American International Group, Inc. (AIG) Q4 2025 Earnings Call Transcript

Gen AI and Data Strategies: AIG has made significant progress embedding gen AI across core underwriting and claims processes. They expanded the use of 'underwriting by AIG Assist' to 7 additional lines of business and plan to deploy it across the majority of commercial businesses in 2026. This has led to a 26% increase in submission count year-over-year in Lexington's business. They are also developing an orchestration layer to coordinate AI agents for better decision-making and cost reduction.

Special Purpose Vehicles (SPVs): AIG launched Syndicate 2479 in partnership with Amwins and Blackstone, with a stamp capacity of $300 million. This SPV is expected to generate premium growth and fee income. Gen AI capabilities were used to match data and define risk characteristics for this SPV.

Everest Portfolio Conversion: AIG acquired renewal rights for Everest's global retail insurance portfolio, expanding its global retail commercial footprint. They converted $65 million in gross premiums written in Q4 and achieved a 75% retention rate in January, reflecting $180 million in gross premiums written.

Convex Group Investment: AIG took a 35% equity interest in Convex Group and a 9.9% stake in its majority owner, Onex Corporation. They also secured a 7.5% whole account quota share of Convex's business for 2026, increasing to 10% in 2027 and 12.5% thereafter.

Underwriting Income: AIG generated $2.3 billion in underwriting income for 2025, a 22% increase year-over-year, marking the first time since 2008 that underwriting income exceeded $2 billion.

Expense Ratio Reduction: AIG reduced its expense ratio to 31.1% in 2025, down 90 basis points from the prior year, and is on track to achieve a sub-30% expense ratio by 2027.

Capital Management: AIG returned $6.8 billion to shareholders in 2025, including $5.8 billion in share repurchases and $1 billion in dividends. They also increased their quarterly dividend by 12.5%.

Corebridge Financial Sell-Down: AIG reduced its ownership in Corebridge Financial to 10.1% by the end of 2025, generating approximately $2.5 billion in gross proceeds during the year.

Market Environment: North America Retail Property contracted due to reduced appetite given the current market environment. Property markets in North America remained under pressure with increased competition in both admitted and non-admitted markets. Retail Property pricing was down 10%, and excess and surplus lines pricing was down 13% for the year.

International Financial Lines: International Financial Lines contracted 5%, and pricing was down 4%, reflecting ongoing rate pressure.

Energy Sector Pricing: Energy pricing was down 10% internationally, driven by abundant capacity, which could impact profitability in this sector.

High Net Worth Quota Share Reinsurance Treaty: Global Personal net premiums written contracted 3%, driven by higher ceded premiums under the high net worth quota share reinsurance treaty entered into at 1/1/25.

Reinsurance Market Dynamics: Although reinsurers compromised on pricing, they remained disciplined on attachment points, which could limit flexibility in reinsurance arrangements.

Expense Ratio Challenges: The expense ratio remains a focus area, with a target to reduce it below 30% by 2027. Current progress shows improvement but still requires further reductions.

Leadership Transition: The transition of leadership to a new CEO could pose risks to strategic continuity and execution of long-term objectives.

Net Premiums Written Growth for 2026: AIG expects low to mid-teens net premiums written growth in General Insurance for the full year 2026, reflecting strong momentum and growth from multiple sources.

Reinsurance Strategy for 2026: AIG achieved enhanced terms and favorable pricing in January 1 renewals, with a weighted average risk-adjusted rate decrease in property catastrophe reinsurance exceeding 15%. The company plans to continue leveraging its reinsurance strategy to minimize portfolio volatility and position itself well for 2026.

Strategic Transactions Impact on 2026 and 2027: Several strategic transactions announced in the fourth quarter of 2025 are expected to contribute to AIG's earnings, earnings per share, and return on equity in 2026, with further accretion anticipated in 2027.

Everest Portfolio Conversion: AIG is focused on converting the Everest portfolio over the next three quarters, with expectations of a 10-point benefit to the combined ratio of the converted business.

Convex Group Partnership: AIG's investment in Convex Group, including a 7.5% whole account quota share of Convex's business for 2026, is expected to be accretive to earnings within the year. The share will increase to 10% in 2027 and 12.5% in 2028 and thereafter.

Special Purpose Vehicles (SPVs): AIG plans to expand its SPV strategy, including the recently launched Syndicate 2479, which is expected to generate premium growth and fee income in 2026.

Gen AI Deployment in 2026: AIG aims to deploy its gen AI capabilities across core underwriting and claims processes, enhancing efficiency and decision-making. The company expects significant productivity gains and increased submission counts in 2026.

Expense Ratio Target: AIG remains focused on achieving a sub-30% expense ratio by 2027, with continued progress expected in 2026.

Capital Management for 2026: AIG intends to repurchase at least $1 billion of common shares in 2026, subject to market conditions, and plans to deploy proceeds from the sell-down of its remaining Corebridge position to additional share repurchases.

Dividends Paid: $1 billion in dividends returned to shareholders in 2025.

Dividend Increase: Quarterly dividend increased by 12.5%, marking the third consecutive year with a dividend increase of 10% or more.

Share Repurchases: $5.8 billion in share repurchases conducted in 2025.

Capital Return: A total of $6.8 billion returned to shareholders in 2025, including share repurchases and dividends.