After bailout and restructuring, AIG bets big on AI
American International Group (AIG), after surviving scandal and near failure, as well as shaking off a government takeover, is moving into what its top executive described as a “new chapter” — one marked by stronger financial performance, disciplined underwriting, and an aggressive push into generative artificial intelligence.
Speaking on a recent presentation with analysts and investors, AIG Chairman and CEO Peter Zaffino highlighted how the insurer’s restructuring efforts are paying off, while positioning the company to lead the industry in technological adoption.
Strongest performance in years
The second quarter delivered one of AIG’s strongest performances in years. Adjusted after-tax income per share rose more than 50% year-over-year, fueled by a 46% jump in underwriting income. The company’s core operating return on equity climbed to nearly 12%, while its calendar-year combined ratio improved to 89.3%.
“Our core operating ROE increased to 11.7% in the quarter, and our calendar year combined ratio was 89.3%, so we thought that was an outstanding result for the second quarter,” Zaffino said.
Zaffino noted that these results came despite an active catastrophe environment, including wildfires earlier in the year. AIG also returned $4.5 billion in capital to shareholders, retired $130 million in debt, and achieved long-awaited ratings upgrades from both S&P and Moody’s — the latter for the first time in decades.
“This is the first upgrade that AIG received from Moody’s since the 1990s,” he said. “It was kind of the last stakeholder that had not voted for the change and the improvement we made. It was a good moment for the company.”
AIG focuses on the future
The 2008 fiscal crisis and government bailout – in which the U.S. offered a $180 million lifeboat to the company and technically assumed control – are clearly and cleanly in the rear-view mirror for Zaffino and AIG. Four years later, in 2012, the Treasury Department sold the last of its AIG stock, netting a total gain of more than $22 billion from the sale of AIG common stock and $0.9 billion from the sale of AIG preferred stock. In 2017, the U.S. Financial Stability Oversight Council removed AIG from its list of “too-big-to-fail” institutions. Now, the company is solely focused on the future.
If there was one theme that dominated Zaffino’s recent discussion, it was AIG’s embrace of artificial intelligence. He described AI as a transformative force for underwriting, claims, and customer engagement.
“We want to embed [Gen AI] into our core business and end-to-end processes supporting underwriting and claims,” he said. “The early results have been very promising.”
Unlike many competitors that are still piloting projects, AIG has already rolled out AI tools in live business lines, including its Lexington subsidiary. Early results show efficiency gains in underwriting workflow, faster submission handling, and improved prioritization of risks.
The company sees the technology not as a replacement for underwriters, but as an enhancer — arming them with better data, reducing cycle times, and improving bind ratios.
“In three years, those who have invested will be far ahead of those who haven’t,” Zaffino said, warning that scale and digital sophistication will increasingly determine competitive advantage.
Property markets still challenging
Beyond AI, AIG is navigating complex insurance cycles. Property markets are still challenging, while casualty and financial lines are stabilizing. The company is leaning on reinsurance to smooth volatility, preferring “predictability over being at the whim of hurricanes or wildfires,” Zaffino explained.
“If you’re running a global business at a low 80s combined ratio with what would be considered a lot of reinsurance, I like that strategy,” he said. “I like the predictability of volatility containment, and I don’t like to be at the whim of what happens with the weather or major hurricanes or wildfires.”
At the same time, AIG is eyeing growth opportunities in casualty, specialty, and select international markets. The insurer stays open to strategic acquisitions, particularly in accident and health, but Zaffino stressed that any deal must be “strategic, ROE-accretive, and culturally aligned.”
Balancing training pipeline, experienced hires
The discussion also underscored how AIG is building for the future through people as well as technology. The company has been selective in hiring, focusing on data science and digital expertise while keeping a strong underwriting culture. Attrition is still low, and the company continues to supplement its training pipeline with experienced hires from across financial services.
“We have a tremendous training program,” he said “Getting out of university into our analyst program and then working through the company has been tremendous. We supplement what we bring in from the outside with talent that is developed within AIG.”
Even in smaller-commercial segments, AIG is using technology to offer faster, more efficient coverage through platforms like Western World, where policies can be bound in minutes. The goal, Zaffino said, is to marry speed with risk intelligence — “not just paying claims but helping clients manage resilience.”
With improved ratings, a leaner balance sheet, and early AI successes, AIG is positioning itself as both a disciplined underwriter and a digital leader. The challenge will be sustaining profitability amid shifting cycles while scaling its technology across the enterprise.
Still, Zaffino sounded confident: “Momentum is on our side. We’re executing incredibly well, and the opportunities in front of us are substantial.”
Year to date AIG stock is up more than 12%, and nearly 175% from its five-year low, to $82 per share.
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