Q2 step-up .
  • Segment mix (more casualty, less property) and lean-parent effects suggest slightly higher AY loss/expense picks, offset by investment income tailwinds .

Key Takeaways for Investors

  • Underwriting quality and reinsurance strategy are protecting margins despite property price pressure; CAT exposure remains well-managed with low attachments and high limits—supporting sustained sub‑90s calendar-year CR when CATs are benign .
  • Estimate momentum skew is positive after three straight quarterly beats on adjusted EPS; NII run-rate and rating upgrades provide downside protection to earnings and cost of capital .
  • Capital return remains a core pillar: management targeting high end of $5–$6B 2025 buybacks; dividend raised to $0.45; leverage conservative at ~18% debt/cap .
  • Expense program (AIG Next) is delivering ahead of plan; expect expense ratio optics to improve through H2 as pushdown “noise” fades .
  • Casualty pricing is firm with robust submission flows; expect growth to tilt toward casualty/specialty while US large-account property is tempered near-term .
  • Near-term catalysts: continued reserve stability amid social inflation, AI commercialization metrics (submission/bind and claims cycle-time gains), and further Corebridge monetization post-quarter (ownership near ~15%) .
  • Watch items: evolution of US property competitive dynamics through wind season, litigation trends in older casualty AYs, and cadence of favorable PYD/ADC amortization .

Footnote: *Values retrieved from S&P Global.