AIG: A Compelling Buy Opportunity Amid Insurance Sector Recovery

The insurance sector is undergoing a significant transformation in 2025, marked by a resurgence in IPO activity, technological innovation, and improved underwriting discipline. Against this backdrop, American International Group (AIG) stands out as a compelling investment opportunity, driven by robust earnings momentum, strategic capital allocation, and valuation metrics that suggest undervaluation relative to both historical trends and industry peers.

Earnings Momentum: A Catalyst for Growth

AIG's third-quarter 2025 results underscore its ability to capitalize on favorable market conditions and operational improvements. The company reported a net income of $519 million, a 13% year-over-year increase, fueled by an 81% surge in General Insurance underwriting income to $793 million according to AIG's official results. This outperformance reflects disciplined risk management and a 580 basis point improvement in the combined ratio to 86.8%, signaling stronger underwriting efficiency per AIG's earnings release.

Adjusted after-tax income per diluted share rose by 77% year-over-year to $2.20, surpassing Wall Street expectations. This momentum is further supported by AIG's strategic investments, including acquisitions of Everest Group's global retail commercial insurance portfolios and stakes in Convex Group and Onex Corporation, which are projected to be accretive to earnings and return on equity according to AIG's official announcement.

Valuation Analysis: Attractive Metrics Amid Sector Recovery

AIG's valuation appears compelling when compared to both its historical averages and industry benchmarks. As of November 2025, the company trades at a price-to-earnings (P/E) ratio of 12.4x, slightly below the peer average of 13.1x but above the Global Insurance industry average of 11.7x according to Simply Wall St. This suggests AIG is priced for moderate growth while offering a margin of safety relative to its peers.

Adjusted after-tax income per diluted share rose by 77% year-over-year to $2.20, surpassing Wall Street expectations. This momentum is further supported by AIG's strategic investments, including acquisitions of Everest Group's global retail commercial insurance portfolios and stakes in Convex Group and Onex Corporation, which are projected to be accretive to earnings and return on equity according to AIG's official announcement.

Historically, AIG's P/E ratio has averaged 8.59 over the past five years, with the current multiple of 14.0x indicating a premium to this level according to Full Ratio. However, this premium is justified by the company's earnings trajectory: analysts project 2026 earnings per share (EPS) of $7.85, up from $6.92 in 2025 according to Yahoo Finance. This 13% growth estimate aligns with broader sector trends, where improved underwriting margins and technological adoption are driving value creation as reported by Deloitte.

The company's price-to-book (P/B) ratio of 1.00 as of November 2025 also highlights its undervaluation relative to tangible assets according to Full Ratio. While this metric has declined slightly from earlier 2025 levels, it remains above the 10-year low of 0.26 and well within the historical range of 0.26–1.25 according to MarketWatch. A P/B ratio near 1.0 suggests the market is valuing AIG's equity at par with its book value, offering potential upside if intangible assets (e.g., brand strength, risk management capabilities) are re-rated.

Sector Tailwinds and Strategic Positioning

The insurance sector's broader recovery in 2025 provides additional tailwinds for AIG. IPO activity in the sector is projected to exceed $8 billion in 2025, reflecting renewed investor confidence. This momentum is driven by narrowing valuation spreads between public and private markets, as well as advancements in technologies like generative AI and geospatial analytics, which are enabling insurers to mitigate losses and enhance resilience as reported by Deloitte.

AIG's focus on capital returns further strengthens its appeal. The company returned $1.5 billion to shareholders in Q3 2025 through share repurchases and dividends, demonstrating a commitment to rewarding investors during a period of strong cash flow generation. With a Core Operating ROE of 13.6%, AIG is also outperforming its cost of capital, a critical metric for long-term value creation according to AIG's earnings release.

Conclusion: A Buy Opportunity with Durable Momentum

AIG's combination of earnings growth, disciplined capital allocation, and attractive valuation metrics positions it as a standout within the recovering insurance sector. While challenges such as margin pressures in property and casualty insurance persist as reported by Deloitte, AIG's strategic investments, technological adoption, and strong underwriting performance provide a durable competitive edge. For investors seeking exposure to a sector poised for growth, AIG offers a compelling entry point at a price that reflects both its historical value and future potential.