Earnings call transcript: AIG beats Q2 2025 earnings expectations, stock dips

American International Group Inc. (AIG), a prominent player in the insurance industry according to InvestingPro, surpassed Wall Street expectations in its second-quarter earnings for 2025, reporting a significant increase in earnings per share (EPS) and revenue. The company, currently trading below its Fair Value based on comprehensive analysis, maintained its strong market position with a market capitalization of $44 billion. Despite these positive results, AIG’s stock experienced a decline in the market, reflecting broader investor sentiment and sector trends.

Key Takeaways

• AIG reported an EPS of $1.81, exceeding the forecast of $1.60.
• Revenue reached $6.88 billion, surpassing the expected $6.78 billion.
• Stock price fell by 3.21% in post-earnings trading.
• AIG achieved a 56% year-over-year increase in adjusted after-tax income per diluted share.
• The company completed its AIG NEXT initiative, achieving significant cost savings.

Company Performance

AIG demonstrated robust performance in Q2 2025, with a notable 56% year-over-year increase in adjusted after-tax income per diluted share, reaching $1.81. The company’s net premiums written rose to $6.9 billion, marking a 1% year-over-year growth. AIG’s core operating return on equity (ROE) stood at 11.7%, while maintaining dividend payments for 13 consecutive years with a current yield of 2.28%. InvestingPro analysis reveals the company’s strong financial health metrics, with particularly robust cash flow and price momentum scores.

Financial Highlights

• Revenue: $6.88 billion, up from $6.78 billion forecasted.
• Earnings per share: $1.81, a 56% increase year-over-year.
• Adjusted after-tax income: $1 billion, a 35% increase year-over-year.
• Net premiums written: $6.9 billion, a 1% increase year-over-year.

Earnings vs. Forecast

AIG’s Q2 2025 earnings outperformed analyst expectations, with an EPS surprise of 13.12%. The company reported $6.88 billion in revenue, exceeding the forecast by 1.47%. This marks a continuation of AIG’s trend of surpassing market expectations, showcasing its operational efficiency and strategic initiatives.

Market Reaction

Despite the strong earnings report, AIG’s stock price fell by 3.21% following the announcement. The stock closed at $79.06 before the earnings release and dropped to $78 in premarket trading, reflecting negative market sentiment. This decline comes amid broader market pressures and sector-specific challenges, though the stock has shown resilience with a 14.4% total return over the past year. For deeper insights into AIG’s valuation and performance metrics, InvestingPro offers comprehensive analysis through its Pro Research Report, part of its coverage of 1,400+ US equities.

Outlook & Guidance

AIG remains optimistic about its future performance, targeting a core operating ROE of over 10% for 2025. The company expects approximately $3 billion in subsidiary dividends this year and plans to continue the rollout of generative AI across its operations. With analysts projecting profitability this year and setting a consensus high target of $98, AIG’s guidance for the upcoming quarters shows steady growth in EPS and revenue, aligning with its strategic goals and market positioning.

Executive Commentary

"We have massive opportunities to have exponential growth," said Peter Zaffino, CEO of AIG, emphasizing the company’s strategic initiatives and market potential. Don Bailey, Executive, noted, "Flight to quality is real," highlighting AIG’s strong market position. John Neal, Incoming President, added, "We’re a leader. We’re an index for the market," underscoring AIG’s competitive edge.

Risks and Challenges

• Property market pricing pressures could impact future profitability.
• Social inflation in the casualty market may affect underwriting margins.
• Broader economic uncertainties and interest rate fluctuations pose risks.
• Continued integration of generative AI could face operational challenges.
• Regulatory changes and geopolitical tensions may affect global operations.

Q&A

During the earnings call, analysts inquired about AIG’s property pricing and reinsurance strategy, reflecting concerns over market conditions. The company confirmed strong submission counts in the Excess & Surplus (E&S) marketplace and addressed the impact of social inflation on the casualty market. AIG also discussed its reserve reapportionment approach, highlighting its proactive risk management strategies.

Full transcript - American International Group (AIG) Q2 2025:

Michelle, Conference Call Operator: Good day, and welcome to AIG’s Second Quarter twenty twenty five Financial Results Conference Call. This conference is being recorded. Now at this time, I would like to turn the call over to Quentin McMillan. Please go ahead.

Quentin McMillan, Financial Executive, AIG: Thanks very much, Michelle, and good morning. Today’s remarks may include forward looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based on management’s current expectations. AIG’s filing with the SEC provides details on important factors that could cause actual results or events to differ materially. Except as required by applicable securities laws, is under no obligation to update any forward looking statements if circumstances or management’s estimates or opinions should change.

Today’s remarks may also refer to non GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on our website at aig.com. Following the deconsolidation of CorBridge Financial on 06/09/2024, the historical results of CorBridge for all periods presented are reflected in AIG’s consolidated financial statements as discontinued operations in accordance with U. S. GAAP.

Finally, today’s remarks related to net premiums written are presented on a comparable basis, which reflects year over year comparison on a constant dollar basis and adjusted for the sale of the global personal travel and assistance business as applicable. We believe this presentation provides the most useful view of our results and the go forward business in light of the substantial changes to the portfolio since 2023. Please refer to page 25 of the earnings presentation for reconciliations of such metrics reported on a comparable basis. With that, I’d now like to turn the call over to our Chairman and CEO, Peter Zaffino.

Peter Zaffino, Chairman and CEO, AIG: Thank you, Quentin, and good morning, everyone. Thank you for joining us today to review our second quarter twenty twenty five financial results. Following my remarks, Keith will provide more detail on the quarter, and then we will take questions. John Hancock and Don Bailey will join us for the Q and A portion of our call. AIG had an outstanding second quarter.

We continue to make meaningful progress on our strategic, operational, and financial objectives that we outlined at Investor Day. Our momentum continues to build with strong performance across the board. We delivered adjusted after tax income per diluted share of 1.81 an increase of 56% year over year. Adjusted after tax income for the quarter was $1,000,000,000 an increase of 35% from the prior year quarter, driven by our general insurance business, which had underwriting income of $626,000,000 an increase of 46% year over year. Net investment income on an adjusted pretax basis was $955,000,000 an increase of 9% year over year.

Accident year combined ratio as adjusted was 88.4%. Calendar year combined ratio was 89.3%, an improvement of three twenty basis points from the prior year quarter. We achieved a core operating ROE of 11.7%. We returned $2,000,000,000 of capital to shareholders, bringing the year to date total to $4,500,000,000 We sold $430,000,000 or 13,400,000.0 shares of Corbridge Financial, reducing our stake to approximately 21%. And finally, both S and P Global and Moody’s upgraded their financial strength ratings of AIG’s insurance subsidiaries during the quarter, which was a major milestone.

This is our first upgrade from S and P Global since 2013 and our first upgrade from Moody’s since 1990. For our call this morning, I will share a detailed review of our second quarter results, a few observations on the global property market and specifically our portfolio, highlights from our successful completion of AIG NEXT, which delivered $500,000,000 in savings and significant operational improvements, an overview of Russia aviation related claims, and an update on our Gen AI initiatives. Before I review the quarter in more detail, I’d like to take a moment to welcome John Neal to AIG. He’ll be joining us as president on December 1. As many of you know, John is one of the most accomplished executives in our industry.

He’s very well known to our stakeholders, has significant global operating experience, and an impressive track record leading underwriting organizations, most recently as the CEO of Lloyd’s of London. John will oversee our general insurance organization and will partner with me and the business leaders in driving the strategic direction of the business. John’s background, experience, and global expertise add depth to our excellent management team, and we look forward to working closely with him in his new role. Now let me provide a more detailed view of our second quarter financial results. Net premiums written were $6,900,000,000 an increase of 1% year over year.

This included 3% growth in global commercial. North America commercial insurance net premiums written increased 4% year over year. Excluding property, which I will discuss in more detail, North America commercial insurance net premiums written increased 11%. We had growth in businesses that we believe have strong risk adjusted margins, and we tempered growth in those businesses that had rate pressure. Retail casualty and Lexington casualty each increased 19%.

Western World increased 15%, and our alternative businesses, which consist of Glatfelter and programs, also increased 19%. These results were offset by retail property and Lexington property, where net premiums written declined by 8%. International commercial insurance net premiums written increased 1% year over year, driven by modest growth in casualty and global specialty, which was offset by declines in property and financial lines. In the second quarter, global commercial continued to produce strong new business of nearly $1,400,000,000 a 7% increase from the prior year quarter. In 2024, North America Commercial experienced tremendous new business growth.

In 2025, we continue to see incremental growth led by Lexington Middle Market, Western World, and our alternative businesses. It’s worth noting that the submission count in our Lexington business continues to be very strong, increasing 28% year over year. International commercial produced very strong new business in specialty with a 35% increase from the prior year quarter led by marine and energy. In addition, global commercial had very strong renewal retention across North America commercial and international commercial of 88%. Global personal net premiums written decreased 3%.

As I discussed on previous earnings call, we entered into a high net worth quota share reinsurance treaty with strategic partners that is driving profitability improvement of the portfolio. However, it had a six point negative impact to global personal net premiums written growth in the quarter. Turning to expenses, Keith will go into more detail in his remarks, but I wanted to make a few points. Our general insurance expense ratio was 31%, a 50 basis point improvement year over year. For the 2025, the general insurance expense ratio was 30.8% compared to 31.6% for the prior year period.

The general insurance business has continued to absorb expenses that used to reside in other operations. In addition, we’ve made meaningful investments in cybersecurity and GenAI, and the cost for both are being absorbed in the businesses. For other operations, general operating expenses were $90,000,000 in the quarter and $175,000,000 for the 2025. This is in line with a $350,000,000 annual run rate for parent expenses for 2025, which is simply an outstanding result. Now I’d like to take a moment to cover the property insurance market and the competitive nature of the rate environment, particularly in large account property as we enter wind season in The United States.

This has been one of the most widely discussed topics in the industry, and I thought it was worth spending a few minutes outlining a technical view of AIG’s underwriting approach to our US property portfolio in this environment. My comments will focus on US property because our international property portfolio is experiencing very different market dynamics. It has terrific results and a rate environment that is currently positive. Our US property business has been one of the best stories for AIG during the repositioning of our underwriting portfolio. What used to be a highly unprofitable portfolio with massive limits, combined ratios of 120 or greater, and significant volatility accompanied with outsized catastrophe losses has now become one of the most profitable lines of business for AIG.

Even in the current environment, our portfolio has been performing exceptionally well across retail property and Lexington wholesale large account, where on average pricing decreases have been 11% and Lexington Middle Market property was largely flat. Since 2018, retail property and Lexington wholesale large account cumulative rate increases have been 135120% respectively, and Lexington middle market has had cumulative rate increases of 90%. Additionally, over the last several years, accident year combined ratios as adjusted have been below 60% on average for both retail and wholesale property. Further, and an important distinction, approximately 90% of our large account property, retail and wholesale, is placed on a shared and layered basis, which means non concurrent pricing and non concurrent terms on that placement. This allows us to establish differentiated pricing and policy wording coverages and exclusions for the limits we deploy for each risk.

And when we report out a rate increases or decreases, it is against the pricing that we establish for our layer, not the index of the average pricing of the market for that placement. Also, with shared and layered placements, most of the business is net of commission. This means it has a very low acquisition expenses. In AIG’s case, retail property has an acquisition ratio of approximately 1%. Inherently, it therefore has a higher loss ratio as the total premium includes very little expenses to gross up.

In contrast, a middle market portfolio, which for AIG is 35% of our total property book, has different characteristics. Middle market accounts have higher acquisition expense ratio and total expense ratio that translates to lower loss ratios because the total premium is grossed up through a higher total expense load. When reviewing the quality and profitability of a property portfolio at a high level, in addition to excellent individual risk underwriting, you should also have a technical view of the following components. Let’s start with catastrophe. You need a proper analysis of potential cat layers using extensive modeling along with an accurate view of exposure and appropriate funding for cat risks, including comprehensive reinsurance at all appropriate return periods and tail risk.

Then you should review average annual losses or AAL, which are cat losses that are within your net retention below your property cat reinsurance program. But typically for lower return periods, net retained catastrophe requires an appropriate risk load. Also important are vertical single losses that are typically protected with property per risk reinsurance. And finally, you should consider attritional loss selections with an appropriate risk margin. When you analyze each of these components, I believe our approach has been conservative with respect to each variable.

Why do I feel this way? The reason is we have a clear and detailed understanding of our fully loaded reinsurance cat costs. We’ve been able to purchase reinsurance at low attachment points and have high exhaust limits. And importantly, these costs are fully embedded into our insurance pricing. This year, our risk adjusted pricing decreases for reinsurance are at or greater than the pricing decreases on our primary business, limiting the impact of the rate environment on our net loss ratios.

This would not be the case if you chose to take these layers net. Even with a significant increase in frequency of CATs, our AALs have been roughly equal to or greater than our actual experience over the past three years. On single large losses, we have significant protection on property per risk with reinsurance attaching at $25,000,000 and exhausting in excess of $600,000,000. This is another strategic choice to reduce volatility. We have fully embedded this cost into our pricing.

We’ve also benefited from risk adjusted pricing decreases on our property per risk treaties. The outcome of all of these variables is our attritional loss ratios over the past three years have performed better than our expected accident year loss ratio picks. As I noted, another critical component of the loss projection is how much risk margin you have embedded as part of the ultimate accident year loss ratio. In our case, that margin has continued to expand as a result of our exceptional underwriting and cumulative rate increases. When developing our loss picks, we include a risk margin that ranges from 10% to 20% depending on the segment of business.

We’ve structured our portfolio to manage through various cycles. Going forward, we’re looking to maintain our US property portfolio, which is evidenced through our strong retention, growing where it makes sense for us based on our risk adjusted returns, and when market conditions warrant, we have the ability to pivot quickly. When you take into consideration all of these components of a property portfolio, we expect in the current environment to deliver strong profitability in both retail and wholesale property. Now I’d like to provide an update on our operational accomplishments. At the 2023, we launched AIG Next to create a leaner, more simplified, and more effective organization supported by the right infrastructure and capabilities while achieving at least $500,000,000 in run rate savings.

We embarked on this journey by pursuing a number of key initiatives. First, we created a lean parent company with costs aligned to being a public company, representing one percent to one and a half percent of net premiums earned. In 2023, other operations expenses were approximately a billion dollars. In order to achieve our future state parent expenses, we transferred $300,000,000 as part of the Corbridge Financial divestiture. We either eliminated or reapportioned the remaining $350,000,000 into our general insurance businesses.

Second, we drove global consistency and local relevancy across our end to end processes, including centralizing our treasury and capital activities to create global enterprise standards. Third, we reduced organizational complexity through the creation of three distinct business segments, North America commercial, international commercial, and global personal, which has led to better and differentiated experiences for our clients and partners. Fourth, we restructured and simplified our underwriting and claims organizations to accelerate and scale our data, digital, and Gen AI strategy. And finally, we advanced our technology transformation and modernize our infrastructure, which included among other initiatives, the elimination of 1,200 legacy applications. As we did with AIG 200 and our underwriting turnaround, I’m very pleased to share that we’ve achieved our objectives ahead of schedule.

We actioned over $530,000,000 of annual run rate expense savings with over $500,000,000 realized through the second quarter. I often say that one of the most impressive differentiators of AIG is our colleagues’ ability to execute multiple complex strategic initiatives at the highest quality. The accelerated results that we’ve achieved through AIG next are a testament to our culture of teamwork and willingness to execute at pace across the company. We thought it would be helpful to provide perspective on the Russia aviation related claims, a complex industry topic in the headlines. These aviation insurance exposures are related to aircraft leased to Russian airlines that were kept in Russia after the invasion of Ukraine.

As you may recall, airline lessors are seeking compensation under contingent and possessed as well as operator policies covering both all risks and war perils. On June 11, a judgment was issued in a legal proceeding in The UK in which a number of lessors led by AerCap brought claims against insurers that issued contingent and possessed policies to them. In that judgment, the UK high court ruled that the lessors suffered a covered war loss as a result of actions that the Russian government took in March 2022. This decision aligns broadly with several prior rulings in The US. As we said at the outset, this was an unusual event for the industry with complicated issues, including whether a covered loss occurred and when, which peril triggered coverage, Did the lessors take appropriate steps to mitigate losses?

Should sanctions apply? And which policy should respond, contingent and possessed or operator? The situation was further complicated by the fact that many policyholders were quick to file coverage litigation, which significantly delayed the loss adjustment process. Despite these complexities, AIG, along with other insurers, made a concerted effort early to engage with policyholders in a unified manner to resolve the claims consensually, reflecting the intent of the policies which were written on a subscription basis in the London market. Unfortunately, the market participants were not able to agree on a solution, which is often the case in our industry, and litigation proceeded in multiple jurisdictions, most notably in The UK.

In The UK proceeding, AIG was the lead all risks representative defendant, and as such advanced the position that any losses by AerCap should fall to the war cover, which was eventually adopted by the court. It’s worth noting that AIG sought to and successfully settled all other claims under contingent and possess policies in The UK proceeding prior to the AerCap ruling, and in many instances obtained releases of our exposure under any applicable operator policies. With regard to the operator policies, there is a separate UK proceeding concerning claims that lessors have brought against AIG and several other insurers. We believe these operator claims face significant hurdles given among other factors that the relevant aircraft continue to be used by the Russian operators. Like many in the market, AIG wrote both all risk and war policies.

Early on, we conducted a thorough evaluation of the potential net financial impact of these claims on AIG, factoring in the complex coverage issues and all applicable reinsurance and various scenarios. As a result of this analysis, as I have stated previously, we prudently reserved for our expected net loss exposure and the outcome in the AerCap case along with the settlements in other cases have been in line with our expected net loss estimates. Now let me take a few minutes to provide an update on our Gen AI work, which continues to accelerate while generating significant interest among our stakeholders. At our Investor Day, we provided an overview of our Gen AI approach and how we’re deploying Gen AI end to end across the core business to power our underwriting business. Specifically, we talked about how we’re leveraging large language models, our agentic ecosystem of capabilities, and our partnerships with AWS, Palantir, and Anthropic among others.

We laid out our framework, which is built around data ingestion, augmentation, and prioritization powered by our agentic AI ecosystem. We first deployed AIG underwriter assistance to our private non for profit business in financial lines at the end of the first quarter, and the early results are very promising. Submission ingestion has increased by four times, and the submit to bind ratio has increased by 20% from the baseline. Looking forward, we remain on track to introduce AIG underwriter assistance for our Lexington middle market, property and casualty businesses in the third quarter of this year and across all of North America commercial, UK and EMEA commercial lines in 2026. And we continue to explore opportunities to accelerate our rollout.

As we scale JetAI across underwriting, we’ve also been building AIG claims assistance. We have successfully configured the core JetAI capabilities of ingestion, augmentation, and prioritization that we built for AIG underwriter assistance to support claims. With this framework, we can ingest unstructured data to expedite first notice of loss, prioritize claims assignments, and augment claims adjusters investigations with relevant external multimodal data from approved sources. For claims, we’ve been training large language models to extract and organize key insights automatically to enable claims adjusters to make more informed decisions faster than ever in order to fulfill our promise of helping our clients when they need us most. We’ve conducted preliminary testing on the first notice of loss process, which is the first report made to an insurer about a potential claim.

In our sample, the processing time has decreased from days to hours. We’ve also seen cycle time for coverage endorsement reviews, a key part of a coverage assessment, decrease from hours to minutes. Our objective with these advanced tools is to enable more technical reviews, provide our underwriting and claims experts with more insight and capabilities, reduce cycle time, significantly enhance decision making, and meaningfully improve service to our clients and partners. Foundational to this work is ontology. You will hear a lot more on this topic in the coming quarters, especially as we make more progress with our rollout.

We’ve been building our AIG ontology since we began our work in AI. It reflects an intent to create a digital twin of our business, representing all key data processes, business logic, and a map of relationships across businesses and functions. Ontology is critical for deploying large language models. It brings together the relevant datasets that define the components of our insurance business, integrates and sequences them, and then models how they relate to one another. Our ontology will create a clear record of any actions taken, which will inform business logic and provide the ability to audit agents’ activities.

We’ve seen an acceleration since investor day as large tech companies have made significant capital expenditure commitments to further advance GenAI capabilities. I’m very encouraged with the progress that AIG is making. With that overview, I will now turn the call over to Keith.

Keith, Financial Executive, AIG: Thank you, Peter, and good morning. I’m going to expand on the financial highlights for the quarter. Overall, total adjusted pretax income, or APTI, was $1,400,000,000 an increase of 37% from the prior year quarter. This was driven by excellent results from the business and focused execution of our investment portfolio strategy. General Insurance gross premiums written were $10,100,000,000 in the second quarter, an increase of 4% from the prior year.

Net premiums written were $6,900,000,000 an increase of 1%. For the second quarter, General Insurance accident year combined ratio as adjusted was 88.4%, an increase of 80 basis points over the prior year quarter. I’ll unpack the loss ratio when I cover the segments. Looking at expenses, in the second quarter, General Insurance expense ratio was 31%, a 50 basis point increase year over year. General Insurance absorbed $83,000,000 of additional expenses that were booked in other operations in the 2024.

We remain on track to reduce our expense ratio below 30% by 2027. Moving to catastrophes, charges for the quarter totaled $170,000,000 or 2.9 loss ratio points. Prior year development for the quarter net of reinsurance was $128,000,000 favorable, which included 97,000,000 of favorable loss reserve development and $31,000,000 of ADC amortization. The favorable development primarily stemmed from workers’ compensation, largely driven by favorable trends on excess of loss sensitive business. U.

S. Property and special risks also developed favorably. We strengthened U. S. Casualty by 106,000,000, which was driven by mass tort and older accident years, of which the vast majority is in accident years 2015 and prior, which are covered by the ADC.

We also reapportioned some of the uncertainty provision and casualty lines into the more recent accident years, as we outlined in the fourth quarter. This is a prudent measure given broader litigation and inflationary trends in the industry. This was not related to any observable deterioration in our book. The General Insurance calendar year combined ratio was outstanding at 89.3%, a three twenty basis point improvement compared to the prior year quarter. Now moving to the segments.

North America Commercial accident year combined ratio as adjusted was 86.2%, an increase of 150 basis points over the prior year quarter. The accident year loss ratio of 63.1 was up 120 basis points owing to changes in business mix as our casualty business grew and we pulled back on property increased prudence in our 2025 loss picks predominantly in casualty lines given mass tort and general litigation trends and reapportionment of unallocated loss adjustment expenses into the loss ratio, largely related to lean parent implementation. The expense ratio was up 30 basis points to 23.1%, also driven by lean parent implementation. The quarter included four seventy basis points of catastrophe losses and 500 basis points of favorable prior year development. North America Commercial calendar year combined ratio was 85.9%, an improvement of four thirty basis points from the prior year.

Turning to International Commercial. The accident year combined ratio as adjusted was 85%, an increase of two ninety basis points. The accident year loss ratio was 54.2%, a 160 basis point increase year over year, reflecting lean parent implementation, additional conservatism in lines facing macro uncertainties, and changes in business mix. The expense ratio rose 130 basis points to 30.8%, driven by Lien Parent. This quarter included 140 basis points of catastrophe losses and 50 basis points of favorable prior year development.

The International Commercial calendar year combined ratio was 85.9%, a two seventy basis point improvement year over year. This is the ninth consecutive quarter of a sub-ninety percent combined ratio and speaks to the high quality of our portfolio. Turning to Global Personal. The accident year combined ratio as adjusted was 96.1%, a 120 basis point improvement adjusting for the divested Travel business. The accident year loss ratio was down 160 basis points to 54.2%, driven by lower reinsurance costs, increased earned premiums, as well as stronger underlying profitability.

The expense ratio was up 40 basis points to 41.9, also driven by Lean Parent implementation. This quarter included two forty basis points of catastrophe losses and no prior year development. The Global Personal calendar year combined ratio was 98.5%, an improvement of 170 basis points year over year. We continue to make progress increasing the profitability of our Global Personal business as outlined at Investor Day. Moving to rates.

Peter has already provided detailed perspective on the property market, so my comments will focus on other lines. Market conditions for pricing have remained largely stable and consistent outside of property. Excluding the property business, our North America commercial pricing increased in the quarter by 6%, which is in line with loss cost trends. In North America casualty, we continue to see price firming, especially in the excess casualty space with pricing up 17%. Primary Casualty saw 12 pricing increases, which were above loss cost trends.

In North America Financial Lines, pricing reductions moderated to down 2%, which is the lowest level of decrease since rates moved negative in the 2022 and was three points better than the first quarter. Moving to International Commercial, overall pricing was down 3%. Global Specialty pricing was down 6%, Talbot down 3%, and Financial Lines down 4%. AIG’s well diversified global portfolio allows us to manage across geography and products, prioritizing lines of business that offer the most compelling risk adjusted returns while navigating a complex and dynamic global insurance market. Moving to other operations.

Second quarter adjusted pretax loss was $106,000,000 versus the prior year quarter of $163,000,000 This reflects a significant reduction in general operating expense and lower interest expense, partially offset by lower net investment income. Adjusted for travel, the total general operating expenses across both General Insurance and other operations were $867,000,000 in the second quarter, up 1% from the prior year. This small increase in GOE compares to 6% growth in net premiums earned. For the 2025, total GOE was $1,700,000,000 down 3% year over year, while net premiums earned grew by four. This is an excellent outcome, especially considering our continual investments in data, digital and Gen AI capabilities and reflects positive operating leverage from our expense discipline.

The second quarter net investment income on an APTI basis was $955,000,000 an increase of $76,000,000 year over year. General Insurance net investment income was $871,000,000 growing 17% year over year. The increase was driven by fixed maturity securities owing to the optimization of our lower yielding portfolios, asset growth, higher reinvestment yields, and an adjustment of interest income primarily from the first quarter. For the 2025, General Insurance net investment income was $1,600,000,000 and grew 7% year over year. This is a better indicator of our expected run rate for the full year, subject to market conditions.

During the second quarter, the average new money yield on the fixed maturity and loan portfolio was roughly 110 basis points higher than sales and maturities. Other operations net investment income of 88,000,000 declined $48,000,000 over the prior year quarter and reflects income from our parent liquidity portfolio of $58,000,000 and CorBridge Financial dividend income of 27,000,000 Yesterday, we announced the sale of another 30,000,000 shares of CorBridge Financial with proceeds of approximately $1,000,000,000 This brings our ownership to roughly 15%. Peter already provided some detail on capital management in his remarks. Based on our current liquidity and cash flow profile, we anticipate being at the high end of our 2025 share repurchase guidance range of 5,000,000,000 to $6,000,000,000 subject to market conditions. Turning to dividends.

We increased our quarterly dividend in the second quarter by 12.5% to $0.45 per share, delivering a third straight year of double digit growth. Turning to liability management. We have made significant progress over the last several years improving our financial strength and flexibility. In May, we issued $1,250,000,000 of debt, upsizing the offering as a result of significant demand. The proceeds were partially used to retire $830,000,000 of debt, effectively managing our maturity ladder.

As a result, we have no material debt maturities in 2025 and 2026. We ended the quarter with approximately $9,000,000,000 of debt outstanding and a debt to total capital ratio of 17.9%, amongst the lowest in our peer group. As Peter already mentioned, but it bears stating again, during the second quarter, AIG’s major insurance subsidiaries received financial strength upgrades from S and P to AA minus from A plus and Moody’s to A1 from A2. These actions speak to the strength and stability of AIG, are a meaningful validation from our key stakeholders, and represent the collective hard work of our colleagues over several years. We continue to have strong capital ratios across our major insurance subsidiaries, which supports consistent and growing statutory dividends over time.

We are on track to generate approximately $3,000,000,000 of subsidiary dividends in 2025. Book value per share at June 30 was $74.14 up 8% from 06/30/2024, reflecting strong growth in net income as well as the favorable impact of lower interest rates on investment AOCI. Adjusted tangible book value per share was $69.81 up 4% from 06/30/2024. In summary, we delivered an excellent second quarter with annualized core operating ROE of 11.7. While the macro and insurance market remain dynamic, we are well positioned with multiple levers to drive continued strong performance.

We remain on track to achieve our 10% plus core operating ROE target in 2025 and continue to make steady progress on the long term financial targets we outlined at our Investor Day. With that, I will turn the call back over to Peter. Thank you, Keith. Michelle, we’re ready to take questions.

Michelle, Conference Call Operator: Thank you. Our first question comes from Alex Scott with Barclays. Your line is open.

Alex Scott, Analyst, Barclays: Hi. Thanks for taking the question. First one I had is just on the property pricing implications and some of the comments you made around the impact of reinsurance and so forth. I just wanted to make sure I understood that right. I mean, it sounded like that net wasn’t really much of a headwind actually in the underwriting.

So I just wanted to understand, if I’m getting that right, if it’s more the mix shift, then can you still hit the combined ratio targets you’ve talked about in the past?

Peter Zaffino, Chairman and CEO, AIG: Yeah. So, Alex, thanks. Good morning. What I was trying to outline, in my prepared remarks was we are a big buyer reinsurance on property. Everybody knows that.

We have low attachment points. We have, high exhaust. In a market like this, we benefit because if if the rates are going down on reinsurance on cat as an example, that does benefit the original pricing. If you’re funding it net, what I was saying, like, if I look at our own AALs, like, if the market gets softer, I don’t reduce the AALs. They stay the same.

And so what I was trying to say is that when you look at the amount of reinsurance that we would purchase, we’re getting risk adjusted reductions that are at or greater than what we’re pricing our original policies. That’s a benefit. So there’s no headwind there. But if you’re funding it net, your AALs are still the same. So you have to take a look at your attritionals a little bit sharper, I believe, because, you know, the overall pricing is going down.

If you don’t have the commensurate rates going down on your catastrophe, that’s a headwind. We don’t have that. And so that’s what I was just trying to unpack, in in sort of the different components Now look at the combined ratio could go up a bit. We have great combined ratios.

I’ve I’ve given, you know, some clarity at investor day and prior quarters that we posted in many of our businesses, you know, in the seventies combined ratio. So if it goes into the low eighties, it’s still a great business. We are tempering our growth there because I don’t know what happens the rest of the year with cat, and it’s just something we wanna be cautious with. But we still want to retain the business. We still want to price it appropriately and believe that we can have very strong returns in the current environment as I look to 2025.

Alex Scott, Analyst, Barclays: Yep, that’s helpful. Second one I had is sort of a follow-up on what you mentioned on growth. I mean, if the growth environment turns out to not be quite as good as expected, what will you do with the capital situation you have? Because I see premium to equity, I think it’s a little below like 70%. I think that’s the lowest in the peer group I look at, and that’s sort of not even that heavily influenced by the corporate proceeds and what you have at the HoldCo.

What will you do in the event that the growth outlook doesn’t end up being what you’d hoped for what you outlined at the Investor Day? How quickly would you take action to try to get some of that capital redeployed elsewhere?

Peter Zaffino, Chairman and CEO, AIG: Well, I outlined at Investor Day, that over a period of time, undefined, but it would be a medium term that if we can’t deploy the capital for growth, we would return it to shareholders. But we do believe look. It’s a moment in time with the property, you know, the second quarter before cat season. The property lines run really well. And I’m I’m gonna ask Don and John to comment on this because we’re seeing other opportunities for growth.

I think that we’re getting massed a little bit with property. We outlined it. We’ve sort of bifurcated it because it’s sort of anomalous to what’s happening in the rest of our lines of business. But, we don’t need the capital, to execute on our sort of capital management strategy subsidiaries. And we really believe we can grow into it over a period of time.

If we can’t, and, you know, the market stays in a in a place where we have excess capital, we’ll return it to shareholders. But I don’t think that’s the place we are. It’s a moment in time in this particular quarter. I think we gotta look out over the next few years, and and I believe AIG now has a business that can grow. When we had the market turn last time, AIG wasn’t prepared.

We were still, you know, reunderwriting our portfolio. We still had a bottom 20%. We were growing in lines, reposition the portfolio. The market turns this time, we have massive opportunities to have exponential growth, and we will execute on that. But, Don, maybe let me start with you about what you’re seeing in casualty, and then maybe I can shift to John, talk a little bit about specialty.

Okay. Absolutely, Don.

Don Bailey, Executive, AIG: Rates are very strong in the casualty market right now. We’ve got gaining momentum there, both Lex casualty and retail casualty grew rather substantially 19% in the second quarter. With Lex casualty submissions are up 39% in the quarter. So gives us a lot of faith in terms of the casualty opportunities we’ve got on a go forward basis. On financial lines, Keith talked a little bit the rate environment there, gaining stability, much less of a headwind going forward.

We’re definitely gonna see the rate opportunities as we go forward there and the growth opportunities that follow. Gladfelter is a machine for us, highly dependable growth engine for us. And with the work we’ve done with Gladfelter to kind of rebuild our programs business, that increasingly is a huge driver of our growth as we go forward as well. So that’s gonna start to deliver even more as we go forward. We covered some of those businesses in Investor Day.

And I would just say this about Lex too, that outside of the large account property segment, every other segment within Lexington is growing quite nicely. And we had 28% increase in our submissions at Lexington in the quarter, which again is a strong indicator for future growth opportunities. Last thing I would just say, our distribution model is highly aligned to drive everything that I just talked about. So we see more and more opportunities ramping up as we go forward, and we continue to be a very strong brand at Lex, Glatfelter and AIG with our distribution partners and our insurers.

Peter Zaffino, Chairman and CEO, AIG: Thanks, Don. That’s helpful. John, maybe just talk about like specialty and how we’re positioned in the market would be great.

Meyer Shields, Analyst, KBW: Yeah.

John Neal, Incoming President, AIG: Yeah, certainly. I mean, specialty, we highlighted this at Investor Day. We talk about it a lot because it is such a fantastic business for us. We’ve delivered 5% growth in the quarter, 7% year to date. And for sure, there is increasing competition and rate pressure generally, but global specialty as much as anywhere is an area we have real clear differentiated proposition.

We’re a leader. We’re an index for the market. And we’re positioned I think better than anyone to achieve superior terms and manage through the cycles. And that’s what we’ve been setting ourselves up for over the years. And I think it’s also worth saying on specialty is we’re still seeing that good growth.

The profit is phenomenally good. We’re confident that that maintains. It’s a big part, know, in the quarter and I agree with you, Peter. I mean, a quarter is not a good judge of any growth plan. There’s a lot of noise in any single, quarter.

Look at the longer term and that’s what we build certainly a specialty book for. If I stick to the quarter, specialty is 45% of the international commercial business on a gross basis. But it’s only 28% of net premiums. And that’s in part due to those reinsurance protections that you talked about, Peter. And those reinsurance protections do make the result better.

It might mean we give up a little bit of margin in a hardening and rising price cycle, and we do that to manage the volatility. But it also significantly mitigates the downside in the market that we’re in now. So that’s a strong thing and that’s part of a long term sustainable reinsurance strategy helping us manage across the cycles. Bear in mind as well, we’ve seen nearly 70% cumulative rate increase in specialty over the last few years, other than 20 odd percent in energy. So we’re really well positioned.

We’ve got long term strategic partnerships with those reinsurers. That’s a big part of our proposition. So the future is really strong

Peter Zaffino, Chairman and CEO, AIG: Thank you both very much. Okay, next question.

John Neal, Incoming President, AIG: Thanks.

Michelle, Conference Call Operator: Thank you. Our next question comes from Meyer Shields with KBW. Your line is open.

Meyer Shields, Analyst, KBW: Great. Thanks so much and good morning. I wanted to just check-in on the reapportionment of reserves to accident years ’21 and ’22. And I guess I know we’re only looking at net numbers, but should we have seen something like that affect ’23 and ’24 as well?

Peter Zaffino, Chairman and CEO, AIG: Thanks, Mayor. Look, I’m going to recap a little bit what I said and that Keith alluded to in the fourth quarter of last year. We had this provisional reserve that we created in 2022 and then we did add to it in subsequent years to add to margin and it was really in response to some of the uncertainty with inflation, other variables sort of post pandemic, and then sort of the social inflation environment that we’re in. The provision, which included IBNR, had been carried in lines that we thought would be most susceptible to the rising inflation. And the uncertainty provision was set above loss picks from our actuarial reviews that didn’t have any reflection for any emergence or anything of that nature.

And so we began the process of, you know, completing reserve reviews, apportioning them into lines of business that we thought were appropriate. And I think that’s what you, had started to see in the fourth quarter twenty twenty four, and it’ll actually go through the fourth quarter of of twenty five. So, you know, the the accident years, the most recent ones, it wasn’t that much, number one. Number two is a zero sum game. Those reserves are already set.

We just are putting them into, you know, lines of business that we think are the most appropriate. When we look at the wide range of outcomes of casualty, we just thought it was prudent to reapportion those accident years. There’s nothing in the underlying portfolio that would suggest that those additional reserves are needed, but we have the uncertainty provision, and we’re allocating them to lines of business throughout 2025.

Meyer Shields, Analyst, KBW: Okay. That’s helpful. And then a bigger picture question. When you talk to your insurers, I know there’s lot of concern in the insurance industry about social inflation. Is that translating into increasing demand for liability coverage?

Is that manifesting itself in the market yet?

Peter Zaffino, Chairman and CEO, AIG: I’ll have Don comment a little bit of what we’re seeing sort of in the casualty market. What I would say, there, is that there is a strong pull for underwriting companies that have expertise in casualty lines. So it’s not just capacity. If you’re going to lead, do you understand the complexities that exist within their business, their industry group, their structures? How do we help them think through the total cost of risk working with our partners?

And I think when AIG had a slight pullback in casualty, there was a lot of demand from our clients asking for us to be, you know, more involved. And so I think the way in which we react to that is by trying to create solutions for our clients in the environment that we’re in. So, Don, maybe just, you know, quickly just what you’re seeing in casualty to Meyer’s question, you know, around, you know, client demand and and how we’re helping them, on an advisory basis.

Don Bailey, Executive, AIG: Yes. Yeah. The social inflation and some other factors in the casualty market have the market appropriately disrupted and generally disciplined, and we expect that to continue. Social inflation, Meyer, it’s a long term issue. And why that matters is that casualty is a long term relationship as opposed to a property relationship oftentimes.

So these are twenty, thirty year relationships. So when we look at the question you’re asking, buyers are definitely in a flight to quality mode where they see that long term partner because of social inflation being even more important and being even more critical. So our brand in this place, our multi lane capabilities, our platform, our financial strength become incredibly attractive for brokers and buyers out there. The flight to quality is real and we’ll see that as we go forward.

Peter Zaffino, Chairman and CEO, AIG: Thank you. Okay, Thanks so much. Thanks, Meyer. Next question.

Michelle, Conference Call Operator: Thank you. Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Elyse Greenspan, Analyst, Wells Fargo: Hi, thanks. Good morning. My first question, I wanted to go to the pricing discussion. You guys said excluding property, North America commercial is up 6% and you pegged that as in line with loss trend. I might have assumed just given the casualty makeup of the book that loss trend would have been above 6%.

So maybe if you could just help by kind of parsing it out on the loss trends that you’re seeing within kind of some number that’s less than 6% ex property in that North America book?

Peter Zaffino, Chairman and CEO, AIG: Thanks, Elyse. Look, we’re not going to break it down by line. And if you look at where we’re getting strong rate, it would be where there’s a bigger loss cost trend. So if you think about excess casualty, in particular, some of the retail primary casualty. You know, we are, you know, looking at well, we took out properties just as it’s a part of the index.

But, you know, I think the loss cost trend, is where we had outlined it on sort of on an index basis, and I think we are covering loss costs on casualty and other lines, excluding property.

Elyse Greenspan, Analyst, Wells Fargo: Okay. Thank you. And then my follow-up, has there been any significant change in price that you guys have seen in July relative to the Q2? Just because I think, right, property is probably perhaps a bigger makeup of the second quarter. Just trying to get a sense of any kind of pricing change quarter to date in the Q3.

Peter Zaffino, Chairman and CEO, AIG: Look, if we had insight that we could give you, we would give it, but it’s just too early, Elyse, I mean, because we’re still aggregating July. We haven’t seen any trends that are concerning different than what we reported for the first half of the year. And I think we really just need to play out the quarter as we go into the last two months of the quarter. So I just think it’s too premature to outline anything in July or there’s nothing that we’ve seen that is significantly different than what we reported in the second quarter.

Elyse Greenspan, Analyst, Wells Fargo: Thank you.

Peter Zaffino, Chairman and CEO, AIG: Thank you.

Michelle, Conference Call Operator: Thank you. Our next question comes from Mike Zaremski with BMO. Your line is open.

Meyer Shields, Analyst, KBW: Hey, thanks. Good morning. Question on the meaningful expense ratio improvement, so just kind of on the cadence. Should we be thinking that the improvement is going to be a bit more kind of back end loaded given the top line being weighted way down a bit by property rates? Or is that kind of not that much of a is operating leverage not that much of a factor at this point?

Peter Zaffino, Chairman and CEO, AIG: Keith, let me start with this. Good morning, Mike. And I will like, just provide, like, sort of high level and any details you wanna add to it, please please do. One is we started this sort of process of apportioning, you know, parent expenses, you know, into the business, you know, in the third quarter of last year. Was it fully loaded in the third and fourth quarter?

No. But it was mostly there. So I think when you look at the first half of the year, it’s kinda continuation of what we did, you know, from other ops, GOE into the business. I don’t think the second quarter is an accurate run rate. I think it starts to bend the curve a bit in the third and fourth where there’s less going into the business, when you compare it to, sort of the second quarter.

There’s some onetime, you know, sort of headwinds in the second quarter, but, like, we’re really just focused on getting to future state, which I think we’ve done an exceptional job in terms of the parent company. The business has done a tremendous job of absorbing those costs. And, you know, I thought it would actually be a longer transition than it has not been. And then you have to recognize too, we haven’t fully earned in all the AIG next while we have completed, you know, the 500,000,000. We still have, you know, more to earn in, in terms of incremental in year benefits in the third and fourth quarter.

So look at this isn’t guidance that you ought to, like, take it way down, but it is guidance saying that I think you gotta look at it for the full year. Like, the first half was a little bit more bumpy than I think the back half will be, and we’re gonna watch, you know, sort of the, you know, the earned premium and making sure that we don’t have any issues on the expense side. But, Keith, I mean, a couple of variables you may wanna add?

Keith, Financial Executive, AIG: Yeah. Just three quick points, and and Peter Peter said it well. You know, the first thing, it’s it’s not linear. Right? Quarter to quarter, I think, is is a good way of looking at.

Looking at it over the course of a a the full year is is a better way. Just a couple quick points. You know, in my script, we talked about, I wanted to give you a fully loaded view of expense looking at GOE plus other operations expenses to get a feel for are we getting the expenses? And the answer is yes. Right?

You see minus 3% in the first half of the year when you load full expenses together and plus one in the quarter, and that compares to, you know, 646% growth on the top line respectively. So we’re getting the operating leverage. Point two, if you look at the expense ratio, it’s up 20 bps adjusted for travel in the first half, and that’s with more than 100 basis points of parent cost pushdown. So we’re getting, again, the ratio is underlying improving. And the third thing, to Peter’s point he made, is that the noise from this, the parent pushdown, will dissipate over time.

You know, this quarter, we had $90,000,000 of expense. It was 184,000,000 in the prior year. The third quarter had 144,000,000 So you’re starting to see and once we get to fourth quarter, that will completely dissipate as we get into 2026.

Meyer Shields, Analyst, KBW: Okay, perfect. That’s helpful. My follow-up question is on the E and S Marketplace. I believe, Peter, you cited submissions intellects being plus high 20s, which just seemed like a I don’t think you disclose it every quarter, but it seemed like a very high level. Can you maybe just kind of talk about dynamics in that marketplace?

I guess some folks ask us that given property is correcting a bit off of very healthy levels, we shouldn’t eventually the retailers look to kind of find capacity and move some of that property out of the E and S market, which can slow the submission rate at least, I guess. So any comments would be helpful.

Peter Zaffino, Chairman and CEO, AIG: My first comment is be careful who you speak to. Because this dynamic is very different than any other market where industry executives that have been in the wholesale and retail will expect this to be you know, a market that just transitions back into retail. And that may or may not happen. We’re not seeing it. Like, I mean, so, like, we we keep citing the submission counters because it’s not that we’re surprised, but we’re, like, unbelievably encouraged because in a market that typically would find retail casualty and retail property being more in demand, that doesn’t seem to be the case.

And and so, you know, when we look at our own growth, Lexington casualties growing very strong. You know, property, to be honest, held up better than than the retail. And that’s from, you know, the middle market play that that we had in the past. And I think that wholesale brokers have become more than E and S market placement. They are now a broad range of whether it’s through, you know, MGAs and MGUs or actually being placement mechanisms for the 40,000 independent agents that exist within The United States.

So I I I think that the market is seeing, some pricing pressure, but so is the retail. And there’s no evidence from us that, it’s slowing down in terms of submission count. And we outlined in Investor Day is that if we can start to harness that submission count and get it to better bind ratios because it’s a business that we like, we still see growth opportunities. It’s not that we’re saturated, with the submission count that we’re maximizing, you know, our own growth potential or the industry is. And, yeah, there may be new entrants, new participants, but they’re irrelevant in terms of the market that we trade in.

So we we remain encouraged, cautious because we wanna watch what’s happening within the property. But overall, it’s it’s holding up really well.

Meyer Shields, Analyst, KBW: Thank you.

Peter Zaffino, Chairman and CEO, AIG: Okay. Thank you very much. Appreciate everybody, participating. I wanna thank all of our AIG colleagues for yet another outstanding contribution to this quarter and I wish everybody a great day.

Michelle, Conference Call Operator: This does conclude the program. You may now disconnect. Good day.

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