AIG’s Q1 2025 Results: Underwriting Discipline Fuels Growth Amid Catastrophic Challenges
14min read AIG’s first-quarter 2025 earnings reveal a company navigating turbulent waters with steady hands. Despite a $520 million hit from California wildfires, aig delivered an adjusted net income of $702 million, or $1.17 per share, showcasing resilience through disciplined underwriting and strategic capital management. Let’s dissect the numbers to uncover why this insurer remains a contender in an era of rising risks.
The Financial Playbook: Growth Amid Chaos
AIG’s top-line momentum is undeniable. Net premiums written (NPW) rose 8% year-over-year on a comparable basis to $4.5 billion, driven by surging commercial insurance segments. North America commercial NPW jumped 14%, with Lexington Casualty leading the charge at 27% growth—a testament to its focus on middle-market casualty and property. Meanwhile, international commercial NPW expanded 8% (FX-adjusted), fueled by 35% growth in property and 17% in marine.
The real story, however, lies in underwriting excellence. The accident-year combined ratio—a critical metric for insurers—hit 87.8%, the best first-quarter result since the 2008 crisis. This reflects AIG’s relentless cost-cutting: the expense ratio dropped to 30.5%, a 130-basis-point improvement year-over-year. The AIG Next efficiency program contributed 20 basis points, while the divestiture of its travel business shaved off an additional 110 basis points.
Capital Alchemy: Shareholders Win Big
AIG’s capital allocation strategy is a masterclass in shareholder-friendly moves. In Q1 alone, it returned $2.5 billion to investors—$2.2 billion via buybacks and $234 million in dividends. The dividend hike of 12.5% to $0.45 per share marks the third straight year of double-digit increases, underscoring its commitment to rewarding patient investors.
The company now aims to repurchase $5–6 billion in shares this year, targeting 500–550 million shares outstanding over time. With a debt-to-capital ratio of 17.1% and $4.9 billion in parent liquidity, AIG’s balance sheet is a fortress, allowing it to weather storms like the California wildfires while still rewarding shareholders.
The Elephant in the Room: Catastrophe Exposure
No discussion of AIG’s Q1 results is complete without addressing the $520 million in catastrophe losses, primarily from wildfires. While this inflated the calendar-year combined ratio to 95.8%, AIG’s reinsurance program limited net losses. After Q1, $35 million remains for North American perils (excluding wind/earthquake) and $385 million globally, net of deductibles—a prudent buffer for the rest of 2025.
Global Ambitions: India’s TATA AIG Engine
AIG’s partnership with India’s TATA Group is a growth engine worth watching. The joint venture, TATA AIG, reported $2.1 billion in 2024 gross premiums, growing at a 20% CAGR since 2020. With India’s non-life insurance market projected to hit $35 billion+ by 2030, AIG is positioned to capitalize. The venture now serves 27 million customers via 85,000 agents, with a 75% focus on high-margin personal lines like motor and health.
The Risks: Tariffs, Tech, and Wildfires
No rose garden exists in insurance. AIG faces headwinds like global supply chain disruptions, which could inflate rebuilding costs post-catastrophe. For example, Canadian softwood lumber (85% of U.S. imports) could spike costs if tariffs disrupt supply. Geopolitical risks, such as sanctions and cyber threats, also loom large.
Internally, AIG must sustain its <30% expense ratio target (Q1 was 30.5%) and improve its global personal lines combined ratio, which stood at 107.9%—a drag on profits.
Conclusion: AIG’s Case for Buy-and-Hold Investors
AIG’s Q1 results underscore its transformation into a lean, growth-oriented insurer. With 87.8% accident-year combined ratio, $5–6 billion in buybacks planned, and a 20%+ EPS growth target, this stock is a buy for investors willing to ride out short-term volatility.
The TATA AIG partnership adds a high-growth kicker, while its fortress balance sheet and disciplined underwriting provide a safety net. Even with risks like catastrophes and tariffs, AIG’s fundamentals—10%+ ROE target, 12.5% dividend hikes, and a $35 billion+ opportunity in India—make it a compelling long-term bet.
Final Take: AIG’s blend of defensive underwriting, shareholder-friendly capital moves, and high-growth markets positions it to outperform over the next decade. Investors who can stomach quarterly bumps will be rewarded.
Data as of Q1 2025. Past performance does not guarantee future results. Always conduct your own research.
Ask Aime: What's behind AIG's resilience against California wildfire losses?
