Global insurance giant AIG (NYSE:AIG) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 4.3% year on year to $6.84 billion. Its non-GAAP profit of $1.81 per share was 13.2% above analysts’ consensus estimates.
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AIG (AIG) Q2 CY2025 Highlights:
- Revenue: $6.84 billion vs analyst estimates of $6.83 billion (4.3% year-on-year growth, in line)
- Adjusted EPS: $1.81 vs analyst estimates of $1.60 (13.2% beat)
- Adjusted Operating Income: $1.39 billion vs analyst estimates of $1.37 billion (20.3% margin, 1.8% beat)
- Market Capitalization: $43.56 billion
StockStory’s Take
AIG’s second quarter results were shaped by cautious underwriting in its U.S. property business and targeted growth in casualty and specialty lines. Management highlighted a deliberate pullback from property segments facing rate pressure, while focusing on areas with more favorable risk-adjusted returns. CEO Peter Zaffino described the property portfolio’s repositioning as “one of the best stories for AIG,” noting that extensive use of reinsurance and a conservative approach to catastrophe risk have stabilized results. The company also credited improved expense discipline and operational streamlining from the AIG Next initiative for helping offset headwinds in select business lines.
Looking ahead, AIG’s outlook centers on disciplined portfolio management, expense reductions, and broad-based adoption of generative AI tools to drive underwriting and claims efficiency. Management expects incremental benefits from operational streamlining, but acknowledged ongoing uncertainty in the property market, particularly around catastrophe risk and rate movements. Zaffino emphasized, “We remain on track to achieve our 10% plus core operating ROE target in 2025,” while cautioning that market conditions could shift, requiring continued vigilance on pricing and risk selection. The company is also preparing for a broader rollout of AI-driven initiatives across its commercial and personal lines in the coming quarters.
Key Insights from Management’s Remarks
AIG’s management attributed second quarter performance to targeted underwriting shifts, cost control, and the early impact of technology investments, while navigating persistent industry volatility.
- Selective property underwriting: AIG deliberately slowed growth in U.S. property insurance, where rate decreases and heightened catastrophe risk led management to focus on retaining profitable accounts while tempering exposure. Nearly 90% of large property placements now use shared and layered reinsurance structures, reducing volatility and acquisition costs.
- Casualty and specialty momentum: Growth was driven by strong submissions and premium increases in casualty and specialty lines. Retail and Lexington Casualty reported double-digit submission growth, and international specialty lines saw new business up 35%, especially in marine and energy segments. Management views these lines as key engines for future expansion.
- Expense ratio improvement: The AIG Next initiative delivered over $500 million in annual run-rate cost savings, achieved ahead of schedule. General Insurance’s expense ratio improved 50 basis points year-over-year, with management targeting further reductions as technology-driven efficiencies scale.
- AI and digital transformation: Early deployment of generative AI tools in underwriting and claims yielded measurable productivity gains, such as a fourfold increase in submission ingestion and faster claims assessments. The company aims to expand these tools across North America and international commercial lines in 2026, signaling a shift toward a technology-enabled operating model.
- Reserve management and litigation environment: Management addressed prudent reserve reallocations in response to inflation and social inflation trends, especially in older casualty accident years. The company’s approach includes maintaining a risk margin in loss picks and proactive engagement in complex legal matters, such as Russia aviation-related claims, which remained within expected loss estimates.
Drivers of Future Performance
Management sees continued focus on profitable growth in select lines, expense discipline, and technology adoption as central to AIG’s outlook for the remainder of 2025 and beyond.
- Expense leverage and cost savings: The company expects further improvement in its expense ratio as the benefits of AIG Next are fully realized and incremental technology investments reduce manual processes. Management’s goal is to keep General Insurance’s expense ratio below 30% by 2027, which could support operating margin expansion if premium growth resumes.
- AI-driven operational efficiency: Broader deployment of generative AI in underwriting and claims handling is expected to accelerate decision-making, reduce cycle times, and improve customer experience. Early results have already shown increased productivity, and management believes scaling these tools across more business units will enhance competitive positioning.
- Market and pricing risks: AIG is monitoring potential headwinds from catastrophe risk, social inflation, and rate softening, especially in U.S. property lines. Management indicated a willingness to pivot quickly if market conditions deteriorate, with capital redeployment or additional shareholder returns as options if organic growth opportunities become limited.
Catalysts in Upcoming Quarters
Looking ahead, our analysts are focused on (1) the pace of generative AI adoption and its measurable impact on underwriting and claims efficiency, (2) continued progress on expense ratio reductions stemming from AIG Next, and (3) any shifts in U.S. property market dynamics, particularly catastrophe exposure and pricing trends. Execution against these milestones will be critical in assessing whether AIG can sustain profitability improvements while navigating industry uncertainty.
AIG currently trades at $78.95, in line with $79.03 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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