Grade: B — Generally Healthy, Minor Concerns
Framework: Financial-sector metrics (combined ratio, ROE, underwriting income, reserve adequacy) + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-12, FY ended December 31, 2025) + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP — Unqualified opinion (serving since 1980)
Note: Beneish M-Score and Altman Z-Score are not applicable to insurance companies due to fundamentally different financial statement structures.
One-line verdict: AIG's turnaround is real. The filing reports a combined ratio of 90.1 (down from 91.8), underwriting income of $2.3 billion (up 22%), and a core operating ROE of 11.1%. The company returned $6.8 billion to shareholders — $5.8 billion in buybacks reducing shares outstanding by 11%, plus $1.0 billion in dividends. Financial strength ratings were upgraded by Fitch, S&P, and Moody's. However, GAAP ROE of 7.5% remains below the 11% benchmark, net premiums written declined 1%, and a pattern of AR outpacing revenue for two consecutive years warrants attention. AIG is a dramatically improved company from its post-crisis nadir, but it has not yet reached elite status.
| Metric | Result |
|---|---|
| Combined Ratio | **90.1** (vs. 91.8 prior year) |
| GAAP ROE | **7.5%** |
| Core Operating ROE | **11.1%** |
| Underwriting Income | **$2.3B** (+22% YoY) |
| Net Premiums Written | **$23.7B** (-1% YoY) |
| Net Investment Income | **$3.4B** (+12% YoY) |
| Capital Returned | **$6.8B** (buybacks + dividends) |
| EPS (Diluted) | **$5.43** |
The Combined Ratio Tells the Story
AIG's General Insurance segment ratios directly from the 10-K:
| Metric | 2025 | 2024 | 2023 | Trend |
|---|---|---|---|---|
| Loss Ratio | 59.0% | 59.8% | 58.9% | Improving from 2024 |
| Acquisition Ratio | 18.1% | 19.4% | 19.5% | Improving |
| Expense Ratio | 31.1% | 32.0% | 31.7% | Improving |
| **Combined Ratio** | **90.1** | **91.8** | **90.6** | **Best in 3 years** |
| Catastrophe Losses | 3.9pp | 5.0pp | 4.3pp | Lower cat year |
| Prior Year Development | +2.1pp | +1.4pp | +1.4pp | Adverse, increasing |
| **Accident Year CR (adjusted)** | **88.3** | **88.2** | **87.7** | **Flat/slight deterioration** |
The headline combined ratio improvement is partially driven by lower catastrophe losses (3.9pp vs. 5.0pp). More concerning: adverse prior year reserve development increased to 2.1 points from 1.4 points. This means reserves established in prior years are proving insufficient — a yellow flag for reserve adequacy. The accident year combined ratio, adjusted for cats and prior year development, was 88.3 — essentially flat with 88.2 in 2024 and slightly worse than 87.7 in 2023.
Profitability: GAAP ROE Still Below Target
| Metric | 2025 | Context |
|---|---|---|
| GAAP ROE | 7.5% | Below 11% benchmark |
| Core Operating ROE | 11.1% | At benchmark on adjusted basis |
| EPS (Diluted) | $5.43 | GAAP |
| Adjusted EPS (Diluted) | $7.09 | +43% from prior year |
| Net Income | ~$3.1B implied | From EPS and share count |
The 43% increase in adjusted EPS from the prior year is striking. The gap between GAAP EPS ($5.43) and adjusted EPS ($7.09) reflects items AIG excludes from its preferred measure — investors should scrutinize what gets adjusted away.
Strategic Transactions
The filing discloses several significant moves in 2025:
These investments totaling nearly $3 billion signal AIG's strategy to diversify beyond pure underwriting — but also introduce execution and valuation risk.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 142 days, +2 days YoY |
| A2 | AR vs Revenue Growth | FAIL | AR outpaced revenue for 2 consecutive years |
| A3 | Revenue vs CFFO | PASS | Revenue -1.8%, CFFO +1.3% |
A2 is a watch item. Accounts receivable growing faster than revenue for two consecutive years at an insurer could indicate slower premium collection, changing reinsurance settlement timing, or extended payment terms with agents. For an insurer of AIG's complexity (three segments across global geographies), some AR volatility is expected, but the persistent pattern should be monitored.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | PASS | CFFO/NI = 1.07 |
| C2 | Free Cash Flow | PASS | FCF $3.3B, FCF/NI = 1.07 |
| C3 | Accruals Ratio | PASS | -0.1% — clean |
| C4 | Cash vs Debt | PASS | Cash $38.4B covers $9.2B debt |
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | PASS | $3.4B = 8% of equity — manageable |
| E1 | Acquirer FCF | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | +2% YoY — stable |
Manipulation Score
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | Beneish M-Score | N/A | Not applicable to insurance companies |
| — | Altman Z-Score | N/A | Not applicable to insurance companies |
Key Risks from the 10-K
1. Adverse Reserve Development — A Growing Concern
Prior year adverse development increased to 2.1 points on the combined ratio in 2025, up from 1.4 in both 2024 and 2023. The filing acknowledges that "the liability for unpaid losses and loss adjustment expenses has been and may continue to be significantly affected by changes in loss cost trends or loss development factors." For a company with AIG's history, reserve adequacy is the single most important metric to watch.
2. Corebridge Financial Dependency
AIG continues to hold a significant stake in Corebridge Financial, Inc. Other Operations "predominantly consists of Net investment income from our AIG Parent liquidity portfolio, Corebridge Financial, Inc. dividend income, corporate General operating expenses, and Interest expense." The value of and dividend income from the Corebridge stake creates concentration risk.
3. Subsidiary Cash Access Limitations
The filing warns: "AIG Parent's ability to access funds from our subsidiaries is limited, and our sources of liquidity may be insufficient to meet our needs." Despite $38.4 billion in consolidated cash, the parent's ability to upstream capital from regulated insurance subsidiaries is constrained by regulatory requirements.
4. Rating Agency Dependency
While rating upgrades in 2025 were positive, the filing notes that a downgrade "could have an adverse effect on sales, competitiveness, customer retention, the marketability of product offerings, liquidity, access to and cost of borrowing." AIG's turnaround narrative depends on maintaining and improving these ratings.
Financial-Sector Grade Assessment
| Financial-Sector Metric | AIG Result | Benchmark | Assessment |
|---|---|---|---|
| Combined Ratio | 90.1 | <100% | PASS |
| GAAP ROE | 7.5% | >=11% | BELOW TARGET |
| Core Operating ROE | 11.1% | >=11% | AT TARGET |
| Reserve Development | Adverse +2.1pp | Non-adverse | WATCH |
| Debt Coverage | $38.4B / $9.2B = 4.2x | >1x | PASS |
| Goodwill/Equity | 8% | <50% | PASS |
| Accident Year CR | 88.3 | <95% | PASS |
Grade: B. AIG has made remarkable progress — a 90.1 combined ratio, 11.1% operating ROE, and rating upgrades from three agencies. The B rather than A reflects: (1) GAAP ROE of 7.5% remains below the 11% benchmark; (2) adverse prior year reserve development is increasing, not decreasing; and (3) AR outpacing revenue for two consecutive years. The company is on the right trajectory but has not yet reached the consistency required for an A grade.
**Disclaimer**: This report is based on AIG's FY2025 10-K filed with SEC EDGAR on February 12, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP (Unqualified opinion, serving since 1980)
Fiscal year ended: December 31, 2025