Analysts See AIG's Q4 As Positive, But Expense Ratio Limits Stock Gains

American International Group (AIG) reported its fourth-quarter earnings on Tuesday, and analysts have largely reacted positively to the results. Piper Sandler analyst Paul Newsome noted that the results came in above consensus but slightly below his estimates due to weaker underwriting results and higher expenses. However, catastrophe losses were in line with his expectations and better than consensus, which contributed to a more favorable outlook. Keefe, Bruyette & Woods analyst Meyer Shields also noted that AIG's fourth-quarter operating EPS beat their $1.09 estimate, led by stronger core and catastrophe loss ratios, reserve releases, and investment income, partially offset by higher expenses and taxes.



Despite the positive outlook, AIG's stock price has not seen significant gains following the earnings report. This can be attributed to the increase in the company's expense ratio, which rose to 32.8% in Q4 2024, up from 32.6% in the previous year. This increase in expenses can be attributed to several factors, including weaker underwriting results, higher expenses, and catastrophe losses. The increase in the expense ratio may impact AIG's future financial performance by reducing profit margins, potentially requiring premium price increases, and highlighting the need for improved operational efficiency.



To mitigate the impact of a higher expense ratio, AIG could consider several strategic initiatives. These include improving underwriting discipline, streamlining operations, diversifying revenue streams, and focusing on capital management. By implementing these initiatives, AIG can work to improve its long-term growth prospects and address the challenges posed by a higher expense ratio.

In conclusion, while analysts have generally reacted positively to AIG's Q4 results, the increase in the company's expense ratio has limited the stock's gains. To address this challenge, AIG can consider various strategic initiatives to improve its long-term growth prospects and mitigate the impact of a higher expense ratio. Investors should monitor AIG's progress in implementing these initiatives and assess the company's ability to manage its expenses effectively.