AIG's 2025 Results Shine but Underwriting Sustainability and Leadership Transition Loom Large

What happened

AIG reported excellent fourth quarter and full-year 2025 results, with CEO Peter Zaffino highlighting strategic progress and financial milestones. However, the DeepValue report indicates that recent earnings beats have heavily depended on unusually low catastrophe losses and favorable prior-year reserve development. For instance, Q3 2025's 86.8% combined ratio improved largely due to lower cats and development, with the accident-year ratio excluding these factors remaining flat at 88.3%. The company is undergoing a CEO transition to Eric Andersen by June 2026, introducing governance and execution uncertainties. Despite the positive headlines, AIG's stock trades near book value at $71.31, pricing in much of the anticipated improvement and leaving limited upside without proof of sustained underwriting discipline.

Implication

The excellent 2025 results reinforce the turnaround narrative but fail to address core concerns about the sustainability of underwriting margins without favorable external factors. With the stock trading at approximately 1.0x book value and 12.6x P/E, consensus expectations for low-teens ROE are already embedded, limiting near-term upside. The impending CEO transition and strategic shifts towards alternative investments via partnerships like CVC add layers of risk that could impact earnings stability. Key monitoring points include Q4 2025 details on accident-year combined ratios and expense trends, which will indicate if underlying improvements are holding. Therefore, the WAIT rating remains prudent, with a re-assessment recommended after 2026 results show whether sub-92% combined ratios can be maintained with normalized catastrophe activity.

Thesis delta

The positive 2025 results do not materially change the investment thesis, as they align with expectations of strong but transient performance. However, if Q4 data reveals sustained accident-year ratio improvements, it could be a step towards upgrading the call. For now, the thesis remains unchanged: wait for concrete evidence from 2026 underwriting results before considering a buy.