AIG 10-K diff: FY 2024-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+113 paragraphs −118 paragraphs ~113 changed
FY 2024-12-31 (earlier)
ITEM 1A | Risk Factors
ITEM 1A | Risk Factors
Risk Factor Summary
The following is a summary of the material risks and uncertainties that could adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below.
Market Conditions• Deterioration of economic conditions, geopolitical tensions, changes in market conditions or weakening in global capital markets have and may continue to materially affect our businesses, results of operations, financial condition and liquidity.Reserves and Exposures
• The amount and timing of insurance liability claims are difficult to predict and such claims may exceed the related liability for unpaid losses and loss adjustment expenses.
• Reinsurance may be unavailable or too expensive relative to its benefit and may not be adequate to protect us against losses.
• Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events as well as mass torts.
• Climate change may adversely affect our business and financial condition.
• Concentration of our insurance, reinsurance and other risk exposures may have adverse effects.
• Losses due to nonperformance or defaults by counterparties may materially and adversely affect the value of our investments, our profitability and sources of liquidity.
Investment Portfolio and Concentration of Investments
• Our investment portfolio is concentrated in certain segments of the economy, and the performance and value of our investment portfolio are subject to a number of risks and uncertainties.• We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered as indicative of the future results of our investment portfolio, our future results or any returns expected on our Common Stock.
• Our valuation of investments involves the application of methodologies and assumptions to derive estimates, which may differ from actual experience and could result in changes to investment valuations that may materially adversely affect our business, results of operations, financial condition and liquidity or lead to volatility in our net income.Liquidity, Capital and Credit
• AIG Parent’s ability to access funds from our subsidiaries is limited, and our sources of liquidity may be insufficient to meet our needs, including providing capital that may be required by our subsidiaries.
• We may not be able to generate cash to meet our needs due to the illiquidity of some of our investments.
• A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity.
Business and Operations
• Our risk management policies, standards and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses, results of operations, financial condition and liquidity.
• Pricing for our products is subject to our ability to adequately assess risks and estimate related losses.
• We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity.• Our foreign operations expose us to risks that may affect our operations.• Third parties we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.
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ITEM 1A | Risk Factors• We may experience difficulty in marketing and distributing products through our current and future distribution channels and the use of third parties may result in additional liabilities.
• Our restructuring initiatives may not yield expected reductions in expenses and/or improvements in operational and organizational efficiency.• Business or asset acquisitions and dispositions may expose us to certain risks.
• We are subject to risks from our continuing equity market exposure to Corebridge. There can be no assurances that the anticipated benefits of our sales of Corebridge stock will be achieved.• Significant legal or regulatory proceedings may adversely affect our business, results of operations or financial condition.• Increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social, governance and sustainability matters, including governmental responses to such matters, may adversely affect our reputation or otherwise adversely impact our business and results of operations.
• An epidemic, pandemic or other health crisis could materially and adversely affect our business, results of operations, financial condition or liquidity.• We may not be able to protect our intellectual property and may be subject to infringement claims.
Regulation
• Our businesses are heavily regulated and changes in laws and regulations may affect our operations, increase our insurance subsidiary capital requirements or reduce our profitability.
• New laws and regulations or new interpretations of current laws and regulations, both domestically and internationally, may affect our businesses, results of operations, financial condition and ability to compete effectively.
• An “ownership change” could limit our ability to utilize tax loss and credit carryforwards to offset future taxable income.
• New and proposed changes to tax laws could increase our corporate taxes.
Estimates and Assumptions
• Estimates or assumptions used in the preparation of financial statements and modeled results used in various areas of our business may differ materially from actual experience.
• Changes in accounting principles and financial reporting requirements may impact our consolidated results of operations and financial condition.
• If our businesses do not perform well and/or their estimated fair values decline, we may be required to recognize an impairment of our goodwill or establish an additional valuation allowance against the related deferred income tax assets, which could have a material adverse effect on our results of operations and financial condition.
Employees and Competition
• Employee error and misconduct may be difficult to detect and prevent and may result in reputational damage and significant losses.
• Competition for employees in our industry is intense, and managing key employee succession is critical to our success. We may not be able to attract and retain the key employees and other highly skilled employees we need to support our businesses.
• We face intense competition in each of our business lines, and technological changes may present new and intensified challenges to our businesses.AIG | 2024 Form 10-K
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ITEM 1A | Risk Factors
Risk FactorsInvesting in AIG involves risk. In deciding whether to invest in AIG, you should carefully consider the following risk factors. Any of these risk factors could have a significant or material adverse effect on our businesses, results of operations, financial condition or liquidity. They could also cause significant fluctuations and volatility in the trading price of our securities. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect AIG. These factors should be considered carefully together with the other information contained in this report and the other reports and materials filed by us with the SEC. Further, many of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity above and beyond a risk’s singular impact.MARKET CONDITIONSDeterioration of economic conditions, geopolitical tensions, changes in market conditions or weakening in global capital markets have and may continue to materially affect our businesses, results of operations, financial condition and liquidity.Our businesses are highly dependent on global economic and market conditions. Weaknesses in economic conditions, including a recessionary environment, poor capital markets performance, market volatility, volatility in interest rate levels and inflation have in the past led to, and may in the future lead to, among other consequences, a poor operating environment, erosion of consumer and investor confidence, reduced business volumes, deteriorating liquidity and declines in asset valuations.
Key ways in which we have been, and could be, negatively affected by economic conditions include:
• increased loss payments and loss costs due to inflation;
• increased challenges to insurance policy terms and conditions, such as standard exclusions;
• increases in costs associated with third-party reinsurance, or decreased ability to obtain reinsurance on acceptable terms;
• the increased likelihood of, or increased magnitude of, asset impairments caused by market fluctuations, deterioration in collateral values or credit deterioration of borrowers; and
• reduced premiums.Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including changes in interest rate levels, plateauing or decreasing economic growth and business activity, recessions, social inflation, inflationary or deflationary pressures in developed economies, including the United States, civil unrest, pandemics, geopolitical tensions, changes to international trade and/or tariff policies, foreign investment restrictions, or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries, or the conflict in Israel and the surrounding areas, and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.
These and other market, economic, regulatory and political factors, including the effects of inflation, macroeconomic uncertainty, domestic and international political tensions, disruption to our business operations in countries exposed to geopolitical risk, natural disasters and the increased costs associated with meeting customer needs in such regions, adverse impacts resulting from changes to international trade and tariff policies, and any potential U.S. government shutdown, have had and could continue to have a material adverse effect on our businesses, results of operations, financial condition, capital and liquidity in many ways, including:• lower levels of consumer demand for and ability to afford our products and commercial business activities that have decreased and may continue to decrease revenues and profitability and thus impair goodwill, deferred tax assets or other long-term assets;
• increased credit impairments, downgrades and losses across single or numerous asset classes due to lower collateral values or deteriorating cash flow and profitability by borrowers that could lead to higher defaults on the Company’s investment portfolio, especially in geographic, industry or investment sectors where the Company has higher concentrations of exposure, and widening of credit spreads that could reduce investment asset valuations and increase statutory capital requirements;
• increased market volatility and uncertainty that could decrease liquidity, increase borrowing costs and limit access to capital markets;
• the reduction of investment income generated by, or the market value of, our investment portfolio;• increased costs related to our direct and third-party support services, labor and financing, increased credit risk and decreased sales as a result of inflationary pressures; and
• limitations on business activities and increased compliance risks with respect to economic sanctions regulations relating to jurisdictions in which our businesses operate or we have operations.
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ITEM 1A | Risk FactorsWe are exposed to certain risks arising from or exacerbated by fluctuations in interest rates, such as the mismatch between the expected duration of our liabilities and our assets, changes in certain statutory reserve or capital requirements that are based on formulas or models that consider interest rates or prescribed interest rates, increased financing and refinancing costs, in particular with respect to our corporate debt instruments; and lower investment income on our floating rate investments that will adjust to lower coupons if short-term rates decrease. Changes in interest rates have had and could continue to have a material adverse effect on the value of our investment portfolio. For example, increases in interest rates have impacted, and may continue to impact, our investment portfolio by decreasing the estimated fair values of the fixed income securities that constitute a substantial portion of our investment portfolio as well as the alternative investments in our investment portfolio. This in turn has increased and could continue to increase the unrealized loss positions in our portfolio which could materially and adversely affect our business, results of operations, financial condition and liquidity. Should a low interest rate environment return, it could in the future negatively affect the performance of our investments and reduce the level of investment income earned on our investment portfolios.
In addition, if our investment managers fail to react appropriately to difficult market or economic conditions, our investment portfolio could incur material losses.RESERVES AND EXPOSURES
The amount and timing of insurance liability claims are difficult to predict and such claims may exceed the related liability for unpaid losses and loss adjustment expenses.We regularly review the adequacy of the established liability for unpaid losses and loss adjustment expenses. We also conduct extensive analyses of our reserves during the year. Our liability for unpaid losses and loss adjustment expenses, however, has and may develop adversely and materially impact our businesses, results of operations, financial condition and liquidity.
Estimation of ultimate net losses, loss expenses and the liability for unpaid losses and loss adjustment expenses is a complex process, particularly for both long-tail and medium-tail liability lines of business. There is also greater uncertainty in establishing reserves with respect to new business, particularly new business involving recently introduced product lines. In these cases, there is less historical experience or knowledge and less data upon which the actuaries can rely. Estimating reserves is further complicated by unexpected claims or unintended coverages that emerge due to unexpected events, such as pandemics or geopolitical conflicts. These emerging issues may increase the size or number of claims beyond our intent at the time of underwriting and may not become apparent for many years after a policy is issued.
While we use a number of analytical reserve development techniques to project future loss development, 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 that we relied upon in setting the liability for unpaid losses and loss adjustment expenses. These changes in loss cost trends or loss development factors could be due to changes in actual versus expected claims and losses, difficulties in predicting changes, such as changes in inflation, unemployment, or other social or economic factors affecting claims, including judicial and legislative actions, and changes in the tort environment. Any deviation in loss cost trends or in loss development factors might not be identified for an extended period of time after we record the initial loss reserve estimates for any accident year or number of years.
We review and update actuarial assumptions at least annually, typically in the third quarter for reserves. If actual experience or revised future expectations result in projected future losses, we may be required to record additional liabilities through a charge to net realized gains or losses in the then-current period, which could negatively affect our business, results of operations, financial condition and liquidity. For additional information on reserve development, see Part II, Item 7. MD&A – Insurance Reserves.For additional information on our loss reserves, see Part II, Item 7. MD&A – Critical Accounting Estimates – Loss Reserves and Note 13 to the Consolidated Financial Statements.
Reinsurance may be unavailable or too expensive relative to its benefit and may not be adequate to protect us against losses.Our subsidiaries are major purchasers of third-party reinsurance and we use reinsurance as part of our overall risk management strategy. While reinsurance does not discharge our subsidiaries from their obligation to pay claims for losses insured under our policies, it makes the reinsurer liable to our subsidiaries for the reinsured portion of the risk. Market conditions beyond our control have impacted and may in the future impact the availability and cost of reinsurance and could have a material adverse effect on our business, results of operations and financial condition. For example, reinsurance is typically more difficult or costly to obtain after a year or consecutive years with a large number of major catastrophes, the severity and frequency of which have increased in recent years, and likelihood of which may be further exacerbated by climate change. We have been and may, at certain times be, (i) forced to incur additional costs for reinsurance, (ii) unable to obtain sufficient reinsurance on acceptable terms, or (iii) unable to obtain reinsurance for certain parts of our business. In instances where reinsurance is more costly, insufficient on acceptable terms or unavailable, we have had to, and will in the future have to accept an increase in exposure to risk, reduce or stop writing certain lines of business written by our subsidiaries or seek alternatives in line with our risk limits, or a combination thereof.
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ITEM 1A | Risk FactorsAdditionally, we are exposed to credit risk with respect to our subsidiaries’ reinsurers to the extent the reinsurance receivable is not secured, or is inadequately secured by collateral or does not benefit from other credit enhancements. We also bear the risk that a reinsurer is, or may be, unwilling to pay amounts we have recorded as reinsurance recoverables for any reason, including that (i) the terms of the reinsurance contract do not reflect the intent of the parties to the contract or there is a disagreement between the parties as to their intent, or (ii) the terms of the contract cannot be legally enforced. The insolvency of one or more of our reinsurers, the inability or unwillingness of such reinsurers to make timely payments under the terms of our contracts or payments in an amount equal to our reinsurance recoverable, or the risk that the reinsurance transaction does not operate as intended, including due to a change in laws and regulations or on account of court or arbitration panel interpretations, could have a material adverse effect on our results of operations and liquidity.
Moreover, the use of reinsurance placed in the capital markets or placed with alternative market reinsurers supported by capital market institutions, like private equity houses that fund single purpose reinsurance capital vehicles, may not provide the same levels of protection as traditional reinsurance transactions. Any disruption, volatility and uncertainty in these markets or with respect to these capital market participants or these types of alternative reinsurance structures may impact the protection provided by this type of reinsurance or may limit our ability to access such markets on terms favorable to us or at all. Also, to the extent that we intend to use structures based on an industry loss index or other non-indemnity trigger rather than on actual losses incurred by us, we could be subject to residual risk.The availability of private sector reinsurance for terrorism is limited and we currently have limited reinsurance coverage for terrorist attacks. While we benefit from the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), which provides U.S. government risk assistance to the insurance industry to manage the exposure to terrorism incidents, TRIPRA has specific program limits and does not cover losses in certain lines of business such as personal property and personal casualty. We also rely on the government-sponsored and government-arranged terrorism reinsurance programs, including pools, in force in applicable non-U.S. jurisdictions. The realization of these risks may materially and adversely affect our business, results of operations and financial condition.For additional information on our reinsurance recoverable, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Reinsurance Activities – Reinsurance Recoverable.Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events as well as mass torts.Events such as hurricanes, windstorms, hailstorms, flooding, earthquakes, landslides, wildfires, solar storms, earth sinking, tsunamis, war or other military action, acts of terrorism, explosions and fires, cyberattacks, product defects, pandemics and other highly contagious diseases, mass torts, civil unrest and other catastrophes have adversely affected our business in the past and could do so in the future.Catastrophic events, and legislative or regulatory responses thereto, have in the past and could in the future result in losses in any business in which we operate, and could expose us to:
• widespread claim costs associated with property, casualty, general liability, bodily injury, workers’ compensation, accident and health, travel, business interruption and cyber claims, among others;
• loss resulting from a decline in the value of our invested assets;• limitations on our ability to recover deferred tax assets;
• loss resulting from actual policy experience that is adverse compared to the assumptions made in product pricing;• revenue loss due to decline in customer base;
• declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties we transact business with and have credit exposure to, including reinsurers;
• significant disruptions to our physical infrastructure, systems and operations; and
• widespread loss or corruption of personal or sensitive business data.
Natural and man-made catastrophic events are generally unpredictable. Our exposure to catastrophe-related loss depends on various factors, including the frequency and severity of the catastrophes, the availability of reinsurance, the rate of inflation and the value and geographic or other concentrations of insured companies and individuals. Vendor models and proprietary assumptions and processes that we use to manage catastrophe exposure may prove to be ineffective due to incorrect assumptions or estimates. For example, modeling for the more unpredictable and infrequent types of catastrophes, such as terrorism, cyber incidents and pandemics, is even more difficult and may be less reliable.In addition, legislative and regulatory initiatives and court decisions following major catastrophes (both natural and man-made), as well as mass torts, have required and could in the future require us to pay the insured beyond the provisions of the original insurance policy and may prohibit the application of a deductible, resulting in inflated and unanticipated claims; or impose other restrictions, which would reduce our ability to mitigate exposure. These initiatives could impair our cash flows and, without regulatory relief, could adversely impact our subsidiaries’ capital ratios.
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ITEM 1A | Risk FactorsFor additional information on potential catastrophic events, including a sensitivity analysis of our exposure to certain catastrophes, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks.For information regarding the effects of climate change on our business, see “Climate change may adversely affect our business and financial condition” below.
Climate change may adversely affect our business and financial condition.
Climate change, indicated by higher concentrations of greenhouse gases, a warming atmosphere and ocean, wildfires, diminished snow and ice, and a rise in sea levels, appears to have contributed to an increase in the frequency and severity of natural disasters and the creation of uncertainty as to future trends and exposures. As such, climate change presents significant financial implications for us in areas such as underwriting, claims and investments, as well as risk capacity, financial reserving and operations.Climate change presents challenges to our ability to effectively underwrite, model and price catastrophe risk particularly if the frequency and severity of catastrophic events such as pandemics, hurricanes, tornadoes, heatwaves, floods, wildfires and windstorms and other natural disasters continues to increase. For example, losses resulting from actual policy experience may be adverse as compared to the assumptions made in product pricing and our ability to mitigate our exposure may be reduced.
Climate change-related risks may also adversely impact the value of the securities that we hold or lead to credit risk of other counterparties we transact business with, including reinsurers. Our reputation or corporate brand could also be negatively impacted as a result of changing customer or societal perceptions of organizations that we either insure or invest in due to their actions (or lack thereof) with respect to climate change, as well as political initiatives or other stakeholder expectations with respect thereto.
In addition, lawmakers and regulators at the federal, state and local levels have imposed and may continue to impose new requirements or issue new guidance aimed at addressing or mitigating climate change-related risks and efforts undertaken in response thereto. Additional actions by foreign governments, regulators and international standard setters have and could result in substantial expansions of the regulations, guidance or expectations to which we may be subject. It is also possible that the laws, regulations and guidance adopted in U.S. local, state, U.S. federal or foreign jurisdictions regarding climate change-related risks will differ from one another, and that they could be inconsistent with the laws and regulations of other jurisdictions in which we operate. This could result in us having to comply with differing or inconsistent laws, regulations and guidance across jurisdictions.
Additionally, litigation related to climate change has increased in recent years. Many lawsuits center on enforcement or interpretation of environmental laws and regulations, often seeking to use litigation as a tool to influence governmental and corporate climate policies. Other cases seek damages for contribution to climate change or for insufficient disclosure around material financial risks, which could cause us to experience increased claims under liability policies, such as casualty and directors’ and officers’ insurance policies, increase our liabilities and affect the viability of certain of our business lines.
In addition, severe weather and other effects of climate change result in more frequent and more severe damages, leading to lawsuits against our insureds. Indirect climate change effects are also seen in litigation over flooding, mudslides and other severe weather that results in injury or damage, as well as in construction defect litigation, chemical release lawsuits, and workers’ compensation claims. Litigation related to climate change may, through increased claims from our customers and adverse impacts to the value of the securities that we hold, adversely impact our business and results of operations.We have also faced and may continue to face business continuity risk as a result of climate change-related incidents that may disrupt business operations, including extreme weather events. We cannot predict the long-term impacts of climate change on our business and results of operations.For information regarding risks associated with other catastrophic events, see Reserves and Exposures – “Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events” above.Concentration of our insurance, reinsurance and other risk exposures may have adverse effects.
We are exposed to risks as a result of concentrations in our insurance policies, investments, derivatives and other obligations that we undertake for customers and counterparties. Further, any risk management arrangements we employ to manage concentration risks, whether directly or through third parties, may not be available on acceptable terms or may prove to be ineffective. Our risk exposures under insurance policies, derivatives and other obligations are, from time to time, compounded by risk exposure assumed in the management of our investment portfolio. Also, our exposure for certain single risk coverages and other coverages may be so large that adverse experience compared to our expectations may have a material adverse effect on our consolidated results of operations or result in additional statutory capital requirements for our subsidiaries.In addition, the deconsolidation for accounting purposes and ongoing divestment of our stake in Corebridge, could increase the materiality of these potential concentrations in the remaining portfolio. For additional information on risks associated with our continuing equity market exposure to Corebridge, see Business Operations – “We are subject to risks from our continuing equity market exposure to Corebridge. There can be no assurances that the anticipated benefits of our sales of Corebridge stock will be achieved” below.
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ITEM 1A | Risk FactorsAlso see Part II, Item 7. MD&A – Business Segment Operations – General Insurance – Business Strategy and – Industry and Economic Factors.
Losses due to nonperformance or defaults by counterparties may materially and adversely affect the value of our investments, our profitability and sources of liquidity.
We are exposed to credit risk arising from exposures to various counterparties related to investments, derivatives, premiums receivable, certain businesses and reinsurance recoverables. These counterparties include, but are not limited to, issuers of fixed income and equity securities we hold, borrowers of loans we hold, customers, plan sponsors, trading counterparties, counterparties under swaps and other derivatives instruments, reinsurers, corporate and governmental entities whose payments or performance we insure, joint venture partners, clearing agents, exchanges, clearing houses, custodians, brokers and dealers, commercial banks, investment banks, intra-group counterparties with respect to derivatives and other third parties, financial intermediaries and institutions and guarantors. These counterparties may default on their obligations to us due to bankruptcy, insolvency, receivership, financial distress, lack of liquidity, adverse economic conditions, operational failure, fraud, government intervention and other reasons. In addition, for exchange-traded derivatives, such as futures, options as well as "cleared" over-the-counter derivatives, we are generally exposed to the credit risk of the relevant central counterparty clearing house and futures commission merchants through which we clear derivatives. Defaults by these counterparties on their obligations to us could have a material adverse effect on the value of our investments, business, financial condition, results of operations and liquidity.An insolvency of, or the appointment of a receiver to rehabilitate or liquidate, a significant competitor could negatively impact our business if such appointment were to impact consumer confidence in our products and services. Additionally, if the underlying assets supporting the structured securities we invest in are expected to default or actually default on their payment obligations, our securities may incur losses.
INVESTMENT PORTFOLIO AND CONCENTRATION OF INVESTMENTS
Our investment portfolio is concentrated in certain segments of the economy, and the performance and value of our investment portfolio are subject to a number of risks and uncertainties.Our results of operations and financial condition have in the past been, and may in the future be, adversely affected by the degree of concentration in our consolidated investment portfolio. For example, we have significant holdings of real estate and real estate-related investments, including residential mortgage- backed securities (both U.S. government-sponsored enterprise-issued and Non-Agency issued), and commercial mortgage-backed securities and whole loans. We also have significant exposures to domestic and global financial institutions certain industries, such as consumer discretionary and non-discretionary, the U.S. federal, state and local government issuers and authorities, and various governments globally. Events or developments that have a negative effect on any particular industry, asset class, group of related industries or geographic region may adversely affect the valuation of our investments to the extent they are concentrated in such segments. Our ability to sell assets in such segments may be limited.
Our investments are also subject to market risks and uncertainties, including, in addition to interest rate risk, changes in the level of credit spreads, currency rates, and equity prices, each of which has affected and will continue to affect the value of investments in our investment portfolio as well as the performance of, and returns generated by, such investments. For information regarding risks associated with interest rate volatility, see Market Conditions above.
Furthermore, our alternative investment portfolio, which is subject to volatility in equity markets, includes investments for which changes in fair value are reported through pre-tax income. An economic downturn or decline in the capital markets has had and could continue to have a material adverse effect on our investment income, including as a result of decreases in the fair value of alternative investments.
We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered as indicative of the future results of our investment portfolio, our future results or any returns expected on our Common Stock.
We rely on external investment managers to manage the majority of our investment portfolio, consisting of liquid fixed income, certain private placement credit, certain private equity investments, commercial real estate-related equity investments and commercial mortgage loans.
Our investment managers are generally compensated based on the size of the investment portfolios that they manage, rather than based on investment profits or income; as a result, these investment managers are not directly incentivized to maximize investment returns. Our investment portfolio’s returns have benefited historically from investment opportunities and general market conditions that may not currently exist and may not be repeated. There can be no guarantee that any investment manager we engage will be able to achieve any particular returns or generate investment opportunities with attractive, risk-adjusted returns for our investment portfolio in the future. If any of our investment managers becomes unable to effectively manage our portfolio investments, the concentration of assets in our portfolio that are managed by it could adversely affect our business, results of operations, financial condition and liquidity.
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ITEM 1A | Risk FactorsIn addition, we have become more reliant on our external asset managers, and such increased dependence has and may reduce our internal capabilities and expertise or expose us to greater risk, including the risk that external asset managers may fail to meet our performance expectations or otherwise experience disruptions or losses.
Our valuation of investments involves the application of methodologies and assumptions to derive estimates, which may differ from actual experience and could result in changes to investment valuations that may materially adversely affect our business, results of operations, financial condition and liquidity or lead to volatility in our net income.
It has been and may continue to be difficult to value those of our investments or derivatives that are not actively traded. There also may be cases where, due to the financial environment or market conditions, normally active markets become inactive or less active, which can result in insufficient observable data. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. These values may not be realized in a market transaction, may not reflect the value of the asset and may change very rapidly as market conditions change and valuation assumptions are modified. Decreases in value and/or an inability to realize that value in a market transaction or other disposition may have a material adverse effect on our business, results of operations, financial condition and liquidity.LIQUIDITY, CAPITAL AND CREDIT
AIG Parent’s ability to access funds from our subsidiaries is limited, and our sources of liquidity may be insufficient to meet our needs, including providing capital that may be required by our subsidiaries.
As a holding company, AIG Parent depends on dividends and other payments from its subsidiaries to fund operations, pay dividends, repurchase shares, meet debt service obligations and meet the capital and liquidity needs of our subsidiaries. The majority of our investments are held by our regulated subsidiaries. Any inability by our subsidiaries to make dividend or other payments in an amount sufficient to enable AIG Parent to meet its cash requirements could have an adverse effect on our operations or our business, results of operations, financial condition, capital and liquidity.
The ability of our subsidiaries to pay dividends to AIG Parent in the future will depend on their earnings, capital levels, tax considerations, covenants contained in any financing or other agreements, applicable regulatory restrictions and rating agency requirements. In addition, such payments could be limited as a result of claims against our subsidiaries by their creditors, including suppliers, vendors, lessors and employees. Additionally, our insurance subsidiaries may be limited in their ability to make dividend payments to AIG Parent in the future because of the need to meet their obligations or to support their own capital levels or because of regulatory limits and restrictions or changes in, or interpretations of, regulatory or rating agency standards.Our decision to pursue strategic changes or transactions in our business and operations may also subject our subsidiaries’ dividend plans to heightened regulatory scrutiny and could make obtaining regulatory approvals for extraordinary distributions by our subsidiaries, if required, more difficult. We are also subject to certain other restrictions on our capital from time to time.
If our liquidity is insufficient to meet our needs, we may need to have recourse to third-party financing, external capital markets or other sources of liquidity, which may not be available or could be expensive. The availability and cost of any additional financing at any given time depends on a variety of factors, including general market conditions, the volume of trading activities, the overall availability of credit, regulatory actions and our credit ratings and credit capacity. It is also possible that, as a result of such recourse to external financing, customers, lenders or investors could develop a negative perception of our long- or short-term financial prospects. If AIG Parent is unable to satisfy a capital need of a subsidiary, the credit rating agencies could downgrade the subsidiary’s financial strength ratings or the subsidiary could become insolvent or, in certain cases, could be seized by its regulator.In the ordinary course of our business, we are required to post collateral for our insurance company subsidiaries from time to time. We may be required to post additional collateral due to regulatory changes from time to time, which could adversely impact our business, financial condition, results of operations and cash flows.
For additional information on our liquidity, see Part II, Item 7. MD&A – Liquidity and Capital Resources.
We may not be able to generate cash to meet our needs due to the illiquidity of some of our investments.
We have a diversified investment portfolio. However, economic conditions as well as adverse capital market conditions, including a lack of buyers, the inability of potential buyers to obtain financing on reasonable terms, volatility, credit spread changes, interest rate changes, foreign currency exchange rates and/or declines in collateral values have in the past impacted, and may in the future impact, the liquidity and value of our investments.We have investments in certain securities, including certain fixed income structured and privately placed securities as well as investments in private equity funds and hedge funds, mortgage loans and real estate, that are less liquid than other investments. If it became necessary to sell such assets in a stressed market environment, the prices achieved in any sale may be lower than their carrying value, which could cause a material adverse effect on our business, financial condition, results of operations and cash flows. Adverse changes in the valuation of real estate and real estate-linked assets, volatility or deterioration of capital markets and widening
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ITEM 1A | Risk Factorscredit spreads have in the past, and may in the future, materially adversely affect the liquidity and the value of our investment portfolios.
In the event additional liquidity is required by one or more of our companies, it may be difficult for us to generate additional liquidity by selling, pledging or otherwise monetizing these or other of our investments at reasonable prices and time frames.A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity.Downgrades of the Insurer Financial Strength (IFS) ratings of our insurance companies could (i) prevent these companies from selling, or make it more difficult for them to succeed in selling, products and services, (ii) make it more difficult for them to obtain new reinsurance or obtain it on reasonable pricing terms, and/or (iii) result in increased policy cancellations or return of premiums. A downgrade of the IFS ratings of our insurance companies could result in a downgrade of AIG Parent’s credit ratings. In the event of a downgrade of AIG Parent’s credit ratings, our financing costs will increase and the availability of financing could be limited. A downgrade could also cause our derivative counterparties to limit or reduce their exposure to us and thus reduce our ability to manage our market risk exposures effectively.
These events could adversely affect our business, results of operations, financial condition and liquidity.
For additional information on rating agency actions, see Part II, Item 7. MD&A – Liquidity and Capital Resources – Credit Ratings and – Financial Strength Ratings.BUSINESS AND OPERATIONS
Our risk management policies, standards and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses, results of operations, financial condition and liquidity.We have developed and continue to enhance enterprise-wide risk management policies, standards and procedures to identify, monitor and mitigate risk to which we are exposed. Our risk management policies, standards and procedures may not be sufficiently comprehensive and may not identify or adequately protect us from every risk to which we are exposed. Many of our methods of identifying, measuring, underwriting and managing risks are based upon our study and use of historical market, applicant, customer, employee and bad actor behavior or statistics based on historical models. As a result, these methods may not accurately predict future exposures from events such as a major financial market disruption as the result of a natural or man-made catastrophe, that could be significantly different than the historical measures indicate, and which could also result in claims levels not previously observed. We have and will continue to enhance our underwriting processes, including, from time to time, considering and integrating newly available sources of data to confirm and refine our traditional underwriting methods. Our efforts at implementing these improvements may not, however, be fully successful, which may adversely affect our competitive position. We have also introduced new product features designed to limit our risk and taken actions on in-force business, which may not be fully successful in limiting or eliminating risk. Moreover, our hedging programs and reinsurance strategies that are designed to manage risk rely on assumptions regarding our assets, liabilities, general market factors and the creditworthiness of our counterparties that could prove to be incorrect or inadequate. Our hedging programs utilize various derivative instruments, including but not limited to interest rate swaps, credit default swaps and foreign exchange forwards, as well as other hedging instruments, which may not effectively or completely reduce our risk. Assumptions underlying models used to measure accumulations and support reinsurance purchases may prove inaccurate and could leave us exposed to larger than expected catastrophe losses in any given period. In addition, our current business continuity and disaster recovery plans may not be sufficient to reduce the impact of pandemics, a major cyber-attack, including ransomware, and other natural or man-made catastrophic events. Other risk management methods depend upon the evaluation of information regarding markets, clients, or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events in each jurisdiction in which we operate. Further, various jurisdictions have unique requirements with respect to AI and environmental, social and governance matters, which may impact the efficacy of our standardized risk management tools and techniques; therefore, our policies and procedures may not be fully effective. Accordingly, our risk management policies and procedures may not adequately mitigate the risks to our business, results of operations, financial condition and liquidity.
If our risk management policies and procedures are ineffective, we may suffer unexpected losses and could be materially adversely affected. As our businesses change and the markets in which we operate evolve, new risks emerge, including risks posed by the rapidly developing technology associated with AI and the implementation thereof within our operations, by our third-party vendors and by competitors, and unanticipated challenges with respect thereto. As a result, new products or new business strategies may present risks that are not appropriately identified, monitored or managed. The effectiveness of our risk management strategies may be limited, resulting in losses, because of market stress or unanticipated financial market movements. In addition, there can be no assurance
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ITEM 1A | Risk Factorsthat we can effectively review and monitor all risks or that all of our employees will understand, follow and comply with our risk management policies and procedures.Pricing for our products is subject to our ability to adequately assess risks and estimate related losses.Our business is dependent on our ability to price our products effectively and charge appropriate premiums and other charges. Pricing adequacy depends on a number of factors and assumptions, including proper evaluation of insurance risks, our expense levels, net investment income expected to be realized, our response to rate actions taken by competitors, legal and regulatory developments, the ability to obtain regulatory approval for rate changes and inflation. Management establishes target returns for each product based upon the factors described above, certain underwriting assumptions and capital requirements, including statutory, GAAP and economic capital models. We monitor and manage pricing and sales to achieve target returns on new business, but we may not be able to achieve those returns, including due to the factors discussed above. Additionally, the property and casualty insurance markets are historically cyclical and experience periods of relatively strong premium rates followed by periods of increased competition that push premium rates down. Inadequate pricing and the difference between estimated results and actual results could have a material adverse effect on the profitability of our operations and our financial condition.We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity.We use information technology systems, infrastructure, including energy supply, and networks and other operational systems to store, retrieve, evaluate and use customer, employee and company data and information. Our business is highly dependent on our ability to access these systems and networks to perform necessary business functions. In the event of a natural disaster, unauthorized access, a terrorist attack, a major cyber-attack or other disruption, our systems, networks, and data may be inaccessible to our employees, customers or business partners for an extended period of time, and we may be unable to meet our business obligations and regulatory requirements for an extended period of time if our data or systems are disabled, manipulated, destroyed or otherwise compromised. Additionally, some of our technology systems are older, legacy-type systems that are less efficient and require an ongoing commitment of significant resources to maintain or upgrade, and in some cases may not be able to be fully protected or to implement the latest security patches. Supply chain disruptions or delays could prevent us from maintaining and implementing changes, updates and upgrades to our systems and networks in a timely manner or at all. System and network failures or outages, including with respect to third parties, have and could compromise our ability to perform business functions in a timely manner, which could harm our ability to conduct business, hurt our relationships with our business partners and customers and expose us to legal claims as well as regulatory investigations and sanctions, any of which could have a material adverse effect on our business, results of operations, financial condition and liquidity.Some of these technology systems also rely upon third-party systems and services, which themselves may rely on the systems and services of other third parties. Problems caused by, or occurring in relation to, our third-party providers’ systems and services, including those resulting from breakdowns or other disruptions in information technology services provided by our third-party providers and the other third parties on which they rely, our inability to acquire third-party services on commercially acceptable terms, failure of a third-party provider to perform as anticipated or in compliance with applicable laws or regulations, inability of a third-party provider to provide the required volumes of services or our third-party providers experiencing cyberattacks or data breaches, could materially and adversely affect our business, results of operations, financial condition and liquidity.Like other global companies, the systems and networks we maintain and third-party systems and networks we or our vendors use are currently, and may in the future continue to be, subject to or targets of unauthorized or fraudulent access, including physical or electronic break-ins or unauthorized tampering, as well as attempted cybersecurity threats such as “denial of service” attacks, phishing, automated attacks, and other disruptive attacks, including ransomware. Cyber threats are constantly evolving and the techniques used in these attacks change, develop and evolve rapidly, including the use of emerging technologies, such as advancing forms of artificial intelligence and quantum computing by nation state threat actors and criminal organizations. The new cyber risks introduced by these changes in technology, such as deepfake schemes, require us to devote significant attention to identification, assessment and analysis of the risks and implementation of corresponding preventative measures. Additionally, the frequency and sophistication of such threats continue to increase and often become further heightened in connection with geopolitical tensions. Also, like other global companies, we have an increasing challenge of retaining and attracting highly qualified personnel to assist us in combatting these security threats.
There is no assurance that our cybersecurity measures, including information security and technology policies and standards, administrative, technical and physical controls and other actions by us or contracted third-parties designed as preventative, will provide fully effective protection from threats to our data, systems and networks, including malware and computer virus attacks, ransomware, unauthorized access, business e-mail compromise, misuse, denial-of-service attacks, system failures and other disruptions. We maintain insurance to cover operational risks, such as cyber risk and technology outages, but this insurance may not cover all costs associated with the consequences of information systems or personal, confidential or proprietary information being compromised. In the case of a successful ransomware attack in which our data and information systems are compromised and
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ITEM 1A | Risk Factorsapplicable processes to restore access are not effective, our information could be held hostage until a ransom, which may be significant, is paid. In some cases, such a compromise may not be immediately detected which may make it difficult to restore critical services, mitigate damage to assets and maintain the integrity and security of data including our policyholder, employee, agent, and other confidential information processed through our systems and networks.
Additionally, since we rely heavily on information technology and systems (which is expected to increasingly include the use of artificial intelligence) and on the integrity and timeliness of data to run our businesses and service our customers, any such security event and resulting compromise of systems or data have and may impede or interrupt our business operations and our ability to service our customers, and may materially and adversely affect our business, results of operations, financial condition and liquidity.
There can be no assurance that any actions taken by us to evaluate and enhance our information security and technology systems and processes, including third-party systems and services on which we rely, as well as changes designed to update and enhance our protective measures to address new threats, will decrease the risk of a system or process failure; further, such changes may create a gap in the associated security measures during the change period. Any such system or process failure or security measures gap could materially and adversely affect our business, results of operations, financial condition and liquidity.
We routinely transmit, receive and store personal, confidential and proprietary information by secured email and other electronic means. Although we attempt to keep such information confidential and secure, we have been, and in the future may be, unable to do so in all events, especially with clients, vendors, service providers, counterparties and other third parties who may not have or use appropriate controls to protect personal, confidential or proprietary information. Failure to secure or appropriately handle personal, confidential or proprietary information could cause a loss of data or compromised data integrity, give rise to remediation or other expenses, expose us to liability under U.S. and international laws and regulations, subject us to litigation, investigations, sanctions, and regulatory and law enforcement action, and result in reputational harm and loss of business, any of which could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Furthermore, certain of our businesses are subject to compliance with laws and regulations enacted by U.S. federal and state governments, the EU or other jurisdictions or enacted by various regulatory organizations or exchanges relating to the privacy and security of the information of clients, employees or others. The variety of applicable privacy and information security laws and regulations exposes us to heightened regulatory scrutiny, requires us to incur significant technical, legal and other expenses in an effort to ensure and maintain compliance and will continue to impact our business in the future by increasing legal, operational and compliance costs. While we have taken steps to comply with privacy and information security laws, we cannot guarantee that our efforts will meet the evolving standards imposed by data protection authorities. If we are found not to be in compliance with these privacy and security laws and regulations, we may be subject to additional potential private consumer, business partner or securities litigation, regulatory inquiries, and governmental investigations and proceedings, including class-actions. Any such developments may damage our reputation and subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to further enhanced regulatory oversight, any of which could have a material adverse effect on our business, results of operations, financial condition and liquidity. Additionally, we expect that developments in privacy and cybersecurity worldwide will increase the financial and reputational implications in the event of a significant breach of our or our third-party suppliers’ information technology systems. For additional information on data protection and cybersecurity regulations, see Item 1. Business – Regulation – Privacy, Data Protection, Cybersecurity and Artificial Intelligence Requirements, and Part II, Item 7. MD&A – Enterprise Risk Management – Operational Risk Management – Cybersecurity Risk.Our foreign operations expose us to risks that may affect our operations.Through our operations, licenses and authorizations and network partners, we provide insurance solutions that help businesses and individuals in approximately 200 countries and jurisdictions protect their assets and manage risks. A substantial portion of our business is conducted outside the United States, and we intend to continue to grow our business in strategic markets. Operations outside the United States have in the past been, and may in the future be, affected by elevated climate risks, regional economic downturns, changes in foreign currency exchange rates and foreign interest rates, political events or upheaval, sanctions policies, nationalization and other restrictive government or regulatory actions, which could also affect our other operations.
Our subsidiaries operating in foreign jurisdictions must satisfy local regulatory requirements and it is possible that these local licenses may require AIG Parent to meet certain conditions. Licenses issued by foreign authorities to our subsidiaries are subject to modification and revocation. Consequently, our insurance subsidiaries could be prevented from conducting future business in some of the jurisdictions where they currently operate. Adverse actions from any single country could adversely affect our results of operations, depending on the magnitude of the event and our financial exposure at that time in that country.
We are subject to myriad regulations which govern items such as sanctions, bribery and anti-money laundering, for which failure to comply could expose us to significant penalties. Laws and regulations aimed at preventing money laundering, which in some jurisdictions apply to insurance companies, create obligations to know certain information about clients and take steps to monitor for suspicious activities. The Foreign Corrupt Practices Act makes it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Also, the Department of the Treasury’s Office of Foreign Assets Control administers regulations that restrict or prohibit dealings involving certain organizations, individuals and22AIG | 2024 Form 10-KTABLE OF CONTENTS
ITEM 1A | Risk Factorscountries. The UK, the EU, Japan and other jurisdictions maintain similar laws and regulations. Although we have policies and controls in place that are designed to ensure compliance with these laws and regulations, if those controls are ineffective and/or an employee or third party fails to comply with applicable laws and regulations, we could suffer civil and criminal penalties, including disgorgement, and our business and our reputation could be adversely affected.
Third parties we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.
We have used and will continue to use outsourcing strategies and third-party providers to transform operational and back office processes and deliver contracted services in a broad range of areas. Such areas include, but are not limited to, administration or servicing of certain policies and contracts, finance, actuarial, information technology services related to infrastructure, and investment advisory and management services. The implementation of any technological advancements may be comprised of multiple workstreams that are complex and, have in the past and may in the future, require significant time and resource prioritization and result in delays due to the lack of sufficient resources to execute on a timely basis, inefficiencies stemming from changes that may be required to the program or sequencing, failure to meet operational and financial targets due to additional priorities or other factors. These risks may impair our ability to achieve anticipated improvements in our businesses may disrupt or may otherwise harm our operations which could materially and adversely affect our businesses, financial condition and operations.
Further, third-party investment managers manage the majority of our investment assets. For information regarding our reliance on third-party investment managers, see Investment Portfolio and Concentration of Investments – “We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered as indicative of the future results of our investment portfolio, our future results or any returns expected on our Common Stock” above.
Some of the third-party providers we use are located outside the U.S., which exposes us to business disruptions and political risks inherent to conducting business outside of the U.S. We periodically negotiate the terms of the provisions and renewal of these relationships, and there can be no assurance that such terms will remain acceptable to us, such third parties or regulators. If such third-party providers experience disruptions, fail to meet applicable licensure requirements, do not perform as anticipated or in compliance with applicable laws and regulations, terminate or fail to renew our relationships, or such third-party providers in turn rely on services from another third-party provider, who experiences such disruptions, licensure failures, nonperformance or noncompliance, termination or non- renewal of its contractual relationships, we may experience operational difficulties, an inability to meet obligations (including, but not limited to, contractual, legal, regulatory or policyholder obligations), a loss of business, increased costs or reputational harm, compromises to our data integrity, or suffer other negative consequences, all of which may have a material adverse effect on our business, consolidated results of operations, liquidity and financial condition. Third parties performing regulated activities on our behalf, such as sales and servicing of insurance products, pose a heightened risk as we may be held accountable for third-party conduct that fails to comply with applicable law.For information regarding cyber risk arising from third-party providers, see Business and Operations – “We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity” above.
We may experience difficulty in marketing and distributing products through our current and future distribution channels and the use of third parties may result in additional liabilities.We maintain relationships with a number of key distributors, which results in certain distributor concentration. Distributors have in the past, and may in the future, elect to renegotiate the terms of existing relationships, such that those terms may not remain attractive or acceptable to us, limit the products they sell, including the types of products offered by us, or otherwise reduce or terminate their distribution relationships with us, with or without cause. This could be due to various reasons, such as industry consolidation of distributors or other industry changes that increase the competition for access to distributors, developments in laws or regulations that affect our business or industry, including the marketing and sale of our products and services, adverse developments in our business, the distribution of products with features that do not meet minimum thresholds set by the distributor, strategic decisions that impact our business, adverse rating agency actions or concerns about market-related risks.Alternatively, renegotiated terms may not be attractive or acceptable to distributors, or we may terminate one or more distribution agreements due to, for example, a loss of confidence in, or a change in control of, one of the third-party distributors. An interruption or reduction in certain key relationships could materially affect our ability to market our products and could materially and adversely affect our business, results of operations, financial condition and liquidity.
Key distribution partners could merge, consolidate, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts.AIG | 2024 Form 10-K23
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ITEM 1A | Risk FactorsAlso, if we are unsuccessful in attracting, retaining and training key distribution partners, or are unable to maintain our distribution relationships, our sales could decline, which could have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, substantially all of our distributors are permitted to sell our competitors’ products. If our competitors offer products that are more attractive than ours or pay higher commission rates to the distribution partners than we do or for other reasons outside of our control, these distribution partners could concentrate their efforts in selling our competitors’ products instead of ours.
In addition, we can, in certain circumstances, be held responsible for the actions of our third-party distributors, including registered representatives, insurance agents and agencies, marketing organizations, and their respective employees, agents and representatives, in connection with the marketing and sale of our products by such parties, including the security of their operations and their handling of confidential information and personal data, in a manner that is deemed not compliant with applicable laws and regulations. This is particularly acute with respect to unaffiliated distributors where we may not be able to directly monitor or control the manner in which our products are sold through third-party firms despite our risk assessment, training and compliance programs. Further, misconduct by employees and agents in the sale of our products could also result in violations of laws by us or our subsidiaries, regulatory sanctions and serious reputational or financial harm to us. The precautions we take to prevent and detect the foregoing activities may not be effective. If our products are distributed in a manner alleged to be inappropriate, or third-party distributors experience a security or data breach due to deficient operational controls, we could suffer reputational and/or other financial harm to our business.
Our restructuring initiatives may not yield expected reductions in expenses and/or improvements in operational and organizational efficiency.
We may not be able to fully realize the anticipated expense reductions and operational and organizational efficiency improvements we expect to result from our focus on our operating model and associated initiatives. Actual costs to implement these initiatives may exceed our estimates or we may be unable to fully implement and execute these initiatives as planned. Our businesses and results of operations may be negatively impacted if we are unable to realize these anticipated expense reductions and efficiency improvements or if implementing these initiatives harms our relationships with customers or employees or our competitive position. The successful implementation of these initiatives may continue to require us to effect business rationalizations, technology enhancements, business process outsourcing, workforce reductions, modifications to our operating model and other actions, which depend on a number of factors, some of which are beyond our control.
Business or asset acquisitions and dispositions may expose us to certain risks.
The completion of any business or asset acquisition or disposition is subject to certain risks, including those relating to the receipt of required regulatory approvals, the terms and conditions of regulatory approvals including any financial accommodations required by regulators, our ability to satisfy such terms, conditions and accommodations, the occurrence of any event, change or other circumstances that could give rise to the termination of a transaction and the risk that parties may not be willing or able to satisfy the conditions to a transaction. As a result, there can be no assurance that any business or asset acquisition or disposition will be completed as contemplated, or at all, or regarding the expected timing of the completion of the acquisition or disposition.
Once we complete acquisitions or dispositions, there can be no assurance that we will realize the anticipated economic, strategic or other benefits of any transaction. For example, the integration of businesses we acquire may not be as successful as we anticipate or there may be undisclosed risks present in such businesses. Additionally, difficulties or delays in separating a divested business from our existing infrastructure, systems and operations could reduce the anticipated economic, strategic or other benefits of such transaction. Acquisitions and dispositions involve a number of risks, including operational, strategic, financial, accounting, legal, compliance and tax risks. Difficulties integrating an acquired business may result in the acquired business performing differently than we expected (including due to the loss of customers) or in our failure to realize anticipated expense-related efficiencies. Our existing businesses could also be negatively impacted by acquisitions. Risks resulting from future acquisitions may have a material adverse effect on our results of operations and financial condition. In connection with a business or asset disposition, we may also hold a concentrated position in securities of the acquirer as part of the consideration, which subjects us to risks related to the price of equity securities and our ability to monetize such securities. We have also provided and may provide financial guarantees and indemnities in connection with the businesses we have sold or may sell, as described in greater detail in Note 15 to the Consolidated Financial Statements. While we do not currently believe that claims under these indemnities will be material, it is possible that significant indemnity claims could be made against us. If such a claim or claims were successful, it could have a material adverse effect on our results of operations, cash flows and liquidity.
For additional information regarding the risks associated with our continuing equity market exposure to Corebridge, see Business and Operations – “We are subject to risks from our continuing equity market exposure to Corebridge. There can be no assurances that the anticipated benefits of our sales of Corebridge stock will be achieved” above.
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ITEM 1A | Risk Factors
We are subject to risks from our continuing equity market exposure to Corebridge. There can be no assurances that the anticipated benefits of our sales of Corebridge stock will be achieved.
Since September of 2022 when we closed on the initial public offering of Corebridge’s common stock, we have continued to sell down our interest in Corebridge. On June 9, 2024, we met the requirements for the deconsolidation of Corebridge for accounting purposes. For a detailed discussion of the deconsolidation, see Note 4 to the Consolidated Financial Statements.
Although Corebridge has been deconsolidated from our consolidated financial results, we continue to hold a significant stake in Corebridge's common stock. At the time of deconsolidation, we elected the fair value option to account for our remaining investment in Corebridge. From that date onward, the fair value change in Corebridge’s stock, and dividends received from Corebridge, are recognized in net investment income. As a result, a decline in the market value of Corebridge common stock may result in a decrease in our investment income and may have a material and adverse effect on our results and financial condition. There can be no assurances given as to the price, transaction costs, or timing of further Corebridge stock sales and, as a result, we may fail to realize the expected benefits of our sales of such stock if there are adverse movements in its market value prior to, or at the time of, such sales.
Further, the sale of our remaining Corebridge stock involves a number of divestment-related risks, including (i) unanticipated developments that may delay, prevent or otherwise adversely affect our ability to continue the full divestment, including an economic downturn or unfavorable capital markets conditions; (ii) unforeseen losses, liabilities or asset impairments arising from further dispositions; and (iii) challenges associated with the valuation of Corebridge and the Company as we seek to fully divest our investment in Corebridge.
In addition, the divestment of Corebridge, or a significant delay in our ability to continue to sell our Corebridge stock, has caused and could continue to cause the emergence, or exacerbate the effects of, many of the other risks discussed herein, including changes in our deferred tax assets and liabilities and our ability to utilize certain tax loss and credit carryforwards to offset future taxable income.Significant legal or regulatory proceedings may adversely affect our business, results of operations or financial condition.
In the normal course of business, we face significant risk from regulatory and governmental investigations and civil actions, litigation and other forms of dispute resolution in various domestic and foreign jurisdictions. We frequently engage in litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and face litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts.
Additionally, from time to time, various regulatory and governmental agencies review the transactions and practices of the Company and our subsidiaries in connection with company-specific matters, or industry-wide and other inquiries into, among other matters, the business practices of current and former operating insurance subsidiaries. Such reviews, investigations, inquiries or examinations have and could lead to extended delays to, or prohibitions of, such transactions or practices, or develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations to our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.We, our subsidiaries and their respective officers and directors are also subject to, or may become subject to, a variety of additional types of legal disputes brought by holders of our securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. Certain of these matters may also involve potentially significant risk of loss due to the possibility of significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from them, and developments in these matters could have a material adverse effect on our consolidated financial condition or consolidated results of operations.
For information regarding certain legal proceedings, see Notes 15 and 21 to the Consolidated Financial Statements.
Increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social, governance and sustainability matters, including governmental responses to such matters, may adversely affect our reputation or otherwise adversely impact our business and results of operations.
There is increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders on companies’ governance, risk oversight, disclosures, plans, policies and practices regarding environmental, social, governance and sustainability matters, including those related to environmental stewardship, climate change, racial justice and workplace conduct. The requirements, standards and expectations of such stakeholders may also, as a whole, reflect diverging or conflicting values or policy objectives.
Governmental actions to mitigate climate and other risks related to environmental, social, governance and sustainability matters, or, conversely, to restrict actions companies may take in response to such risks, could have an adverse effect on our business and results of operations. Internationally and at the U.S. federal, state and local levels, regulators have imposed and likely will continue to impose requirements and guidance related to environmental, social, governance and sustainability matters, which will continue to
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ITEM 1A | Risk Factorsevolve and may conflict with one another, impose additional costs on us and expose us to new or additional risks, including financial, regulatory, litigation, reputational and operational risks. See Item 1. Business – Regulation – Climate Change .
Furthermore, certain organizations that provide information to investors have developed ratings for evaluating companies on their approach to different environmental, social and governance matters, and unfavorable ratings of our company or our industries may lead to negative investor sentiment and the diversion of investment to other companies or industries.
We may not be able to meet the requirements, standards or expectations of our various stakeholders on environmental, social, governance and sustainability issues, including with respect to any current or future targets, goals, plans, standards or expectations (including any previously announced climate target, goal or plan) on these matters, whether established or set by us or third parties, due to a variety of factors, including regulatory or other developments, changes to the methodologies, assumptions and estimates that underlie our climate- and other sustainability-related targets, goals and strategy, or the actions of or information provided by third parties outside of our control, who may apply standards, methodologies, practices and policies that differ from ours. If we are unable to meet such targets, goals, plans, standards or expectations, it could result in adverse publicity, reputational harm, or loss of customer and/ or investor confidence, which could adversely affect our business and results of operations. Conversely, actions we may take toward meeting such targets, goals, plans, standards or expectations could expose us to negative investor sentiment, regulatory scrutiny, adverse publicity or reputational harm.For information on the effects of climate change on our business, see Reserves and Exposures – “Climate change may adversely affect our business and financial condition” above.An epidemic, pandemic or other health crisis could materially and adversely affect our business, results of operations, financial condition or liquidity.
Public health crises and related governmental response measures, for example related to the COVID-19 pandemic, have resulted in significant societal disruption, economic uncertainty, volatility in business and consumer confidence and global economic slowdowns, which have adversely impacted our business and may again do so.
For example, we have experienced increased claim volumes; adverse effects resulting from our exposure to certain industries, and difficulties in arriving at accurate valuations thereof, which has caused or may cause impairment of the estimates and assumptions used to run our businesses or resulting in greater variability and subjectivity in our investment decisions; and increased difficulty and cost in obtaining reinsurance coverage.
If a public health crisis emerges the markets and economies in which we operate may experience heightened stress and further volatility, which may materially adversely affect our business, results of operations and financial condition. Legal proceedings, including class actions, could also be filed against us, our insureds, or others, seeking coverage for epidemic or pandemic-related losses or alleging bad faith denial of such coverage. In addition, remote or hybrid work may negatively impact our compliance efforts, culture and employees’ morale, which could result in greater turnover, lower productivity and greater operational risks.We may not be able to protect our intellectual property and may be subject to infringement claims.
Effective intellectual property rights protection, including in the form of contractual rights, copyright, trademark, patent and trade secret laws, may be unavailable, limited, or subject to change in some countries where we do or plan to do business. Third parties may infringe or misappropriate our intellectual property. We have, and may in the future, litigate to protect our intellectual property. Any such litigation may be costly and may not be successful. Additionally, third parties may have patents or other protections that could be infringed by our products, methods, processes or services or which could limit our ability to offer certain product features. Consequently, we have in the past been and may in the future be subject to costly litigation in the event that another party alleges that we infringe upon their intellectual property rights. Any such intellectual property litigation could prove to be both costly and unsuccessful, result in significant expense, damages, and in some circumstances, we could be enjoined from providing certain products or services to our customers. Alternatively, we could be required to enter into costly licensing arrangements with third parties to resolve infringement or contractual disputes. The loss of intellectual property protection or the inability to secure or protect our intellectual property assets could harm our reputation and have a material adverse effect on our business and our ability to compete.REGULATION
Our businesses are heavily regulated and changes in laws and regulations may affect our operations, increase our insurance subsidiary capital requirements or reduce our profitability.Our operations generally, and our insurance subsidiaries in particular, are subject to extensive and potentially conflicting laws and regulations in the jurisdictions in which we operate. Our business and financial condition are also subject to supervision and regulation by authorities in the various jurisdictions in which we do business. Federal, state and foreign regulators also periodically review and investigate our insurance businesses, including Company-specific and industry-wide practices. The primary purpose of insurance regulation is the protection of insurance and reinsurance contract holders. The extent of regulation on our insurance business varies across the jurisdictions in which we operate, but generally is governed by laws that delegate regulatory, supervisory and26AIG | 2024 Form 10-KTABLE OF CONTENTS
ITEM 1A | Risk Factorsadministrative authority to insurance departments and similar regulatory agencies. The laws and regulations that apply to our business and operations generally grant regulatory agencies and/or self-regulatory organizations broad rulemaking and enforcement powers, including the power to regulate the issuance, marketing, sale and distribution of our products, the manner in which we underwrite our policies, the delivery of our services, the nature or extent of disclosures that we give our customers, the compensation of our distribution partners, the manner in which we handle claims on our policies and the administration of our policies and contracts, as well as the power to limit or restrict our business for failure to comply with applicable laws and regulations.
We strive to comply with laws and regulations applicable to our businesses, operations and legal entities, including maintenance of all required licenses and approvals. The application of and compliance with such laws and regulations may be subject to interpretation, evolving industry practices and regulatory expectations that could result in increased compliance costs. The relevant authorities may not agree with our interpretation of these laws and regulations or with our policies and procedures adopted to address evolving industry practices or meet regulatory expectations. Such authorities’ interpretations and views may also change from time to time. It is also possible that the laws, regulations and interpretations across various jurisdictions in which we do business may conflict with one another, or affect how we do business beyond such jurisdictions’ borders, including in the United States and/or globally. If we are found not to have complied with applicable legal or regulatory requirements, these authorities could preclude or temporarily suspend us from carrying on some or all of our activities, impose substantial administrative penalties such as fines or require corrective actions, which individually or in the aggregate could interrupt our operations and materially and adversely affect our reputation, business, results of operations and financial condition. Additionally, in instances where such authorities’ interpretation of new or revised requirements related to capital, accounting treatment, valuation or reserving has materially differed, or may in the future materially differ from ours, we have incurred, and may again incur, higher operating costs, and sales of products subject to such requirements or treatment have been and may again be affected.
Regulators in jurisdictions in which we do business have adopted RBC, solvency and liquidity standards applicable to insurers operating in their jurisdiction. Failure to comply with such capital (including, in the U.S., RBC), solvency, liquidity and similar requirements, or as otherwise may be agreed by us or one of our insurance company subsidiaries with an insurance regulator, would generally permit the insurance regulator to take certain regulatory actions that could materially impact the affected company’s operations. Those actions range from requiring an insurer to submit a plan describing how it would regain a specified RBC or solvency ratio to a mandatory regulatory takeover of the company. The NAIC has adopted methodologies for assessing group-wide regulatory capital, which could evolve into more formal group-wide prescribed capital requirements on certain insurance companies and/or their holding companies that may augment jurisdictional RBC or solvency standards that apply at the legal entity level, and the basis for such capital calculations may differ, in whole or in part, from the statutory statements of our insurance subsidiaries used to calculate RBC. Furthermore, efforts to address systemic risks within the financial services industry, including insurance services, may lead regulators to apply new or heightened standards and safeguards for activities or practices that we and other insurers or other nonbank financial services companies engage in. The Financial Stability Oversight Council has authority under Dodd-Frank to determine that certain nonbank financial companies, including insurers, be designated as nonbank SIFIs subject to supervision by the Board of Governors of the Federal Reserve System and enhanced prudential standards, and has in place guidance and procedures intended to govern any such designations. We cannot predict the effect that any such initiatives or heightened standards may have on our business, results of operations, liquidity and financial condition.
There has also been increased regulatory scrutiny of the use of data, machine learning, predictive models and artificial intelligence, including in the insurance industry. Certain insurance regulators have developed, and others are developing, regulations or guidance applicable to insurance companies that use artificial intelligence, data analytics, machine learning and predictive models in their operations. We cannot predict the impact of the regulatory actions that have been or may in the future be taken with regard to data analytics, artificial intelligence, machine learning or predictive models, but any limitations or restrictions could have a material impact on our business, processes, results of operations and financial condition.
We also cannot predict the impact that laws and regulations adopted in foreign jurisdictions may have on our businesses, results of operations or cash flows, or on the financial markets generally. It is possible such laws, regulations or standards, including, without limitation, Solvency II and European Data Protection Board Cross Border Data Transfer, Corporate Sustainability Reporting Directive (CSRD), and Corporate Sustainability Due Diligence Directive (CSDDD) in the EU, and standard-setting initiatives by the FSB and the IAIS, including, but not limited to, the IAIS’ Common Framework for the Supervision of IAIGs, its global Insurance Capital Standard, which was recently adopted as a group-level prescribed capital requirement, and its holistic framework for the assessment and mitigation of systemic risk, may significantly alter our business practices. For example, regulators have imposed and may continue to impose new requirements, and regulators and other international organizations may continue to issue guidance, aimed at addressing or mitigating climate change-related risks. They may also limit our ability to engage in capital or liability management, require us to raise additional capital, and impose burdensome requirements and additional costs. It is also possible that the laws and regulations adopted in foreign jurisdictions will differ from one another, and that they could be inconsistent with the laws and regulations of other jurisdictions in which we operate, including the United States.For additional information on our regulatory environment, see Item 1. Business – Regulation.AIG | 2024 Form 10-K
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ITEM 1A | Risk FactorsFor information regarding the effects of regulations related to climate change on our business, see Reserves and Exposures – “Climate change may adversely affect our business and financial condition” above.For information regarding the regulatory response to the COVID-19 pandemic, see Business and Operations – “An epidemic, pandemic or other health crisis could materially and adversely affect our business, results of operations, financial condition or liquidity” above .New laws and regulations or new interpretations of current laws and regulations, both domestically and internationally, may affect our businesses, results of operations, financial condition and ability to compete effectively.
Legislators, regulators, self-regulatory and other organizations have in the past, and may in the future, periodically consider various proposals that, if enacted, may affect or restrict, among other things, our business practices and activities, product designs and distribution relationships, how we market, sell or service certain products we offer, the investment assets we hold and our investment management practices, our capital, reserving and accounting requirements, or the profitability of certain of our businesses.Further, new laws, regulations or guidance may affect or significantly limit our ability to conduct certain businesses at all, including restrictions on the type of activities in which financial institutions are permitted to engage. Changes in legislation or regulation could also impose additional taxes on a limited subset of financial institutions and insurance companies (either based on size, activities, geography or other criteria), limit our ability to engage in capital or liability management, require us to raise additional capital, and impose burdensome requirements and additional costs. It is uncertain whether and how these and other changes in legislation or regulation would apply to us, those who sell or service our products, or our competitors or how they could impact our ability to compete effectively, as well as our business, consolidated results of operations, liquidity and financial condition.An “ownership change” could limit our ability to utilize tax loss and credit carryforwards to offset future taxable income.Our ability to use U.S. federal net operating loss carryforwards to offset future taxable income may be significantly limited if we experience an “ownership change” as defined in Section 382 of the Internal Revenue Code. In general, an ownership change will occur when the percentage of AIG Parent's ownership (measured by value) by one or more “5-percent shareholders” (as defined in Section 382 of the Internal Revenue Code) has increased by more than 50 percentage points over the lowest percentage owned by such shareholders at any time during the prior three years (calculated on a rolling basis). An entity that experiences an ownership change generally will be subject to an annual limitation on its utilization of pre-ownership change tax loss and credit carryforwards equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate posted monthly by the Internal Revenue Service (AFR) (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation on our ability to utilize tax loss and credit carryforwards arising from an ownership change under Section 382 of the Internal Revenue Code would be dependent on the value of our equity and the AFR at the time of any ownership change. If we were to experience an “ownership change,” it is possible that a significant portion of our tax loss carryforwards could expire before we would be able to use them to offset future taxable income.New and proposed changes to tax laws could increase our corporate taxes.The Inflation Reduction Act of 2022 includes a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with average profits over $1 billion over a three-year period. While the U.S. Treasury and the Internal Revenue Service issued proposed regulations for CAMT during the third quarter of 2024, there are still certain details regarding the application of the CAMT that remain unclear and we continue to evaluate the impact of the proposed regulations along with any other guidance.
New tax laws outside the U.S., in particular those enacted in response to proposals by the Organisation for Economic Co-operation and Development, could make substantive changes to the global international tax regime. Such changes could increase our global tax costs. We continue to monitor and assess the impact of such proposals.Finally, it is possible that tax laws will be further changed either in a technical corrections bill or entirely new legislation. It remains difficult to predict whether or when there will be any tax law changes or further guidance by the authorities in the U.S. or elsewhere in the world. New or proposed changes to tax laws may have a material adverse effect on our business, consolidated results of operations, liquidity and financial condition, as the impact of proposals on our business can vary substantially depending upon the specific changes or further guidance made and how the changes or guidance are implemented by the authorities.
For additional information, see Note 21 to the Consolidated Financial Statements.28
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ITEM 1A | Risk Factors
ESTIMATES AND ASSUMPTIONS
Estimates or assumptions used in the preparation of financial statements and modeled results used in various areas of our business may differ materially from actual experience.Our consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the application of accounting policies that often involve a significant degree of judgment. The accounting policies that we consider most dependent on the application of estimates and assumptions, and therefore may be viewed as critical accounting estimates, are described in Part II, Item 7. MD&A – Critical Accounting Estimates and in Note 1 to the Consolidated Financial Statements. These accounting estimates require the use of assumptions, some of which are highly uncertain at the time of estimation. These estimates are based on judgment, current facts and circumstances, and, when applicable, models developed internally or with inputs from third parties. Therefore, actual results may differ from these estimates and models, possibly in the near term, and could have a material effect on our financial statements.
In addition, we employ models to price products, calculate reserves and value assets and execute hedging strategies, as well as to assess risk and determine statutory capital requirements, among other uses. These models are complex and rely on estimates and projections that are inherently uncertain, may use incomplete, outdated or incorrect data or assumptions and may not operate as intended. To the extent that any of our operating practices and procedures do not accurately produce, or reproduce, data that we use to conduct any or all aspects of our business, such differences may negatively impact our business, reputation, results of operations, and financial condition. Additionally, if any of our modeling practices do not accurately produce, or reproduce, data that we use to conduct any or all aspects of our business, such errors may negatively impact our business, reputation, results of operations and financial condition.Changes in accounting principles and financial reporting requirements may impact our consolidated results of operations and financial condition.Our consolidated financial statements are prepared in accordance with U.S. GAAP, which are periodically revised. Accordingly, from time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board (FASB). The adoption of new or revised accounting standards has in the past, and may in the future impact, our reported consolidated results of operations, liquidity and reported financial condition and may cause investors to perceive greater volatility in our financial results, negatively impacting our level of investor interest and investment.For information regarding the impact of accounting pronouncements that have been issued but are not yet required to be implemented, see Note 2 to the Consolidated Financial Statements.
If our businesses do not perform well and/or their estimated fair values decline, we may be required to recognize an impairment of our goodwill or establish an additional valuation allowance against the related deferred income tax assets, which could have a material adverse effect on our results of operations and financial condition.Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. We test goodwill at least annually for impairment and conduct interim qualitative assessments on a periodic basis. Impairment testing is performed based upon estimates of the fair value of the “reporting unit” to which the goodwill relates. In 2024, for substantially all of the reporting units we elected to bypass the qualitative assessment of whether goodwill impairment may exist and, therefore, performed quantitative assessments that supported a conclusion that the fair value of all of the reporting units tested exceeded their book value. If it is determined that goodwill has been impaired, we must write down goodwill by the amount of the impairment, with a corresponding charge to net income (loss). These write-downs could have a material adverse effect on our consolidated results of operations, liquidity and financial condition. For additional information on goodwill impairment, see Part II, Item 7. MD&A – Critical Accounting Estimates – Goodwill Impairment and Note 12 to the Consolidated Financial Statements.
Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. If, based on available evidence, it is more likely than not that the deferred tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net income, which such action we have taken from time to time. Such charges could have a material adverse effect on our consolidated results of operations, liquidity and financial condition. For additional information on deferred tax assets, see Part II, Item 7. MD&A – Critical Accounting Estimates – Income Taxes and Note 21 to the Consolidated Financial Statements.
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ITEM 1A | Risk Factors
EMPLOYEES AND COMPETITION
Employee error and misconduct may be difficult to detect and prevent and may result in reputational damage and significant losses.
We are exposed to the risk that employee fraud or misconduct could occur despite extensive training for employees and fraud monitoring. Instances of fraud, illegal acts, errors, failure to document transactions properly or to obtain proper internal authorization, misuse of customer or proprietary/confidential information, or failure to comply with regulatory requirements or our internal policies may result in losses and/or reputational damage.
Competition for employees in our industry is intense, and managing key employee succession is critical to our success. We may not be able to attract and retain the key employees and other highly skilled employees we need to support our businesses.
Our success depends, in large part, on our ability to attract and retain key and other highly skilled employees. Due to the intense competition in our industry for key employees, we may be unable to retain or hire such employees. In addition, we may experience higher than expected employee turnover and difficulty attracting new employees as a result of uncertainty from strategic actions and organizational and operational changes. Losing any of our key employees also could have a material adverse effect on our operations given their skills, knowledge of our business, years of industry experience and the potential difficulty of promptly finding qualified replacements. Our business and consolidated results of operations could be materially adversely affected if we are unsuccessful in retaining and attracting key employees.In addition, we would be adversely affected if we fail to adequately plan for the succession of our Chief Executive Officer, other members of senior management and other key employees. While we have long-term compensation plans designed to retain our employees and succession plans, our compensation plans cannot guarantee that the services of these employees will continue to be available to us and our succession plans may not operate effectively.We face intense competition in each of our business lines, and technological changes may present new and intensified challenges to our businesses.
Our businesses operate in highly competitive environments, both domestically and overseas. Our principal competitors are other property and casualty insurance organizations.
We compete through a combination of risk acceptance criteria, product pricing, and terms and conditions. Reductions of our credit ratings or IFS ratings or negative publicity may make it more difficult to compete to retain existing customers and to maintain our historical levels of business with existing customers, counterparties and distribution relationships. A decline in our position as to any one or more of these factors could adversely affect our profitability.Technological advancements and innovation in the insurance industry, including those related to evolving customer preferences, the digitization of insurance products and services, data ingestion and exchange with trading partners, acceleration of automated underwriting, and use of artificial intelligence and electronic processes present competitive risks. Technological advancements and innovation are occurring in distribution, underwriting, recordkeeping, advisory, marketing, claims and operations at a rapid pace, and that pace may increase, particularly as companies increasingly use data analytics and technology as part of their business strategy. If we are unable to effectively implement these technological advancements in our business, including the use of artificial intelligence, in a way that matches or exceeds our competitors, we may suffer competitive harm as a result, which could adversely impact our reputation, results of operations and financial condition. For further discussion on regulatory developments with respect to emerging technologies, see Regulation above.
Further, additional costs may also be incurred in order to implement changes to automate and digitize procedures critical to our distribution channels in order to increase flexibility of access to our services and products. While we seek opportunities to leverage technological advancements and innovation for our customers’ benefit, our business and results of operations could be materially and adversely affected if external technological advancements or innovation, or the regulation of technological advancements or innovation, limit our ability to retain existing business, write new business at adequate rates or on appropriate terms, or impact our ability to adapt or deploy current products as quickly and effectively as our competitors.
FY 2025-12-31 (later)
ITEM 1A | Risk Factors
ITEM 1A | Risk Factors
Risk Factor Summary
The following is a summary of the material risks and uncertainties that could adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below.
Market Conditions• Deterioration of economic conditions, geopolitical tensions, changes in market conditions or weakening global capital markets have affected and may continue to materially affect our businesses, results of operations, financial condition and liquidity.Reserves and Exposures
• The amount and timing of insurance liability claims are difficult to predict and such claims may exceed the related liability for unpaid losses and loss adjustment expenses.
• Reinsurance may be unavailable or too expensive relative to its benefit and may not be adequate to protect us against losses.
• Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events as well as mass torts.
• Climate change may adversely affect our business and financial condition.
• Concentration of our insurance, reinsurance and other risk exposures may have adverse effects.
• Losses due to nonperformance or defaults by counterparties may materially and adversely affect the value of our investments, our profitability and sources of liquidity.
Investment Portfolio and Concentration of Investments
• Our investment portfolio is concentrated in certain segments of the economy, and the performance and value of our investment portfolio are subject to a number of risks and uncertainties.• We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered indicative of the future results of our investment portfolio.
• The valuation of our investments involves the application of methodologies and assumptions to derive estimates, which may differ from actual experience and could result in changes to investment valuations that may materially adversely affect our business, results of operations, financial condition and/or liquidity or lead to volatility in our net income.Liquidity, Capital and Credit
• AIG Parent’s ability to access funds from our subsidiaries is limited, and our sources of liquidity may be insufficient to meet our needs, including providing capital that may be required by our subsidiaries.
• We may not be able to generate cash to meet our needs due to the illiquidity of some of our investments.
• A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity.
Business and Operations
• Our risk management policies, standards and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses, results of operations, financial condition and liquidity.
• Pricing for our products is subject to our ability to adequately assess risks and estimate related losses.
• We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity.• Our development and use of new technology, such as generative artificial intelligence, may present risks.• Our foreign operations expose us to risks that may affect our operations.AIG | 2025 Form 10-K
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ITEM 1A | Risk Factors• Third parties we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.• We may experience difficulty in marketing and distributing products through our current and future distribution channels and the use of third parties may result in additional liabilities.
• Our restructuring initiatives may not yield expected reductions in expenses and/or improvements in operational and organizational efficiency.• Strategic transactions, including business or asset acquisitions and dispositions, may expose us to certain risks.
• We are subject to risks from our continuing equity market exposure to Corebridge. The anticipated benefits of our sales of Corebridge stock may not be achieved.• Significant legal or regulatory proceedings may adversely affect our business, results of operations or financial condition.• Scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social, governance and sustainability matters, including governmental responses to such matters, may adversely affect our reputation or otherwise adversely impact our business and results of operations.• We may not be able to protect our intellectual property and may be subject to infringement claims.
Regulation
• Our businesses are heavily regulated and changes in laws and regulations may affect our operations, increase our insurance subsidiary capital requirements or reduce our profitability.
• New laws and regulations or new interpretations of current laws and regulations, both domestically and internationally, may affect our businesses, results of operations, financial condition and ability to compete effectively.
• An “ownership change” could limit our ability to utilize tax loss and credit carryforwards to offset future taxable income.
• New and proposed changes to tax laws could increase our corporate taxes.
Estimates and Assumptions
• Estimates or assumptions used in the preparation of financial statements and modeled results used in various areas of our business may differ materially from actual experience.
• Changes in accounting principles and financial reporting requirements may impact our consolidated results of operations and financial condition.
• If our businesses do not perform well and/or their estimated fair values decline, we may be required to recognize an impairment of our goodwill or establish an additional valuation allowance against the related deferred income tax assets, which could have a material adverse effect on our results of operations and financial condition.
Employees and Competition
• Employee error and misconduct may be difficult to detect and prevent and may result in reputational damage and significant losses.
• Competition for employees in our industry is intense, and managing key employee succession is critical to our success. We may not be able to attract and retain the key employees and other highly skilled employees we need to support our businesses.
• We face intense competition in each of our business lines, and technological changes may present new and intensified challenges to our businesses.12
AIG | 2025 Form 10-KTABLE OF CONTENTS
ITEM 1A | Risk Factors
Risk FactorsInvesting in AIG involves risk. In deciding whether to invest in AIG, you should carefully consider the following risk factors. Any of these risk factors could have a significant or material adverse effect on our businesses, results of operations, financial condition or liquidity. They could also cause significant fluctuations and volatility in the trading price of our securities. Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect AIG. These factors should be considered carefully together with the other information contained in this report and the other reports and materials filed by us with the SEC. Further, many of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity beyond a risk’s singular impact.MARKET CONDITIONSDeterioration of economic conditions, geopolitical tensions, changes in market conditions or weakening global capital markets have affected and may continue to materially affect our businesses, results of operations, financial condition and liquidity.Our businesses are highly dependent on global economic and market conditions. Weaknesses in economic conditions, including a recessionary environment, poor capital markets performance, market volatility, volatility in interest rate levels and inflation have in the past led to, and may in the future lead to, among other consequences, a poor operating environment, erosion of consumer and investor confidence, reduced business volumes, deteriorating liquidity and declines in asset valuations.
Key ways in which we have been, and could be, negatively affected by economic conditions include:
• increased loss payments and loss costs due to inflation;
• increased challenges to insurance policy terms and conditions, such as standard exclusions;
• increases in costs associated with third-party reinsurance, or decreased ability to obtain reinsurance on acceptable terms;
• the increased likelihood of, or increased magnitude of, asset impairments caused by market fluctuations, deterioration in collateral values or credit deterioration of borrowers; and
• reduced premiums.Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including changes in interest rate levels, plateauing or decreasing economic growth and business activity, recessions, social inflation, inflationary or deflationary pressures in developed economies, including the United States (U.S.), civil unrest, pandemics, geopolitical tensions, changes to international trade and/or tariff policies, foreign investment restrictions, military action or armed conflicts and corresponding sanctions imposed by the U.S. and other countries, and new or evolving legal and regulatory requirements on business investment, data protection, cybersecurity and artificial intelligence, hiring, migration, labor supply and global supply chains.
These and other market, economic, regulatory and political factors, including the effects of inflation, macroeconomic uncertainty, domestic and international political tensions, disruption to our business operations in countries exposed to geopolitical risk, natural disasters and the increased costs associated with meeting customer needs in such regions, adverse impacts resulting from changes to international trade, tariff and monetary policies, and any potential U.S. government shutdowns, have had and could continue to have a material adverse effect on our businesses, results of operations, financial condition, capital and liquidity in many ways, including:• lower levels of consumer demand for and ability to afford our products and commercial business activities that have decreased and may continue to decrease revenues and profitability and thus impair goodwill, deferred tax assets or other long-term assets;
• increased credit impairments, downgrades and losses across single or numerous asset classes due to lower collateral values or deteriorating cash flow and profitability by borrowers that could lead to higher defaults on the Company’s investment portfolio, especially in geographic, industry or investment sectors where the Company has higher concentrations of exposure, and widening of credit spreads that could reduce investment asset valuations and increase statutory capital requirements;
• increased market volatility and uncertainty that could decrease liquidity, increase borrowing costs and limit access to capital markets;
• the reduction of investment income generated by, or the market value of, our investment portfolio;• increased costs related to our direct and third-party support services, labor and financing, increased credit risk and decreased sales; and
• limitations on business activities and increased compliance risks with respect to economic sanctions regulations.
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ITEM 1A | Risk FactorsWe are exposed to certain risks arising from or exacerbated by fluctuations in interest rates, such as a potential mismatch between the expected duration of our liabilities and our assets, changes in certain statutory reserve or capital requirements that are based on formulas or models that consider interest rates or prescribed interest rates, increased financing and refinancing costs, in particular with respect to our corporate debt instruments, and lower investment income on our floating rate investments that will adjust to lower coupons if short-term rates decrease. Changes in interest rates have had and could continue to have a material adverse effect on the value of our investment portfolio. For example, increases in interest rates have impacted, and may continue to impact, our investment portfolio by decreasing the estimated fair values of the fixed income securities that constitute a substantial portion of our investment portfolio as well as the alternative investments in our investment portfolio. This in turn has in the past increased and could in the future increase the unrealized loss positions in our portfolio which could materially and adversely affect our business, results of operations, financial condition and liquidity. Should a low interest rate environment return, it could negatively affect the performance of our investments and reduce the level of investment income earned on our investment portfolios. In addition, if our investment managers fail to react appropriately to difficult market or economic conditions, our investment portfolio could incur material losses.RESERVES AND EXPOSURES
The amount and timing of insurance liability claims are difficult to predict and such claims may exceed the related liability for unpaid losses and loss adjustment expenses.We regularly review the adequacy of the established liability for unpaid losses and loss adjustment expenses. We also conduct extensive analyses of our reserves during the year. Our liability for unpaid losses and loss adjustment expenses, however, has at times developed and may in the future develop adversely and materially impact our businesses, results of operations, financial condition and liquidity.
Estimation of ultimate net losses, loss expenses and the liability for unpaid losses and loss adjustment expenses is a complex process, particularly for long-tail and medium-tail liability lines of business. There is also greater uncertainty in establishing reserves with respect to new business, particularly new business involving recently introduced product lines. In these cases, there is less historical experience or knowledge and less data upon which actuaries can rely. Estimating reserves is further complicated by unexpected claims or unintended coverages that may emerge due to unexpected events, such as pandemics or geopolitical conflicts. These emerging issues may increase the size or number of claims beyond our intent at the time of underwriting and may not become apparent for many years after a policy is issued.
While we use a number of analytical reserve development techniques to project future loss development, 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 that we rely upon in setting the liability for unpaid losses and loss adjustment expenses. These changes in loss cost trends or loss development factors could be due to changes in actual versus expected claims and losses, difficulties in predicting changes, such as changes in inflation, unemployment, or other social or economic factors affecting claims, including judicial and legislative actions, and changes in the tort environment. Any deviation in loss cost trends or in loss development factors might not be identified for an extended period of time after we record the initial loss reserve estimates for any accident year or number of years.
We review and update actuarial assumptions at least annually. If actual experience or revised future expectations result in projected future losses, we may be required to record additional liabilities through a charge to net realized gains or losses in the then-current period, which could negatively affect our business, results of operations, financial condition and liquidity. For additional information on reserve development, see Part II, Item 7. MD&A – Insurance Reserves.For additional information on our loss reserves, see Part II, Item 7. MD&A – Critical Accounting Estimates – Loss Reserves and Note 13 to the Consolidated Financial Statements.
Reinsurance may be unavailable or too expensive relative to its benefit and may not be adequate to protect us against losses.Our subsidiaries are major purchasers of third-party reinsurance and we use reinsurance as part of our overall risk management strategy. While reinsurance does not discharge our subsidiaries from their obligation to pay claims for losses insured under our policies, it makes the reinsurer liable to our subsidiaries for the reinsured portion of the risk. Market conditions beyond our control have impacted and may in the future impact the availability and cost of reinsurance and could have a material adverse effect on our business, results of operations and financial condition. For example, reinsurance is typically more difficult or costly to obtain after a year or consecutive years with a large number of major catastrophes, the severity and frequency of which have increased in recent years, and their likelihood may be further exacerbated by climate change. We have been and may, at certain times be, forced to incur additional costs for reinsurance, unable to obtain sufficient reinsurance on acceptable terms, or unable to obtain reinsurance for certain parts of our business. In instances where reinsurance is more costly, insufficient on acceptable terms or unavailable, we have had to, and may in the future have to, accept an increase in exposure to risk, reduce or stop writing certain lines of business written by our subsidiaries or seek alternatives in line with our risk limits, or a combination thereof.
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ITEM 1A | Risk FactorsAdditionally, we are exposed to credit risk with respect to our subsidiaries’ reinsurers to the extent the reinsurance receivable is not secured, or is or becomes inadequately secured by collateral or does not benefit from other credit enhancements. We also bear the risk that a reinsurer is, or may be, unwilling to pay amounts we have recorded as reinsurance recoverables for any reason, including that the terms of the reinsurance contract do not reflect the intent of the parties to the contract or there is a disagreement between the parties as to their intent, or the terms of the contract cannot be legally enforced. The insolvency of one or more of our reinsurers, the inability or unwillingness of such reinsurers to make timely payments under the terms of our contracts or payments in an amount equal to our corresponding reinsurance recoverable, or the risk that the reinsurance transaction does not operate as intended, including due to a change in laws and regulations or on account of court or arbitration panel interpretations, could have a material adverse effect on our results of operations and liquidity.
Moreover, the use of reinsurance placed in the capital markets or placed with alternative market reinsurers supported by capital market institutions, like private equity firms that fund single purpose reinsurance capital vehicles, may not provide the same levels of protection as traditional reinsurance transactions. Any disruption, volatility and uncertainty in these markets or with respect to these capital market participants or these types of alternative reinsurance structures may impact the protection provided by this type of reinsurance or may limit our ability to access such markets on terms favorable to us or at all. Also, to the extent that we use structures based on an industry loss index or other metrics rather than on actual losses incurred by us, we could be subject to residual risk.The availability of private sector reinsurance for terrorism is limited and we currently have limited reinsurance coverage for terrorist attacks. While we benefit from the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), which provides U.S. government risk assistance to the insurance industry to manage the exposure to terrorism incidents, TRIPRA has specific program limits and does not cover losses in certain lines of business such as personal property and personal casualty. We also rely on the government-sponsored and government-arranged terrorism reinsurance programs, including pools, in force in applicable non-U.S. jurisdictions. The realization of these risks may materially and adversely affect our business, results of operations and financial condition.For additional information on reinsurance, see Note 8 to the Consolidated Financial Statements.Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events as well as mass torts.Events such as hurricanes, windstorms, hailstorms, flooding, earthquakes, landslides, wildfires, solar storms, earth sinking, tsunamis, war or other military action, acts of terrorism, explosions and fires, cyberattacks, product defects, pandemics, mass torts, civil unrest and other catastrophes have adversely affected our business in the past and could do so in the future.Catastrophic events, and legislative or regulatory responses thereto, have in the past and could in the future result in losses in any business in which we operate, and could expose us to:
• widespread claim costs associated with property, casualty, general liability, bodily injury, workers’ compensation, accident and health, travel, business interruption and cyber claims, among others;
• loss resulting from a decline in the value of our invested assets;• loss resulting from actual policy experience that is adverse compared to the assumptions made in product pricing, which could adversely affect underwriting profitability;• revenue loss due to decline in customer base;
• declines in value and/or losses with respect to companies and other entities whose securities we hold and counterparties we transact business with and have credit exposure to, including reinsurers;
• significant disruptions to our physical infrastructure, systems and operations; and
• widespread loss or corruption of personal or sensitive business data.
Natural and man-made catastrophic events are generally unpredictable. Our exposure to catastrophe-related loss depends on various factors, including the frequency and severity of the catastrophes, the availability of reinsurance, the rate of inflation and the value and geographic or other concentrations of insured companies and individuals. Vendor models and proprietary assumptions and processes that we use to manage catastrophe exposure may prove to be ineffective due to incorrect assumptions or estimates. For example, modeling for the more unpredictable and infrequent types of catastrophes, such as terrorism, cyber incidents and pandemics, is even more difficult and may be less reliable.In addition, legislative and regulatory initiatives and court decisions following major catastrophes (both natural and man-made), as well as new and emerging mass tort claims, have required and could in the future require us to pay the insured beyond the contractual terms of the insurance policy and may prohibit the application of a deductible, resulting in inflated and unanticipated claims, or impose other restrictions, which would reduce our ability to mitigate exposure. These initiatives could impair our cash flows and adversely impact our subsidiaries’ capital ratios.
For additional information on potential catastrophic events, including a sensitivity analysis of our exposure to certain catastrophes, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risk.
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ITEM 1A | Risk FactorsFor information regarding the effects of climate change on our business, see “Climate change may adversely affect our business and financial condition” below.
Climate change may adversely affect our business and financial condition.
Climate change, indicated by higher concentrations of greenhouse gases, a warming atmosphere and ocean, wildfires, diminished snow and ice, and a rise in sea levels, appears to have contributed to an increase in the frequency and severity of natural disasters and the creation of uncertainty as to future trends and exposures. As such, climate change presents significant financial implications for us in areas such as underwriting, claims and investments, as well as risk capacity, financial reserving and operations.Climate change presents challenges to our ability to effectively underwrite, model and price catastrophe risk particularly if the frequency and severity of catastrophic events such as hurricanes, tornadoes, heatwaves, floods, wildfires and windstorms and other natural disasters continues to increase. For example, losses resulting from actual policy experience may be adverse as compared to the assumptions made in product pricing and our ability to mitigate our exposure may be reduced.
Climate-related risks may also adversely impact the value of the securities that we hold or lead to credit risk of other counterparties we transact with, including reinsurers. Our reputation could also be negatively impacted as a result of changing and divergent customer or societal perceptions of organizations that we either insure or invest in due to their actions (or lack thereof) with respect to climate change, as well as political initiatives or other stakeholder expectations with respect thereto.
In addition, lawmakers and regulators at the federal, state and local levels have imposed and may continue to impose new requirements or issue new guidance aimed at addressing or mitigating climate and other sustainability-related risks. Additional actions by foreign governments, regulators and international standard setters have expanded, and could substantially expand, the regulations, guidance or expectations to which we may be subject. Laws, regulations and guidance adopted in U.S. local, state, federal or foreign jurisdictions regarding these topics differ from one another and this results in us having to comply with differing or inconsistent laws, regulations and guidance across jurisdictions in which we operate.
Additionally, climate-related litigation has increased in recent years. Many lawsuits center on enforcement or interpretation of environmental laws and regulations, often seeking to use litigation as a tool to influence governmental and corporate climate policies. Other cases seek damages for alleged contributions to climate change or for insufficient disclosure around material financial risks, which could cause us to experience increased claims under liability policies, such as casualty and directors’ and officers’ insurance policies, increase our liabilities and affect the viability of certain of our business lines. Furthermore, claims asserted against insureds have in the past, and may in the future, include alleged failure to manage risks associated with climate change, or that actions taken by the insured contributed to loss from the event. Such litigation may, through increased claims from our customers, adversely impact our business and results of operations. For more information regarding risks associated with legal proceedings, see Business and Operations – "Significant legal or regulatory proceedings may adversely affect our business, results of operations or financial condition."We have also faced and may continue to face business continuity risk as a result of climate change-related incidents that may disrupt business operations, including extreme weather events. We cannot predict the long-term impacts of climate change on our business and results of operations.For information regarding risks associated with other catastrophic events, see Reserves and Exposures – “Our consolidated results of operations, liquidity, financial condition and ratings are subject to the effects of natural and man-made catastrophic events as well as mass torts” above.Concentration of our insurance, reinsurance and other risk exposures may have adverse effects.
We are exposed to risks as a result of concentrations in our insurance policies, investments, derivatives and other obligations that we undertake for customers and counterparties. Further, any risk management arrangements we employ to manage concentration risks, whether directly or through third parties, may not be available on acceptable terms or may prove to be ineffective. Our risk exposures under insurance policies, derivatives and other obligations are, from time to time, compounded by risk exposure assumed in the management of our investment portfolio. Also, our exposure for certain single risk coverages and other coverages may be so large that adverse experience compared to our expectations may have a material adverse effect on our consolidated results of operations or result in additional statutory capital requirements for our subsidiaries.Losses due to nonperformance or defaults by counterparties may materially and adversely affect the value of our investments, our profitability and sources of liquidity.
We are exposed to credit risk arising from exposures to various counterparties related to investments, derivatives, premiums receivable, certain businesses and reinsurance recoverables. These counterparties include, but are not limited to, issuers of fixed income and equity securities we hold, borrowers of loans we hold, customers, plan sponsors, trading counterparties, counterparties under swaps and other derivatives instruments, reinsurers, corporate and governmental entities whose payments or performance we insure, joint venture partners, clearing agents, exchanges, clearing houses, custodians, brokers and dealers, commercial banks, investment banks, intra-group counterparties with respect to derivatives and other third parties, financial intermediaries and
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ITEM 1A | Risk Factorsinstitutions and guarantors. These counterparties may default on their obligations to us due to bankruptcy, insolvency, receivership, financial distress, lack of liquidity, adverse economic conditions, operational failure, fraud, government intervention and other reasons. In addition, for exchange-traded derivatives, such as futures, options as well as "cleared" over-the-counter derivatives, we are generally exposed to the credit risk of the relevant central counterparty clearing house and futures commission merchants through which we clear derivatives. Defaults by these counterparties on their obligations to us could have a material adverse effect on the value of our investments, business, financial condition, results of operations and liquidity.An insolvency of, or the appointment of a receiver to rehabilitate or liquidate, a significant competitor could negatively impact our business if such appointment were to impact consumer confidence in our products and services. Additionally, if the underlying assets supporting the structured securities we invest in are expected to default or actually default on their payment obligations, our securities may incur losses.
INVESTMENT PORTFOLIO AND CONCENTRATION OF INVESTMENTS
Our investment portfolio is concentrated in certain segments of the economy, and the performance and value of our investment portfolio are subject to a number of risks and uncertainties.Our investment portfolio’s returns have benefited historically from investment opportunities and general market conditions that may not currently exist and may not be repeated. Our results of operations and financial condition have in the past been, and may in the future be, adversely affected by the degree of concentration in our consolidated investment portfolio. For example, we have significant holdings of real estate and real estate-related investments, including residential mortgage- backed securities (both U.S. government-sponsored enterprise-issued and Non-Agency issued), and commercial mortgage-backed securities and whole loans. We also have significant exposures to domestic and global financial institutions, certain industries, such as consumer discretionary and non-discretionary, the U.S. federal, state and local government issuers and authorities, and various governments globally. Events or developments that have a negative effect on any particular industry, asset class, group of related industries or geographic region may adversely affect the valuation of our investments to the extent they are concentrated in such segments. Our ability to sell assets in such segments may be limited.
Our investments are also subject to market risks and uncertainties, including, in addition to interest rate risk, changes in the level of credit spreads, currency rates and equity prices, each of which has affected and will continue to affect the value of investments in our investment portfolio as well as the performance of, and returns generated by, such investments. For information regarding risks associated with interest rate volatility, see Market Conditions above.
Furthermore, our alternative investment portfolio, which is subject to volatility in equity markets, includes investments for which changes in fair value are reported through pre-tax income. An economic downturn or decline in the capital markets has had, and could in the future have, a material adverse effect on our investment income, including as a result of decreases in the fair value of alternative investments.
We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered indicative of the future results of our investment portfolio.
We rely on external investment managers to manage the majority of our investment portfolio, consisting of liquid fixed income securities, structured fixed income securities, certain private credit, private fund, joint venture and partnership investments, structured products, commercial real estate-related equity investments and commercial mortgage loans.
Our investment managers are generally compensated based on the size of the investment portfolios that they manage, rather than based on investment profits or income. As a result, these investment managers are not directly incentivized to maximize investment returns. There can be no guarantee that any investment manager we engage will be able to achieve any particular returns or generate investment opportunities with attractive, risk-adjusted returns for our investment portfolio in the future. If any of our investment managers becomes unable to effectively manage our portfolio investments, the concentration of assets in our portfolio that are managed by it could adversely affect our business, results of operations, financial condition and liquidity.
In addition, we have become more reliant on our external asset managers, and such increased dependence has reduced and may continue to reduce our internal capabilities and expertise or expose us to greater risk, including the risk that external asset managers may fail to meet our performance expectations or otherwise experience disruptions or losses.
The valuation of our investments involves the application of methodologies and assumptions to derive estimates, which may differ from actual experience and could result in changes to investment valuations that may materially adversely affect our business, results of operations, financial condition and/or liquidity or lead to volatility in our net income.
It has been and may continue to be difficult to value those of our investments or derivatives that are not actively traded. There also may be cases where, due to the financial environment or market conditions, normally active markets become inactive or less active, which can result in insufficient observable data. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. These values may not be realized in
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ITEM 1A | Risk Factorsa market transaction, may not reflect the value of the asset and may change very rapidly as market conditions change and valuation assumptions are modified. Decreases in value and/or an inability to realize that value in a market transaction or other disposition may have a material adverse effect on our business, results of operations, financial condition and liquidity.LIQUIDITY, CAPITAL AND CREDIT
AIG Parent’s ability to access funds from our subsidiaries is limited, and our sources of liquidity may be insufficient to meet our needs, including providing capital that may be required by our subsidiaries.
As a holding company, AIG Parent depends on dividends and other payments from its subsidiaries to fund operations, pay dividends, repurchase shares, meet debt service obligations and meet the capital and liquidity needs of our subsidiaries. The majority of our investments are held by our regulated subsidiaries. Any inability by our subsidiaries to make dividend or other payments in an amount sufficient to enable AIG Parent to meet its cash requirements could have an adverse effect on our operations or our business, results of operations, financial condition, capital and liquidity.
The ability of our subsidiaries to pay dividends to AIG Parent in the future will depend on their earnings, capital levels, tax considerations, covenants contained in any financing or other agreements, applicable regulatory restrictions and rating agency requirements. In addition, such payments could be limited as a result of claims against our subsidiaries by their creditors, including suppliers, vendors, lessors and employees. Additionally, our insurance subsidiaries may be limited in their ability to make dividend payments to AIG Parent in the future because of the need to meet their obligations or to support their own capital levels or because of regulatory limits and restrictions or changes in, or interpretations of, regulatory or rating agency standards.Any decision to pursue strategic changes or transactions in our business and operations may also subject our subsidiaries’ dividend plans to heightened regulatory scrutiny and could make obtaining regulatory approvals for extraordinary distributions by our subsidiaries, if required, more difficult. We are also subject to certain other restrictions on our capital from time to time.
If our liquidity is insufficient to meet our needs, we may need to have recourse to third-party financing, external capital markets or other sources of liquidity, which may not be available or could be expensive. The availability and cost of any additional financing at any given time depends on a variety of factors, including general market conditions, the volume of trading activities, the overall availability of credit, regulatory actions and our credit ratings and credit capacity. It is also possible that, as a result of such increased recourse to external financing, customers, lenders or investors could develop a negative perception of our long- or short-term financial prospects. If AIG Parent is unable to satisfy the required regulatory capital needs of a subsidiary, the subsidiary could become insolvent and be subject to supervisory actions by its regulator, including the appointment of a statutory receiver to assume control of and manage the business. The credit rating agencies could also downgrade the subsidiary’s financial strength ratings.In the ordinary course of our business, we are required to post collateral for our insurance company subsidiaries from time to time. We may be required to post additional collateral due to regulatory changes from time to time, which could adversely impact our business, financial condition, results of operations and cash flows.
For additional information on our liquidity, see Part II, Item 7. MD&A – Liquidity and Capital Resources.
We may not be able to generate cash to meet our needs due to the illiquidity of some of our investments.
We have a diversified investment portfolio. However, economic conditions as well as adverse capital market conditions, including a lack of buyers, the inability of potential buyers to obtain financing on reasonable terms, volatility, credit spread changes, interest rate changes, foreign currency exchange rates and/or declines in collateral values have in the past impacted, and may in the future impact, the liquidity and value of our investments.We have investments, including certain fixed income, structured and privately placed securities as well as investments in private funds, joint ventures, mortgage loans and real estate, for which limited or no established trading markets exist, that are less liquid than other investments, or that limit or restrict, by their terms, our ability to sell or otherwise dispose of such investments. In the event these investments become stressed or distressed, our ability to exit them or otherwise preserve their value may be limited. If it became necessary to sell such assets in a stressed market environment, the prices achieved in any sale may be lower than their carrying value, which could cause a material adverse effect on our business, financial condition, results of operations and cash flows. Adverse changes in the valuation of real estate and real estate-linked assets, volatility or deterioration of capital markets and widening credit spreads have in the past, and may in the future, materially adversely affect the liquidity and the value of our investment portfolios.
In the event additional liquidity is required by one or more of our companies, it may be difficult for us to generate additional liquidity by selling, pledging or otherwise monetizing these or other investments at reasonable prices and time frames.
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ITEM 1A | Risk FactorsA downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity.Downgrades of the Insurer Financial Strength (IFS) ratings of our insurance companies could (i) prevent these companies from selling, or make it more difficult for them to succeed in selling, products and services, (ii) make it more difficult for them to obtain new reinsurance or obtain it on reasonable pricing and other terms, and/or (iii) result in increased policy cancellations or return of premiums. A downgrade of the IFS ratings of our insurance companies could result in a downgrade of AIG Parent’s credit ratings. In the event of a downgrade of AIG Parent’s credit ratings, our financing costs will increase and the availability of financing could be limited. A downgrade could also cause our derivative counterparties to limit or reduce their exposure to us and thus reduce our ability to manage our market risk exposures effectively.
These events could also trigger regulatory scrutiny and potential actions by our regulators. Any of the foregoing events could adversely affect our business, results of operations, financial condition and liquidity. For additional information on rating agency actions, see Part II, Item 7. MD&A – Liquidity and Capital Resources – Financial Strength Ratings and – Credit Ratings.BUSINESS AND OPERATIONS
Our risk management policies, standards and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk, which could adversely affect our businesses, results of operations, financial condition and liquidity.We have developed and continue to enhance enterprise-wide risk management policies, standards and procedures to identify, monitor and mitigate risk to which we are exposed. Our risk management policies, standards and procedures may not be sufficiently comprehensive and may not identify or adequately protect us from every risk to which we are exposed. Many of our methods of identifying, measuring, underwriting and managing risks are based upon our study and use of historical market, applicant, customer, employee and bad actor behavior or statistics based on historical models. As a result, these methods may not accurately predict future exposures from events such as a major financial market disruption resulting from a natural or man-made catastrophe, that could be significantly different than the historical measures indicate, and which could also result in claims levels not previously observed. Establishing and maintaining adequate and disciplined underwriting standards is difficult and our efforts to do so may not be successful. We have and will continue to enhance our underwriting processes, including, from time to time, considering and integrating newly available sources of data to confirm and/or refine our traditional underwriting methods. Our efforts at implementing these improvements may not, however, be fully successful, which may adversely affect our competitive position. We have also introduced new product features designed to limit our risk and taken actions on in-force business, which may not be fully successful in limiting or eliminating risk. Moreover, our hedging programs and reinsurance strategies that are designed to manage risk rely on assumptions regarding our assets, liabilities, general market factors and the creditworthiness of our counterparties that could prove to be incorrect or inadequate. Our hedging programs utilize various hedging and derivative instruments, including but not limited to interest rate swaps, credit default swaps and foreign exchange forwards, which may not effectively or completely reduce our risk. Assumptions underlying models used to measure accumulations and support reinsurance purchases may prove inaccurate and could leave us exposed to larger than expected catastrophe losses in any given period. In addition, our current business continuity and disaster recovery plans may not be sufficient to reduce the impact of pandemics, a major cyber-attack, including ransomware, and other natural or man-made catastrophic events. Other risk management methods depend upon the evaluation of information regarding markets, clients or other matters that is publicly available or otherwise accessible to us, which may not always be accurate, complete, up-to-date or properly evaluated. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to record and verify large numbers of transactions and events in each jurisdiction in which we operate. Further, various jurisdictions have unique requirements with respect to AI, third-party engagement, business resiliency and environmental, social and governance matters as well as matters relating to data protection and cybersecurity, which may impact the efficacy of our standardized risk management tools and techniques. Therefore, our policies and procedures may not be fully effective, and accordingly, our risk management policies, standards and procedures may not adequately mitigate the risks to our business, results of operations, financial condition and liquidity.
If our risk management policies, standards and procedures are ineffective, we may suffer unexpected losses and could be materially adversely affected. As our businesses change and the markets in which we operate evolve, new risks emerge, including risks posed by the rapidly developing technology associated with AI and the implementation thereof within our operations, by our third-party vendors and by competitors, and unanticipated challenges with respect thereto. As a result, new products or new business strategies may present risks that are not appropriately identified, monitored or managed. The effectiveness of our risk management strategies may be limited, resulting in losses, because of market stress or unanticipated financial market movements. In addition, there can be no assurance that we can effectively review and monitor all risks or that all of our employees will understand, follow and comply with our risk management policies and procedures.
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ITEM 1A | Risk FactorsPricing for our products is subject to our ability to adequately assess risks and estimate related losses.Our business is dependent on our ability to price our products effectively and charge appropriate premiums and other charges. Pricing adequacy depends on a number of factors and assumptions, including proper evaluation of insurance risks, our expense levels, net investment income expected to be realized, our response to rate actions taken by competitors, legal and regulatory developments, the ability to obtain regulatory approval for rate changes and inflation. Management establishes target returns for each product based upon the factors described above, certain underwriting assumptions and capital requirements, including statutory, GAAP and economic capital models. We monitor and manage pricing and sales to achieve target returns on new business, but we may not be able to achieve those returns. Additionally, the property and casualty insurance markets are historically cyclical and experience periods of relatively strong premium rates followed by periods of increased competition that drive premium rates down. Inadequate pricing and the difference between estimated results and actual results could have a material adverse effect on the profitability of our operations and our financial condition.We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity.We use information technology systems, infrastructure, including energy supply, and networks and other operational systems to store, retrieve, evaluate and use customer, employee and company data and information. Our business is highly dependent on our ability to access these systems and networks to perform necessary business functions. In the event of a natural disaster, unauthorized or fraudulent access, a terrorist attack, a major cyber-attack or other disruption, our systems, networks, and data may be inaccessible to our employees, customers or business partners for an extended period of time, and we may be unable to meet our business obligations and regulatory requirements for an extended period of time if our data or systems are disabled, manipulated, destroyed or otherwise compromised. Additionally, some of our technology systems are older, legacy-type systems that are less efficient and require an ongoing commitment of significant resources to maintain or upgrade, and in some cases may not be able to be fully protected or to implement the latest security patches. Supply chain disruptions or delays could prevent us from maintaining and implementing changes, updates and upgrades to our systems and networks in a timely manner or at all. System and network failures or outages, including with respect to third parties, have in the past compromised and could in the future compromise our ability to perform business functions in a timely manner, which could harm our ability to conduct business, hurt our relationships with our business partners and customers and expose us to legal claims as well as regulatory investigations and sanctions, any of which could have a material adverse effect on our business, results of operations, financial condition and liquidity.Some of these technology systems also rely upon third-party systems and services, which themselves may rely on the systems and services of other third parties. Problems caused by, or occurring in relation to, our third-party providers’ systems and services, including those resulting from breakdowns or other disruptions in information technology services provided by our third-party providers and the other third parties on which they rely, our inability to acquire third-party services on commercially acceptable terms, failure of a third-party provider to perform as anticipated or in compliance with applicable laws or regulations, inability of a third-party provider to provide the required volumes of services or our third-party providers experiencing cyberattacks or data breaches, could materially and adversely affect our business, results of operations, financial condition and liquidity.Like other global companies, the systems and networks we maintain and third-party systems and networks we or our vendors use are currently, and may in the future continue to be, subject to or targets of unauthorized or fraudulent access, including physical or electronic break-ins or unauthorized tampering, as well as cybersecurity threats such as “denial of service” attacks, phishing, automated attacks, and other disruptive attacks, including ransomware. Cyber threats are constantly evolving and the techniques used in these attacks evolve rapidly, including the use of emerging technologies, such as advancing forms of artificial intelligence and quantum computing by nation state threat actors and criminal organizations. The new cyber risks introduced by these changes in technology, such as deepfake schemes, require us to devote significant attention to identification, assessment and analysis of the risks and implementation of corresponding preventative measures. Additionally, the frequency and sophistication of such threats continue to increase and often become further heightened in connection with geopolitical tensions. Also, like other global companies, we have an increasing challenge of retaining and attracting highly qualified personnel to assist us in combatting these security threats.
Our cybersecurity measures, including information security and technology policies and standards, administrative, technical and physical controls and other actions by us or contracted third-parties designed to be preventative, may not provide fully effective protection from threats to our data, systems and networks, including malware and computer virus attacks, ransomware, unauthorized access, business e-mail compromise, misuse, denial-of-service attacks, system failures and other disruptions. We maintain insurance to cover operational risks, such as cyber risk and technology outages, but it may not cover all costs associated with the consequences of information systems or personal, confidential or proprietary information being compromised. In the case of a successful ransomware attack in which our data and information systems are compromised and applicable processes to restore access are not effective, our information could be held hostage until a ransom, which may be significant, is paid. In some cases, such a compromise may not be immediately detected, which may make it difficult to restore critical services, mitigate damage to assets and maintain the integrity and security of data including any policyholder, employee, agent, and other confidential information processed through our systems and networks.
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ITEM 1A | Risk Factors
Additionally, since we rely heavily on information technology and systems (which is expected to increasingly include the use of artificial intelligence), on digital connectivity with trading partners, and on the integrity and timeliness of data to run our businesses and service our customers, any such security event and resulting compromise of systems or data have in the past and could in the future impede or interrupt our business operations and our ability to service our customers, and materially and adversely affect our business, results of operations, financial condition and liquidity.
Any actions we take to evaluate and enhance our information security and technology systems and processes, including third-party systems and services on which we rely, as well as changes designed to update and enhance our protective measures to address new threats, may not sufficiently decrease the risk of a system or process failure, and further, such changes may create a gap in the associated security measures during the change period. Any such system or process failure or security measures gap could materially and adversely affect our business, results of operations, financial condition and liquidity.
We routinely transmit, receive and store personal, confidential and proprietary information by secured email and other electronic means. We have been, and in the future may be, unable to keep such information confidential and secure, especially with clients, vendors, service providers, counterparties and other third parties who may not have or use appropriate controls to protect personal, confidential or proprietary information. Failure to secure or appropriately handle personally identifiable information or confidential or proprietary information has caused and could in the future cause a loss of data or compromised data integrity. In addition, such failure has and could subject us to litigation, investigations, sanctions, and regulatory and law enforcement action and other liability under U.S. and international laws and regulations, including remediation or other expenses. It could also result in reputational harm and loss of business. Any of the foregoing events could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Furthermore, several of our businesses are required to comply with laws and regulations enacted by U.S. federal and state governments, the EU or other jurisdictions, or enacted by various regulatory organizations or exchanges relating to the privacy and security of the information of clients, employees or others. The variety of applicable privacy and information security laws and regulations exposes us to heightened regulatory scrutiny, requires us to incur significant technical, legal and other expenses in an effort to achieve and maintain compliance and will continue to impact our business in the future by increasing legal, operational and compliance costs. While we have taken steps to comply with privacy and information security laws, we cannot guarantee that our efforts will meet the evolving standards imposed by data protection authorities. If we are found not to be in compliance with these privacy and security laws and regulations, we may be subject to potential private consumer, business partner or securities litigation, regulatory inquiries, and governmental investigations and proceedings, including class-actions. Any such developments may damage our reputation and subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to further enhanced regulatory oversight, any of which could have a material adverse effect on our business, results of operations, financial condition and liquidity. Additionally, we expect that developments in privacy and cybersecurity worldwide will increase financial and reputational implications in the event of a significant breach of our or our third-party suppliers’ information technology systems. For additional information on data protection and cybersecurity regulations, see Item 1. Business – Regulation – Privacy, Data Protection, Cybersecurity and Artificial Intelligence Requirements and Part II, Item 7. MD&A – Enterprise Risk Management – Technology Risk – Cybersecurity Risk.
Our development and use of new technology, such as generative artificial intelligence, may present risks.
We use artificial intelligence (AI) in our business, including applying generative AI to certain aspects of the underwriting and claims processes in certain lines of business, which may raise technological, security, legal, regulatory and other risks and challenges that may adversely affect our operations, business or reputation. Such risks include the misuse, inadvertent or otherwise, of personal data or other sensitive, confidential or proprietary information, flaws in our or third-party models or training datasets resulting in biased, inaccurate or unanticipated outcomes, ethical considerations regarding the use and deployment of AI technologies, potential infringement of third-party intellectual property rights or the dilution of our intellectual property, and challenges implementing appropriate governance controls to ensure the ongoing, safe deployment of AI systems. The market-wide development of AI tools is growing rapidly and we face competitive risks if our deployment of AI technologies is unable to keep pace with that of our competitors, or we fail to anticipate trends in the use of AI tools.
AI technologies may be misused, and that risk is increased by the relative newness of the technology, the speed at which it is being adopted and ongoing uncertainty with respect to the laws, regulations and standards governing its development and deployment federally, across localities and states and internationally. Such misuse, and a realization of the previously mentioned risks, could negatively impact our reputation, financial condition and results of operations, the demand for our products and services, otherwise cause competitive harm and/or draw adverse legal and regulatory scrutiny. Insurers' use of AI is subject to existing regulations, and it is possible that the insurance industry will be subject to new or additional regulations and/or guidance regarding the development and use of AI technologies that could affect our operations in one or more jurisdictions. We cannot predict what, if any, regulatory actions will be taken with regard to the use of AI in our business, but any limitations may have a material impact on our underwriting and claims processes, our financial condition or our results of operations. Moreover, because some AI technologies are relatively new, such as generative AI, many of the potential risks regarding their use are currently unknown. As we expand the incorporation of AI
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ITEM 1A | Risk Factorstechnologies in our business, these risks will be heightened. For additional information regarding regulation with respect to AI technologies, see Item 1. Business - Regulation - Privacy, Data Protection, Cybersecurity and Artificial Intelligence Requirements.
For additional risks with respect to the use of AI , see Business and Operations – “We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity,” Regulation – “Our businesses are heavily regulated and changes in laws and regulations may affect our operations, increase our insurance subsidiary capital requirements or reduce our profitability,” and Employees and Competition – “We face intense competition in each of our business lines, and technological changes may present new and intensified challenges to our businesses.”Our foreign operations expose us to risks that may affect our operations.Through our operations, licenses and authorizations and network partners, we provide insurance solutions that help businesses and individuals in approximately 200 countries and jurisdictions protect their assets and manage risks. A substantial portion of our business is conducted outside the U.S., and we intend to continue to grow our business in strategic markets. Operations outside the U.S. have in the past been, and may in the future be, affected by elevated climate risks, regional economic downturns, changes in foreign currency exchange rates and foreign interest rates, geopolitical events or upheaval, sanctions policies, changes to international trade and/or tariff policies, nationalization and other restrictive government or regulatory actions, which could also affect our other operations.
Our subsidiaries operating in foreign jurisdictions must satisfy local regulatory requirements and these local licenses may require AIG Parent to meet certain conditions. Licenses issued by foreign authorities to our subsidiaries are subject to modification and revocation. Consequently, our insurance subsidiaries could be prevented from conducting future business in some of the jurisdictions where they currently operate. Adverse actions from any single country could adversely affect our results of operations, depending on the magnitude of the event and our financial exposure at that time in that country.
We are subject to myriad regulations which govern items such as sanctions, bribery and anti-money laundering, for which failure to comply could expose us to significant penalties. Laws and regulations aimed at preventing money laundering, which in some jurisdictions apply to insurance companies, create obligations to know certain information about clients and take steps to monitor for suspicious activities. U.S. and non-U.S. anti-corruption laws, such as the Foreign Corrupt Practices Act, the Foreign Extortion Prevention Act, and the U.K. Bribery Act 2010, broadly prohibit bribery of government officials, solicitation of bribes by government officials, commercial bribery, and other forms of potentially corrupt activities. Also, the Department of the Treasury’s Office of Foreign Assets Control administers regulations that restrict or prohibit dealings involving certain organizations, individuals and countries. The UK, the EU, Japan and other jurisdictions maintain similar laws and regulations. If our policies and controls designed to ensure compliance with these laws and regulations are ineffective and/or an employee or third party fails to comply with applicable laws and regulations, we could in the future suffer civil and criminal penalties, including disgorgement, and our business and our reputation could be adversely affected.
Third parties we rely upon to provide certain business and administrative services on our behalf may not perform as anticipated, which could have an adverse effect on our business and results of operations.
We have used and will continue to use outsourcing strategies and third-party providers to perform operational, middle- and back-office processes and deliver contracted services in a broad range of areas, including, but not limited to, administration or servicing of certain policies and contracts, finance, actuarial, information technology services related to infrastructure, and investment advisory and management services. In addition, we rely upon third parties to implement technological enhancements which may be complex and, have in the past and may in the future, require significant time and resource prioritization and result in inefficiencies and delays in meeting operational and financial targets. These risks may impair our ability to achieve anticipated improvements in our businesses, may disrupt or otherwise harm our operations which could materially and adversely affect our businesses, financial condition and operations.
Further, our use of third-party investment managers to manage the majority of our investment assets could create risk. For information regarding our reliance on third-party investment managers, see Investment Portfolio and Concentration of Investments – “We rely on investment management and advisory arrangements with third-party investment managers for the majority of our investment portfolio. The historical performance of any investment manager we engage should not be considered as indicative of the future results of our investment portfolio.” above.
Third parties performing regulated activities on our behalf, such as sales and servicing of insurance products, pose a heightened risk as we may be held accountable for their conduct in circumstances where it fails to comply with applicable law. Some of the third-party providers we use are located outside the U.S., which exposes us to business disruption and political risks inherent to conducting business across multiple jurisdictions. We periodically negotiate the terms of the provisions and renewal of these relationships, and future terms may not be acceptable to us, such third parties or regulators.22AIG | 2025 Form 10-KTABLE OF CONTENTS
ITEM 1A | Risk FactorsIf such third-party providers experience disruptions, fail to meet applicable licensure requirements, do not perform as anticipated or in compliance with applicable laws and regulations, terminate or fail to renew our relationships, or such third-party providers in turn rely on services from another third-party provider, which experiences such disruptions, licensure failures, non-performance or non-compliance, termination or non-renewal of its contractual relationships, we may experience operational difficulties, an inability to meet obligations (including, but not limited to, contractual, legal, regulatory or policyholder obligations), a loss of business, increased costs or reputational harm, compromises to our data integrity, or suffer other negative consequences, including potential regulatory consequences, such as increased scrutiny and sanctions, all of which may have a material adverse effect on our business, consolidated results of operations, liquidity and financial condition.For information regarding cyber risk arising from third-party providers, see Business and Operations – “We are exposed to certain risks if we are unable to maintain the availability of our critical technology systems and data and safeguard the confidentiality and integrity of our data, which could compromise our ability to conduct business and adversely affect our consolidated business, results of operations, financial condition and liquidity” above.
We may experience difficulty in marketing and distributing products through our current and future distribution channels and the use of third parties may result in additional liabilities.We maintain relationships with a number of key distributors, which results in distributor concentration. Distributors have in the past, and may in the future, elect to renegotiate the terms of existing relationships, such that those terms may not remain attractive or acceptable to us, limit the products they sell, including the types of products they offer on our behalf, or otherwise reduce or terminate their distribution relationships with us, with or without cause. This could be due to various reasons, such as industry consolidation of distributors or other industry changes that increase the competition for access to distributors, developments in laws or regulations that affect our business or industry, including the marketing and sale of our products and services, adverse developments in our business, the distribution of products with features that do not meet minimum thresholds set by the distributor, strategic decisions that impact our business, adverse rating agency actions or concerns about market-related risks.Alternatively, renegotiated terms may not be attractive or acceptable to distributors, or we may terminate one or more distribution agreements due to, for example, a loss of confidence in, or a change in control of, one of the third-party distributors. An interruption or reduction in certain key relationships could materially affect our ability to market our products and could materially and adversely affect our business, results of operations, financial condition and liquidity.
Key distribution partners could merge, consolidate, change their business models in ways that affect how our products are sold, or terminate their distribution contracts with us, or new distribution channels could emerge and adversely impact the effectiveness of our distribution efforts.If we are unsuccessful in attracting, retaining and training key distribution partners, or are unable to maintain our distribution relationships, our sales could decline, which could have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, substantially all of our distributors are permitted to sell our competitors’ products. If our competitors offer products that are more attractive than ours or pay higher commission rates to the distribution partners than we do or for other reasons outside of our control, these distribution partners could concentrate their efforts on selling our competitors’ products instead of ours.
In addition, we can, in certain circumstances, be held responsible for the actions of our third-party distributors, including registered representatives, insurance agents and agencies, marketing organizations, business partners, and their respective employees, agents and representatives, in connection with the marketing and sale of our products by such parties, including the security of their operations and their handling of confidential information and personal data, in a manner that is deemed not compliant with applicable laws and regulations. This is particularly acute with respect to unaffiliated distributors where our risk assessment, training and compliance programs may not be sufficient to directly monitor or control the manner in which our products are sold. Further, misconduct by employees and agents in the sale of our products could also result in violations of laws by us or our subsidiaries, regulatory sanctions and serious reputational or financial harm to us. The precautions we take to prevent and detect the foregoing activities may not be effective. If our products are distributed in a manner alleged to be inappropriate, or third-party distributors experience a security or data breach due to deficient operational controls, we could suffer reputational and/or other financial harm to our business.
Our restructuring initiatives may not yield expected reductions in expenses and/or improvements in operational and organizational efficiency.
From time to time, we engage in restructuring initiatives designed to reduce our expenses and improve operational and organizational efficiency. We may not be able to fully realize the anticipated expense reductions and operational and organizational efficiency improvements we expect to result from our focus on our operating model and associated initiatives. Actual costs to implement these initiatives may exceed our estimates or we may be unable to fully implement and execute these initiatives as planned. Our businesses and results of operations may be negatively impacted if we are unable to realize these anticipated expense reductions and efficiency improvements or if implementing these initiatives harms our relationships with customers or employees or our competitive position.
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ITEM 1A | Risk FactorsThe successful implementation of these initiatives may continue to require us to effect business rationalizations, technology enhancements, business process outsourcing, workforce reductions, modifications to our operating model and other actions, which depend on a number of factors, some of which are beyond our control.
Strategic transactions, including business or asset acquisitions and dispositions, may expose us to certain risks.
We have engaged in strategic transactions, including business or asset acquisitions and dispositions, and may continue to do so. Such transactions may, individually or in the aggregate, be material to us. The completion of any strategic transaction is subject to certain risks, including those relating to the receipt of required regulatory approvals, the terms and conditions of regulatory approvals, our ability to satisfy such terms and conditions, the occurrence of any event, change or other circumstances that could give rise to the termination of a transaction and the risk that parties may not be willing or able to satisfy the conditions to a transaction. As a result, business or asset acquisitions or dispositions may not be completed as contemplated, on the expected timeline, or at all.
Once completed, there can be no assurance that we will realize the anticipated economic, strategic or other benefits of any transaction. For example, the integration of businesses we acquire may not be as successful as we anticipate or there may be undisclosed risks present in such businesses. Additionally, difficulties or delays in separating a divested business from our existing infrastructure, systems and operations could reduce the anticipated economic, strategic or other benefits of such transaction.
Strategic transactions, including acquisitions and dispositions involve a number of risks, such as operational, strategic, financial, accounting, legal, compliance and tax risks. Our existing businesses could also be negatively impacted by acquisitions. Risks resulting from future acquisitions may have a material adverse effect on our results of operations and financial condition. In connection with a strategic transaction, we may also hold a concentrated position in securities of the acquirer or the target, received as part of the consideration, which subjects us to risks related to the price of equity securities and our ability to monetize such securities.
We have also provided and may provide financial guarantees and indemnities in connection with the businesses we have sold or may sell, as described in greater detail in Note 15 to the Consolidated Financial Statements. While we do not currently believe that claims under these indemnities will be material, it is possible that significant indemnity claims could be made against us. Any such claim or claims, if successful, could have a material adverse effect on our results of operations, cash flows and liquidity.
For additional information regarding the risks associated with our continuing equity market exposure to Corebridge, see Business and Operations – “We are subject to risks from our continuing equity market exposure to Corebridge. The anticipated benefits of our sales of Corebridge stock may not be achieved" below.
We are subject to risks from our continuing equity market exposure to Corebridge. The anticipated benefits of our sales of Corebridge stock may not be achieved.
Since the closing of the initial public offering of Corebridge’s common stock in September of 2022, we have continued to sell down our interest in Corebridge.
Although Corebridge has been deconsolidated from our consolidated financial results, we continue to hold a significant stake in Corebridge's common stock. At the time of deconsolidation on June 9, 2024, we elected the fair value option to account for our remaining investment in Corebridge. From that date onward, fair value changes in Corebridge’s stock and dividends received from Corebridge are recognized in net investment income. As a result, a decline in the market value of Corebridge common stock may result in a decrease in our investment income and may have a material and adverse effect on our results and financial condition.
There can be no assurance as to the price, transaction costs, or timing of further Corebridge stock sales and, as a result, we may fail to realize the expected benefits of our sales of such stock, including if there are adverse movements in its market value prior to, or at the time of, such sales.
For a detailed discussion of the Corebridge deconsolidation, see Note 4 to the Consolidated Financial Statements.Significant legal or regulatory proceedings may adversely affect our business, results of operations or financial condition.
In the normal course of business, we face significant risk from regulatory and governmental investigations and civil actions, litigation and other forms of dispute resolution in various domestic and foreign jurisdictions. We frequently engage in litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and face litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts.
Additionally, from time to time, various regulatory and governmental agencies review the transactions and practices of the Company and our subsidiaries in connection with company-specific matters, or industry-wide and other inquiries into, among other matters, the business practices of current and former operating insurance subsidiaries. Such reviews, investigations, inquiries or examinations have and could lead to extended delays to, or prohibitions of, such transactions or practices, or develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations to our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.24
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ITEM 1A | Risk FactorsWe, our subsidiaries and our and their respective officers and directors are also subject to, or may become subject to, a variety of additional types of legal disputes brought by holders of our securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. Certain of these matters may also involve potentially significant risk of loss due to the possibility of significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from them, and developments in these matters could have a material adverse effect on our business, financial condition or results of operations.
For information regarding certain legal proceedings, see Notes 15 and 21 to the Consolidated Financial Statements.
Scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social, governance and sustainability matters, including governmental responses to such matters, may adversely affect our reputation or otherwise adversely impact our business and results of operations.
There is scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders on companies’ governance, risk oversight, disclosures, plans, policies and practices regarding environmental, social, governance and sustainability matters, including those related to environmental stewardship, climate change, gender, race and market and workplace conduct. The requirements, standards and expectations of such stakeholders may also, as a whole, reflect diverging or conflicting values or policy objectives.
Governmental actions to mitigate climate and other risks related to environmental, social, governance and sustainability matters, or, conversely, to restrict actions companies may take in response to such risks, could have an adverse effect on our business and results of operations. Internationally and at the U.S. federal, state and local levels, regulators have imposed and likely will continue to impose requirements and guidance related to environmental, social, governance and sustainability matters, which will continue to evolve and may conflict with one another, impose additional costs on us and expose us to new or additional risks, including financial, regulatory, litigation, reputational and operational risks. See Item 1. Business – Regulation – Sustainability.
Furthermore, certain organizations that provide information to investors have developed ratings for evaluating companies on their approach to different environmental, social and governance matters, and unfavorable ratings of the Company or our industry may lead to negative investor sentiment and the diversion of investment to other companies or industries.
We may not be able to meet the requirements, standards or expectations of our various stakeholders on environmental, social, governance and sustainability issues, including with respect to any current or future targets, goals, plans, standards or expectations on these matters (including any previously announced climate target, goal or plan), whether established or set by us or third parties, due to a variety of factors, including regulatory or other developments, changes to the methodologies, assumptions and estimates that underlie our climate- and other sustainability-related targets, goals and strategy, or the actions of or information provided by third parties outside of our control, who may apply standards, methodologies, practices and policies that differ from ours. Due to potentially diverging or conflicting values and policy objectives of our stakeholders, any actual or perceived action on our part relating to environmental, social, governance and sustainability issues, or a lack thereof, could result in adverse publicity, negative investor sentiment, regulatory scrutiny, reputational harm, or loss of customer and/or investor confidence, which could adversely affect our business and results of operations.For information on the effects of climate change on our business, see Reserves and Exposures – “Climate change may adversely affect our business and financial condition” above.We may not be able to protect our intellectual property and may be subject to infringement claims.
Effective intellectual property rights protection, including in the form of contractual rights, copyright, trademark, patent and trade secret laws, may be unavailable, limited, or subject to change in some countries where we do or plan to do business. Third parties may infringe or misappropriate our intellectual property. We have, and may in the future, litigate to protect our intellectual property. Any such litigation may be costly and may not be successful. Additionally, third parties may have patents or other protections that could be infringed by our products, methods, processes or services or which could limit our ability to offer certain product features. Consequently, we have in the past been and may in the future be subject to costly litigation in the event that another party alleges that we infringe upon their intellectual property rights. Any such intellectual property litigation could prove to be both costly and unsuccessful, result in significant expense, damages, and in some circumstances, we could be enjoined from providing certain products or services to our customers. Alternatively, we could be required to enter into costly licensing arrangements with third parties to resolve infringement or contractual disputes. The loss of intellectual property protection or the inability to secure or protect our intellectual property assets could harm our reputation and have a material adverse effect on our business and our ability to compete.AIG | 2025 Form 10-K
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ITEM 1A | Risk FactorsREGULATION
Our businesses are heavily regulated and changes in laws and regulations may affect our operations, increase our insurance subsidiary capital requirements or reduce our profitability.Our operations generally, and our insurance subsidiaries in particular, are subject to extensive and potentially conflicting laws and regulations in the jurisdictions in which we operate. Our business and financial condition are also subject to supervision and regulation by authorities in the various jurisdictions in which we do business. Federal, state and foreign regulators also periodically review and inspect our insurance businesses, including Company-specific and industry-wide practices. The primary purpose of insurance regulation is the protection of insurance and reinsurance contract holders. The extent of regulation on our insurance business varies across the jurisdictions in which we operate, but generally is governed by laws that delegate regulatory, supervisory and administrative authority to insurance departments and similar regulatory agencies. The laws and regulations that apply to our business and operations generally grant regulatory agencies and/or self-regulatory organizations broad rulemaking and enforcement powers, including the power to regulate the issuance, marketing, sale and distribution of our products, the manner in which we underwrite our policies, the delivery of our services, the nature or extent of disclosures that we give our customers, the compensation of our distribution partners, the manner in which we handle claims on our policies and the administration of our policies and contracts, as well as the power to limit or restrict our business for failure to comply with applicable laws and regulations.
The application of and compliance with the laws and regulations applicable to our businesses, operations and legal entities, including maintenance of all required licenses and approvals, may be subject to interpretation, evolving industry practices and regulatory expectations that could result in increased compliance costs. The relevant authorities may not agree with our interpretation of these laws and regulations or with our policies and procedures adopted to address evolving industry practices or meet regulatory expectations. Such authorities’ interpretations and views may also change from time to time. It is also possible that the laws, regulations and interpretations across various jurisdictions in which we do business may conflict with one another, or affect how we do business beyond such jurisdictions’ borders, including in the U.S. and/or globally. If we are found not to have complied with applicable legal or regulatory requirements, these authorities could preclude or temporarily suspend us from carrying on some or all of our activities, impose substantial administrative penalties such as fines or require corrective actions, which individually or in the aggregate could interrupt our operations and materially and adversely affect our reputation, business, results of operations and financial condition. Additionally, in instances where such authorities’ interpretation of new or revised requirements related to capital, accounting treatment, valuation or reserving has materially differed, or may in the future materially differ from ours, we have incurred, and may again incur, higher operating costs, and sales of products subject to such requirements or treatment have been and may in the future be affected.
Regulators in jurisdictions in which we do business have adopted capital (including in the U.S., RBC), solvency and liquidity standards applicable to insurers operating in their jurisdiction. Failure to comply with such capital, solvency, liquidity and similar requirements, or as otherwise may be agreed by us or one of our insurance company subsidiaries with an insurance regulator, would generally permit the insurance regulator to take certain regulatory actions that could materially impact the affected company’s operations. Those actions range from requiring an insurer to submit a plan describing how it would regain a specified RBC or solvency ratio to a mandatory regulatory takeover of the company. The NAIC has adopted methodologies for assessing group-wide regulatory capital, which could evolve into more formal group-wide prescribed capital requirements on certain insurance companies and/or their holding companies that may augment jurisdictional RBC or solvency standards that apply at the legal entity level, and the basis for such capital calculations may differ, in whole or in part, from the statutory statements of our insurance subsidiaries used to calculate RBC. Furthermore, efforts to address systemic risks within the financial services industry, including insurance services, may lead regulators to apply new or heightened standards and safeguards for activities or practices that we and other insurers or other nonbank financial services companies engage in. The Financial Stability Oversight Council has authority under Dodd-Frank to determine that certain nonbank financial companies, including insurers, be designated as nonbank SIFIs subject to supervision by the Board of Governors of the Federal Reserve System and enhanced prudential standards, and has in place guidance and procedures intended to govern any such designations. We cannot predict the effect that any such designations, or initiatives or heightened standards may have on our business, results of operations, liquidity and financial condition.
There has also been increased regulatory scrutiny of the use of AI, data analytics, and predictive models, including in the insurance industry. Certain insurance regulators have developed, and others are developing, regulations or guidance applicable to insurance companies that use AI, data analytics, and predictive models in their operations. We cannot predict the impact of the regulatory actions that have been or may in the future be taken with regard to AI, data analytics, and predictive models, but any limitations or restrictions could have a material impact on our business, processes, results of operations and financial condition.
We also cannot predict the impact that laws and regulations adopted in foreign jurisdictions may have on our businesses, results of operations or cash flows, or on the financial markets generally. It is possible such laws, regulations or standards, including, without limitation, Solvency II and European Data Protection Board Cross Border Data Transfer, Corporate Sustainability Reporting Directive, and Corporate Sustainability Due Diligence Directive in the EU, and standard-setting initiatives by the FSB and the IAIS, including, but not limited to, the IAIS’ Common Framework for the Supervision of IAIGs, its global Insurance Capital Standard, which was recently adopted as a group-level prescribed capital requirement, and its holistic framework for the assessment and mitigation of systemic risk,26AIG | 2025 Form 10-KTABLE OF CONTENTS
ITEM 1A | Risk Factorsmay significantly alter our business practices. Regulators have imposed and may continue to impose new requirements, and regulators and other international organizations may continue to update, revise or overhaul regulatory regimes to which we are subject in order to address existing and emerging risks. They may also limit our ability to engage in capital or liability management, require us to raise additional capital, or impose requirements and additional costs that may be burdensome. Laws and regulations adopted in foreign jurisdictions may also differ from one another, and could be inconsistent with the laws and regulations of other jurisdictions in which we operate, including the U.S.For additional information on our regulatory environment, see Item 1. Business – Regulation.For information regarding the effects of regulations related to climate change on our business, see Reserves and Exposures – “Climate change may adversely affect our business and financial condition” above.New laws and regulations or new interpretations of current laws and regulations, both domestically and internationally, may affect our businesses, results of operations, financial condition and ability to compete effectively.
Legislators, regulators, self-regulatory and other organizations have in the past, and may in the future, periodically consider various proposals that, if enacted, may affect or restrict, among other things, our business practices and activities, product designs and distribution relationships, how we market, sell or service certain products we offer, the investment assets we hold and our investment management practices, our capital, reserving and accounting requirements, or the profitability of certain of our businesses.Further, new laws, regulations or guidance may affect or significantly limit our ability to conduct certain businesses at all, including restrictions on the type of activities in which financial institutions are permitted to engage. Changes in legislation or regulation could also impose additional taxes on a limited subset of financial institutions and insurance companies (either based on size, activities, geography or other criteria), limit our ability to engage in capital or liability management, require us to raise additional capital, or impose burdensome requirements and additional costs. It is uncertain whether and how these and other changes in legislation or regulation would apply to us, those who sell or service our products, or our competitors or how they could impact our ability to compete effectively, as well as our business, consolidated results of operations, liquidity and financial condition.An “ownership change” could limit our ability to utilize tax loss and credit carryforwards to offset future taxable income.Our ability to use U.S. federal net operating loss carryforwards to offset future taxable income may be significantly limited if we experience an “ownership change” as defined in Section 382 of the Internal Revenue Code. In general, an ownership change will occur when the percentage of AIG Parent's ownership (measured by value) by one or more “5-percent shareholders” (as defined in Section 382 of the Internal Revenue Code) has increased by more than 50 percentage points over the lowest percentage owned by such shareholders at any time during the prior three years (calculated on a rolling basis). An entity that experiences an ownership change generally will be subject to an annual limitation on its utilization of pre-ownership change tax loss and credit carryforwards equal to the equity value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate posted monthly by the Internal Revenue Service (AFR) (subject to certain adjustments). The annual limitation would be increased each year to the extent that there is an unused limitation in a prior year. The limitation on our ability to utilize tax loss and credit carryforwards arising from an ownership change under Section 382 of the Internal Revenue Code would be dependent on the value of our equity and the AFR at the time of any ownership change. If we were to experience an “ownership change,” it is possible that a significant portion of our tax loss carryforwards could expire before we are able to use them to offset future taxable income.New and proposed changes to tax laws could increase our corporate taxes.On July 4, 2025, new U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBB Act”), which, among other provisions, makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. We do not expect the OBBB Act to have a material impact on our results of operations.
New tax laws, in particular those enacted in response to proposals by the Organisation for Economic Co-operation and Development, could make substantive changes to the global international tax regime. Such changes could increase our global tax costs. We continue to monitor and assess the impact of such proposals.Finally, it is possible that tax laws will be further changed either in a technical corrections bill or entirely new legislation. It remains difficult to predict whether or when there will be any tax law changes or further guidance by the authorities in the U.S. or elsewhere in the world. New or proposed changes to tax laws may have a material adverse effect on our business, consolidated results of operations, liquidity and financial condition, as the impact of proposals on our business can vary substantially depending upon the specific changes or further guidance made and how the changes or guidance are implemented by the authorities.
For additional information, see Note 21 to the Consolidated Financial Statements.AIG | 2025 Form 10-K
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ITEM 1A | Risk Factors
ESTIMATES AND ASSUMPTIONS
Estimates or assumptions used in the preparation of financial statements and modeled results used in various areas of our business may differ materially from actual experience.Our consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the application of accounting policies that often involve a significant degree of judgment. The accounting policies that we consider most dependent on the application of estimates and assumptions, and therefore may be viewed as critical accounting estimates, are described in Part II, Item 7. MD&A – Critical Accounting Estimates and in Note 1 to the Consolidated Financial Statements. These accounting estimates require the use of assumptions, some of which are highly uncertain at the time of estimation. These estimates are based on judgment, current facts and circumstances, and, when applicable, models developed internally or with inputs from third parties. Therefore, actual results have in the past differed and may in the future differ from these estimates and models, possibly in the near term, and could have a material effect on our financial statements.
In addition, we employ models to price products, calculate reserves and value assets and execute hedging strategies, as well as to assess risk and determine statutory capital requirements, among other uses. These models are complex and rely on estimates and projections that are inherently uncertain, may use incomplete, outdated or incorrect data or assumptions and may not operate as intended. To the extent that any of our operating practices and procedures do not accurately produce or reproduce data that we use to conduct any or all aspects of our business, such differences may negatively impact our business, reputation, results of operations, and financial condition. Additionally, if any of our modeling practices do not accurately produce, or reproduce, data that we use to conduct any or all aspects of our business, such errors may negatively impact our business, reputation, results of operations and financial condition.Changes in accounting principles and financial reporting requirements may impact our consolidated results of operations and financial condition.Our consolidated financial statements are prepared in accordance with U.S. GAAP, which are periodically revised. Accordingly, from time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board (FASB). The adoption of new or revised accounting standards has in the past, and may in the future impact, our reported consolidated results of operations, liquidity and reported financial condition and may create, or cause investors to perceive greater volatility in our financial results, negatively impacting our level of investor interest and investment.For information regarding the impact of accounting pronouncements that have been issued but are not yet required to be implemented, see Note 2 to the Consolidated Financial Statements.
If our businesses do not perform well and/or their estimated fair values decline, we may be required to recognize an impairment of our goodwill or establish an additional valuation allowance against the related deferred income tax assets, which could have a material adverse effect on our results of operations and financial condition.Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. We test goodwill at least annually for impairment and conduct interim qualitative assessments on a periodic basis. Impairment testing is performed based upon estimates of the fair value of the “reporting unit” to which the goodwill relates. In 2025, for substantially all of the reporting units we elected to bypass the qualitative assessment of whether goodwill impairment may exist and, therefore, performed quantitative assessments that supported a conclusion that the fair value of all of the reporting units tested exceeded their book value. If it is determined that goodwill has been impaired, we must write down goodwill by the amount of the impairment, with a corresponding charge to net income (loss). Any such write-downs could have a material adverse effect on our consolidated results of operations, liquidity and financial condition. For additional information on goodwill impairment, see Note 12 to the Consolidated Financial Statements.
Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. If, based on available evidence, it is more likely than not that the deferred tax asset will not be realized, then a valuation allowance must be established with a corresponding charge to net income, an action we have taken from time to time. Such charges could have a material adverse effect on our consolidated results of operations, liquidity and financial condition. For additional information on deferred tax assets, see Part II, Item 7. MD&A – Critical Accounting Estimates – Income Taxes and Note 21 to the Consolidated Financial Statements.
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ITEM 1A | Risk Factors
EMPLOYEES AND COMPETITION
Employee error and misconduct may be difficult to detect and prevent and may result in reputational damage and significant losses.
We are exposed to the risk that employee fraud or misconduct could occur despite extensive training for employees and fraud monitoring. Instances of fraud, illegal acts, errors, failure to document transactions properly or to obtain proper internal authorization, misuse of customer or proprietary/confidential information, or failure to comply with regulatory requirements or our internal policies may result in losses and/or reputational damage.
Competition for employees in our industry is intense, and managing key employee succession is critical to our success. We may not be able to attract and retain the key employees and other highly skilled employees we need to support our businesses.
Our success depends, in large part, on our ability to attract and retain key and other highly skilled employees. Due to the intense competition in our industry for key employees, we may be unable to retain or hire such employees. In addition, we may experience higher than expected employee turnover and difficulty attracting new employees as a result of uncertainty from strategic actions and organizational and operational changes. Losing any of our key employees also could have a material adverse effect on our operations given their skills, knowledge of our business, years of industry experience and the potential difficulty of promptly finding qualified replacements. Our business and consolidated results of operations could be materially adversely affected if we are unsuccessful in retaining and attracting key employees.In addition, we would be adversely affected if we fail to adequately plan for or implement the succession of our Chief Executive Officer, other members of senior management and other key employees. While we have long-term compensation plans designed to retain our employees and succession plans, our compensation plans cannot guarantee that the services of these employees will continue to be available to us and our succession plans may not operate effectively.We face intense competition in each of our business lines, and technological changes may present new and intensified challenges to our businesses.
Our businesses operate in highly competitive environments, both domestically and overseas. Our principal competitors are other property and casualty insurance organizations.
We compete through a combination of risk acceptance criteria, product pricing, and terms and conditions. Reductions of our credit ratings or IFS ratings or negative publicity may make it more difficult to compete to retain existing customers and to maintain our historical levels of business with existing customers, counterparties and distribution relationships. A decline in our position as to any one or more of these factors could adversely affect our profitability.Technological advancements and innovation in the insurance industry, including those related to evolving customer preferences, the digitization of insurance products and services, data ingestion and exchange with trading partners, acceleration of automated underwriting, and use of AI and electronic processes present competitive risks. Technological advancements and innovation are occurring in distribution, underwriting, recordkeeping, advisory, marketing, claims and operations at a rapid pace, and that pace may increase, particularly as companies increasingly use data analytics and technology as part of their business strategy. If we are unable to effectively implement these technological advancements, including the use of AI, in a way that matches or exceeds our competitors, we may suffer competitive harm, which could adversely impact our reputation, results of operations and financial condition. For further discussion on regulatory developments with respect to emerging technologies, see Regulation above.
Further, additional costs have been and may in the future be incurred in order to implement changes to automate and digitize procedures critical to our distribution channels in order to increase flexibility of access to our services and products. While we seek opportunities to leverage technological advancements and innovation for our customers’ benefit, our business and results of operations could be materially and adversely affected if external technological advancements or innovation, or their regulation, limit our ability to retain existing business, write new business at adequate rates or on appropriate terms, or impact our ability to adapt or deploy current products as quickly and effectively as our competitors.
Item 7 · Management's Discussion & Analysis
+735 paragraphs −975 paragraphs ~735 changed
FY 2024-12-31 (earlier)
ITEM 7 | Management’s Discussion and Analysis of Financial Condition and Results of OperationsCautionary Statement Regarding Forward-Looking Information and Factors That May Affect Future Results
This Annual Report on Form 10-K and other publicly available documents may include, and members of management may from time to time make and discuss, statements which, to the extent they are not statements of historical or present fact, may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward‑looking statements are intended to provide management’s current expectations or plans for future operating and financial performance, based on assumptions currently believed to be valid and accurate. Forward-looking statements are often preceded by, followed by or include words such as “will,” “believe,” “anticipate,” “expect,” “expectations,” “intend,” “plan,” “strategy,” “prospects,” “project,” “anticipate,” “should,” “guidance,” “outlook,” “confident,” “focused on achieving,” “view,” “target,” “goal,” “estimate” and other words of similar meaning in connection with a discussion of future operating or financial performance. These statements may include, among other things, projections, goals and assumptions that relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expense reduction efforts, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, the effect of catastrophic events, both natural and man-made, and macroeconomic and/or geopolitical events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, the successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results, and other statements that are not historical facts.
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All forward-looking statements involve risks, uncertainties and other factors that may cause actual results and financial condition to differ, possibly materially, from the results and financial condition expressed or implied in the forward-looking statements. Factors that could cause actual results to differ, possibly materially, from those in specific projections, targets, goals, plans, assumptions and other forward-looking statements include, without limitation:• the impact of adverse developments affecting economic conditions in the markets in which we operate in the U.S. and globally, including financial market conditions, macroeconomic trends, fluctuations in interest rates and foreign currency exchange rates, inflationary pressures, including social inflation, pressures on the commercial real estate market, and an economic slowdown or recession and geopolitical events or conflicts;• the occurrence of catastrophic events, both natural and man-made, which may be exacerbated by the effects of climate change;
• disruptions in the availability or accessibility of our or a third party’s information technology systems, including hardware and software, infrastructure or networks, and the inability to safeguard the confidentiality and integrity of customer, employee or company data due to cyberattacks, data security breaches or infrastructure vulnerabilities;
• our ability to effectively implement technological advancements, including the use of artificial intelligence (AI), and respond to competitors' AI and other technology initiatives;• the effects of changes in laws and regulations, including those relating to privacy, data protection, cybersecurity and AI, and the regulation of insurance, in the U.S. and other countries in which we operate;• our ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses, and the anticipated benefits thereof;
• concentrations in our investment portfolios, including our continuing equity market exposure to Corebridge Financial, Inc. (Corebridge);
• our reliance on third-party investment managers;• changes in the valuation of our investments;• our reliance on third parties to provide certain business and administrative services;• availability of adequate reinsurance or access to reinsurance on acceptable terms;• our ability to adequately assess risk and estimate related losses as well as the effectiveness of our enterprise risk management policies and procedures;
• changes in judgments or assumptions concerning insurance underwriting and insurance liabilities;
• concentrations of our insurance, reinsurance and other risk exposures;• nonperformance or defaults by counterparties;• the effectiveness of strategies to retain and recruit key personnel and to implement effective succession plans;• difficulty in marketing and distributing products through current and future distribution channels;
• actions by rating agencies with respect to our credit and financial strength ratings as well as those of its businesses and subsidiaries;
• changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill;• our ability to address evolving global stakeholder expectations and regulatory requirements with respect to environmental, social and governance matters;
• the effects of sanctions and the failure to comply with those sanctions;• our ability to effectively implement restructuring initiatives and potential cost-savings opportunities;
• changes to sources of or access to liquidity;
• changes in accounting principles and financial reporting requirements or their applicability to us;• changes to tax laws in the U.S. and other countries in which we operate;
• the outcome of significant legal, regulatory or governmental proceedings;
• our ability to effectively execute on sustainability targets and standards;
• the impact of epidemics, pandemics and other public health crises and responses thereto; and• such other factors discussed in:
– Part I, Item 1A. Risk Factors of this Annual Report;
– this Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) of this Annual Report; and
– our other filings with the Securities and Exchange Commission (SEC).
Forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We are not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in any forward-looking statements is disclosed from time to time in other filings with the SEC.36
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INDEX TO ITEM 7
PageUse of Non-GAAP Measures
38
Critical Accounting Estimates
40Executive Summary47Overview47
Regulatory, Industry and Economic Factors
47Consolidated Results of Operations48Business Segment Operations53General Insurance54Other Operations61Investments62Overview62
Investment Highlights in 2024
62Investment Strategies62Credit Ratings68Insurance Reserves70Loss Reserves70Liquidity and Capital Resources74Overview74Liquidity and Capital Resources Highlights74Analysis of Sources and Uses of Cash75Liquidity and Capital Resources of AIG Parent and Subsidiaries76Credit Facilities77Contractual Obligations77Off-Balance Sheet Arrangements and Commercial Commitments78Debt79
Credit Ratings
79Financial Strength Ratings80Regulation and Supervision80Dividends80Repurchases of AIG Common Stock80
Dividend Restrictions
81Enterprise Risk Management81
Overview
81
Risk Governance Structure
81
Risk Appetite, Limits, Identification and Measurement
81
Credit Risk Management
82
Market Risk Management
82
Liquidity Risk Management
84
Operational Risk Management
84
Business and Strategy Risks
84
Insurance Risks
85Glossary88Acronyms90Throughout the MD&A, we use certain terms and abbreviations, which are summarized in the Glossary and Acronyms.
We have incorporated into this discussion a number of cross-references to additional information included throughout this Annual Report to assist readers seeking additional information related to a particular subject.AIG | 2024 Form 10-K37
TABLE OF CONTENTSITEM 7 | Use of Non-GAAP Measures
Use of Non-GAAP Measures
Throughout this MD&A, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.
We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our segments. We believe they also allow for more meaningful comparisons with our insurance competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis in the Consolidated Results of Operations section of this MD&A.
Book value per share, excluding investments related cumulative unrealized gains and losses recorded in Accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI (AIG adjusted common shareholders' equity) by total common shares outstanding.
Book Value per share, excluding Goodwill, Value of business acquired (VOBA), Value of distribution channel acquired (VODA) and Other intangible assets (Tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis. Tangible book value per share is derived by dividing Total AIG common shareholders’ equity, excluding intangible assets (AIG tangible common shareholders’ equity) by total common shares outstanding.
Book Value per share, excluding Investments AOCI, Goodwill, VOBA, VODA and Other intangible assets (Adjusted tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions and Fortitude Re funds withheld assets since these fair value movements are economically transferred to Fortitude Re. Adjusted tangible book value per share is derived by dividing AIG adjusted common equity, excluding intangible assets, (AIG adjusted tangible common shareholders’ equity) by total common shares outstanding.
Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs), corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.
Return on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates the fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.
Return on Equity – Adjusted After-tax Income, Excluding Goodwill, VOBA, VODA and Other Intangible assets (Return on tangible equity) is used to show the return on AIG tangible common shareholder’s equity, which we believe is a useful measure of realizable shareholder value. We exclude Goodwill, VOBA, VODA and Other intangible assets from AIG common shareholders’ equity to derive AIG tangible common shareholders’ equity. Return on AIG tangible common equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG tangible common shareholders' equity.
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ITEM 7 | Use of Non-GAAP Measures
Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to NOLs, CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. We believe this metric will provide investors with greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.
Adjusted pre-tax income (APTI) is derived by excluding the items set forth below from income from continuing operations before income tax:
• changes in the fair values of equity securities, AIG's investment in Corebridge and gain on sale of shares;
• net investment income on Fortitude Re funds withheld assets;
• net realized gains and losses on Fortitude Re funds withheld assets;
• loss (gain) on extinguishment of debt;
• all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication. Earned income on such economic hedges is reclassified from net realized gains and losses to specific APTI line items based on the economic risk being hedged (e.g. net investment income);
• income or loss from discontinued operations;
• net loss reserve discount benefit (charge);
• net results of businesses in run-off;
• pension expense related to lump sum payments to former employees;
• net gain or loss on divestitures and other;
• non-operating litigation reserves and settlements;
• restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;
• the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain;
• integration and transaction costs associated with acquiring or divesting businesses;
• losses from the impairment of goodwill;
• non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles; and
• income from elimination of the international reporting lag.
Adjusted after-tax income attributable to AIG common shareholders is derived by excluding the tax effected APTI adjustments described above, dividends on preferred stock and preferred stock redemption premiums, noncontrolling interest on net realized gains (losses), other non-operating expenses and the following tax items from net income attributable to AIG:
• deferred income tax valuation allowance releases and charges;
• changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and
• net tax charge related to the enactment of the Tax Cuts and Jobs Act.
Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. Our ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.
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ITEM 7 | Use of Non-GAAP Measures
Accident year loss and accident year combined ratios, as adjusted (Accident year loss ratio, ex-CAT and Accident year combined ratio, ex-CAT): both the accident year loss and accident year combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. We believe that as adjusted ratios are meaningful measures of our underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. We also exclude prior year development to provide transparency related to current accident year results.
Results from discontinued operations, including Corebridge, are excluded from all of these measures.Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment.
The accounting policies that we believe are most dependent on the application of estimates and assumptions, which are critical accounting estimates, are related to the determination of:
• loss reserves;• reinsurance assets, including the allowance for credit losses and disputes;
• allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities;
• fair value measurements of certain financial assets and financial liabilities;
• income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions; and
• goodwill impairment.These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.
LOSS RESERVES
Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Because these estimates are subject to the outcome of future events and because loss trends vary and time is often required for changes in trends to be recognized and confirmed, changes in estimates are common.
The estimate of loss reserves relies on several key judgments:
• the determination of the actuarial methods used as the basis for these estimates;
• the relative weights given to these models by product line;
• the underlying assumptions used in these models; and
• the determination of the appropriate groupings of similar product lines and, in some cases, the disaggregation of dissimilar losses within a product line.Numerous assumptions are made in determining the best estimate of reserves for each line of business, in consideration of expected ultimate losses, loss cost trends and loss development factors, where appropriate. The importance of any one assumption can vary by both line of business and accident year. Because such assumptions may differ from actual experience, there is potential for significant variation in the development of loss reserves. This estimation uncertainty is particularly relevant for long-tail lines of business.All of our methods to calculate net reserves include assumptions about estimated reinsurance recoveries and their collectability. Reinsurance collectability is evaluated independently of the reserving process and appropriate allowances for uncollectible reinsurance are established.40
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ITEM 7 | Critical Accounting EstimatesOverview of Loss Reserving Process and Methods
Our loss reserves can generally be categorized into two distinct groups: short-tail reserves and long-tail reserves. Short-tail reserves consist principally of U.S. Property and Special Risks, UK/Europe Property and Special Risks, U.S. Personal Insurance, and UK/Europe and Japan Personal Insurance. Long-tail reserves include U.S. Workers’ Compensation, U.S. Excess Casualty, U.S. Other Casualty, U.S. Financial Lines, and UK/Europe Casualty and Financial Lines.
Short-Tail ReservesIn short-tail lines of business, such as property or personal insurance, where the nature of these claims tends to be higher frequency with short reporting periods, with volatility arising from occasional severe events, the actual losses reported make up a greater proportion of the ultimate loss estimate. During the first few development quarters of an accident year, the expected ultimate losses generally reflect the average loss costs from a period of preceding accident quarters that have been adjusted for changes in rate and loss cost trends, mix of business, known exposure to unreported losses, or other factors affecting the particular line of business. For more mature quarters, specific loss development methods and/or frequency/severity methods may be used to determine the incurred but not reported (IBNR). IBNR for claims arising from catastrophic events or events of unusual severity would be determined taking into account information known by the claims department, using alternative techniques or expected percentages of ultimate loss emergence based on historical emergence of similar events or claim types.Long-Tail ReservesEstimation of loss reserves for our long-tail business is a complex process and depends on a number of factors, including the product line and volume of business, as well as estimates of reinsurance recoveries. Experience in more recent accident years generally provides limited statistical credibility of reported net losses on long-tail business. That is because in the more recent accident years, a relatively low proportion of estimated ultimate net incurred losses are reported or paid. Therefore, IBNR reserves constitute a relatively high proportion of loss reserves.For our long-tail lines, we generally make actuarial and other assumptions with respect to the following:
• Loss cost trend factors, which are used to establish expected loss ratios for subsequent accident years based on the projected loss ratios for prior accident years.
• Expected loss ratios, which are used for the latest accident year and, in some cases, for accident years prior to the latest accident year. The expected loss ratio also generally reflects the average loss ratio from prior accident years, adjusted for the loss cost trend and the effect of rate changes and other quantifiable factors on the loss ratio.
• Loss development factors, which are used to project the reported losses for each accident year to an ultimate basis. Generally, the actual loss development factors observed from prior accident years would be used as a basis to determine the loss development factors for the subsequent accident years.• Tail factors, which are development factors used for certain long-tail lines of business to project future loss development for periods that extend beyond the available development data. The development of losses to the ultimate loss for a given accident year for these lines may take decades and the projection of ultimate losses for an accident year is very sensitive to the tail factors selected beyond a certain age.
We record quarterly changes in loss reserves for each product line of business. The overall change in our loss reserves is based on the sum of the changes for all product lines of business. The quarterly loss reserve changes are based on the estimated current loss ratio for each subset of coverage less any amounts paid. Also, any change in estimated ultimate losses from prior accident years deemed to be necessary based on the results of our latest detailed valuation reviews, large loss analyses, or other analytical techniques, either positive or negative, is reflected in the loss reserve and incurred losses for the current quarter. Differences between actual loss emergence in a given period and our expectations based on prior loss reserve estimates are used to monitor reserve adequacy between detailed valuation reviews and may also influence our judgment with respect to adjusting reserve estimates.Details of the Loss Reserving ProcessThe process of determining the current loss ratio for each product line of business is based on a variety of factors. These include considerations such as: prior accident year and policy year loss ratios; rate changes; and changes in coverage, reinsurance, or mix of business. Other considerations include actual and anticipated changes in external factors such as trends in loss costs, inflation, employment rates or unemployment duration or in the legal and claims environment. The current loss ratio for each product line of business is intended to represent our best estimate after reflecting all relevant factors. At the close of each quarter, the assumptions and data underlying the loss ratios are reviewed to determine whether they remain appropriate. This process includes a review of the actual loss experience in the quarter, actual rate changes achieved, actual changes in reinsurance, quantifiable changes in coverage or mix of business, and changes in other factors that may affect the loss ratio. The loss ratio is changed to reflect the revised estimate if this review suggests that the previously determined loss ratio is no longer appropriate and, generally, shorter tailed lines of business are more likely to experience changes than longer tailed lines for immature accident years unless the information is directionally unfavorable.
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ITEM 7 | Critical Accounting EstimatesWe conduct a comprehensive loss reserve detailed valuation review at least annually for each product line of business in accordance with Actuarial Standards of Practice. These standards provide that the unpaid loss estimate may be presented in a variety of ways, such as a point estimate, a range of estimates, a point estimate based on the expected value of several reasonable estimates, or a probability distribution of the unpaid loss amount. Our actuarial best estimate for each product line of business represents an expected value generally considering a range of reasonably possible outcomes.
The reserve analysis, globally, for each product line of business is performed by a credentialed actuarial team in collaboration with claims, underwriting, business unit management, risk management and senior management. Our actuaries consider the ongoing applicability of prior data groupings and update numerous assumptions, including the analysis and selection of loss development and loss trend factors. They also determine and select the appropriate actuarial or other methods used to develop our best estimate for each business product line, and may employ multiple methods and assumptions for each product line. These data groupings, accident year weights, method selections and assumptions necessarily change over time as business mix changes, development factors mature and become more credible and loss characteristics evolve. We consult with third-party specialists to help inform our judgments as needed. Through the execution of these detailed valuation reviews an actuarial best estimate of the loss reserve is determined. The sum of these estimates for each product line of business yields an overall actuarial best estimate for that line of business.
A critical component of our detailed valuation reviews is an internal peer review of our reserving analyses and conclusions, where actuaries independent of the initial review evaluate the reasonableness of assumptions used, methods selected, and weightings given to different methods. In addition, each detailed valuation review is subjected to a review and challenge process by specialists in our Enterprise Risk Management (ERM) group.
For certain product lines, we measure sensitivities and determine explicit ranges around the actuarial best estimate using multiple methodologies and varying assumptions. Where we have ranges, we use them to inform our selection of best estimates of loss reserves by product line of business. Our range of reasonable estimates is not intended to cover all possibilities or extreme values and is based on known data and facts at the time of estimation.Actuarial and Other Methods for Our Lines of BusinessOur actuaries determine the appropriate actuarial methods and segmentation. This determination is based on a variety of factors including the nature of the losses associated with the product line of business, such as the frequency or severity of the claims. In addition to determining the actuarial methods, the actuaries determine the appropriate loss reserve groupings of data. This determination is a judgmental, dynamic process and refinements to the groupings are made every year. The groupings may change to reflect observed or emerging patterns within and across product lines, or to differentiate risk characteristics (for example, size of deductibles and extent of third-party claims specialists used by our insureds). As an example of reserve segmentation, we write many unique subsets of professional liability insurance, which cover different products, industry segments, and coverage structures. While for pricing or other purposes, it may be appropriate to evaluate the profitability of each subset individually, we believe it is appropriate to combine the subsets into larger groups for reserving purposes to produce a greater degree of credibility in the loss experience. This determination of data segmentation and related actuarial methods is assessed, reviewed and updated at least annually.The actuarial methods we use most commonly include paid and incurred loss development methods, expected loss ratio methods, including “Bornhuetter Ferguson” and “Cape Cod,” and frequency/severity models. Loss development methods utilize the actual loss development patterns from prior accident years updated through the current year to project the reported losses to an ultimate basis for all accident years. We also use this information to update our current accident year loss selections. Loss development methods are generally most appropriate for lines of business that exhibit a stable pattern of loss development from one accident year to the next, and for which the components of the product line have similar development characteristics. Expected loss ratio methods rely on the application of an expected loss ratio to the earned premium for the product line of business to determine the liability for loss reserves and loss adjustment expenses. We generally use expected loss ratio methods in cases where the reported loss data lacked sufficient credibility to utilize loss development methods, such as for new product lines of business or for long-tail product lines at early stages of loss development. Frequency/severity models may be used where sufficient frequency counts are available to apply such approaches.A key advantage of loss development methods is that they respond more quickly to any actual changes in loss costs for the product line of business. Therefore, if loss experience is unexpectedly deteriorating or improving, the loss development method gives full credibility to the changing experience. Expected loss ratio methods would be slower to respond to the change, as they would continue to give more weight to a prior expected loss ratio, until enough evidence emerged to modify the expected loss ratio to reflect the changing loss experience. On the other hand, loss development methods have the disadvantage of overreacting to changes in reported losses if the loss experience is anomalous due to the various key factors described above and the inherent volatility in some of the lines. For example, the presence or absence of large losses at the early stages of loss development could cause the loss development method to overreact to the favorable or unfavorable experience by assuming it is a fundamental shift in the development pattern. In these instances, expected loss ratio methods such as Bornhuetter Ferguson have the advantage of recognizing large losses without extrapolating unusual large loss activity onto the unreported portion of the losses for the accident year.
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ITEM 7 | Critical Accounting Estimates
The Cape Cod method is a hybrid between the loss development and Bornhuetter Ferguson methods, where the historic loss data and loss development factor assumptions are used to determine the expected loss ratio estimate in the Bornhuetter Ferguson method.
Where appropriate, supplemental analysis for the given line of business may be performed in addition to the above described techniques such as Shareholder Class Action suit analysis for Directors and Officers (D&O) coverages.
Frequency/severity methods generally rely on the determination of an ultimate number of claims and an average severity for each claim for each accident year. Multiplying the estimated ultimate number of claims for each accident year by the expected average severity of each claim produces the estimated ultimate loss for the accident year. Frequency/severity methods generally require a sufficient volume of claims in order for the average severity to be predictable. Average severity for subsequent accident years is generally determined by applying an estimated annual loss cost trend to the estimated average claim severity from prior accident years. In certain cases, a structural approach may also be used to predict the ultimate loss cost. Frequency/severity methods have the advantage that ultimate claim counts can generally be estimated more quickly and accurately than can ultimate losses. Thus, if the average claim severity can be accurately estimated, these methods can more quickly respond to changes in loss experience than other methods. However, for average severity to be predictable, the product line of business must consist of homogenous types of claims for which loss severity trends from one year to the next are reasonably consistent and where there are limited changes to deductible levels or limits. Generally these methods work best for high frequency, low severity product lines of business such as personal auto. However, frequency and severity metrics are also used to test the reasonability of results for other product lines of business and provide indications of underlying trends in the data. In addition, ultimate claim counts can be used as an alternative exposure measure to earned premiums in the Cape Cod method.
The estimation of liability for loss reserves and loss adjustment expenses relating to asbestos and environmental pollution losses on insurance policies written many years ago is typically subject to greater uncertainty than other types of losses. This is due to inconsistent court decisions, as well as judicial interpretations and legislative actions that in some cases have tended to broaden coverage beyond the original intent of such policies or have expanded theories of liability. In addition, reinsurance recoverable balances relating to asbestos and environmental loss reserves are subject to greater uncertainty due to the underlying age of the claim, underlying legal issues surrounding the nature of the coverage, and determination of proper policy period. For these reasons, these balances tend to be subject to increased levels of disputes and legal collection activity when actually billed. The insurance industry as a whole is engaged in extensive litigation over these coverage and liability issues and is thus confronted with a continuing uncertainty in its efforts to quantify these exposures.
We continue to receive claims asserting injuries and damages from toxic waste, hazardous substances, and other environmental pollutants and alleged claims to cover the cleanup costs of hazardous waste dump sites, referred to collectively as environmental claims, and indemnity claims asserting injuries from asbestos. The vast majority of these asbestos and environmental losses emanate from policies written in 1984 and prior years. Commencing in 1985, standard policies contained absolute exclusions for pollution-related damage and asbestos. The current environmental policies that we specifically price and underwrite for environmental risks on a claims-made basis have been excluded from the analysis. Nevertheless, most of these legacy exposures have been heavily reinsured with very highly rated reinsurers.
The majority of our remaining exposures for asbestos and environmental losses are related to excess casualty coverages, not primary coverages. The litigation costs are treated in the same manner as indemnity amounts, with litigation expenses included within the limits of the liability we incur. Individual significant loss reserves, where future litigation costs are reasonably determinable, are established on a case-by-case basis.
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TABLE OF CONTENTS
ITEM 7 | Critical Accounting EstimatesKey Assumptions of our Actuarial Methods by Line of Business
Line of Business or Category
Key Assumptions
U.S. Workers’
Compensation
We generally use a combination of loss development and expected loss ratio methods for U.S. Workers’ Compensation as this is a long-tail line of business.The tail factor is typically the most critical assumption, and small changes in the selected tail factor can have a material effect on our carried reserves. For example, the tail factors beyond twenty years for guaranteed cost business could vary by 1 percentage point below to 2.5 percentage points above those indicated in the 2024 detailed valuation review. For excess of deductible business, in our judgment, it is reasonably possible that tail factors beyond twenty years could vary by 1.5 percentage points below to 3 percentage points above those indicated in the 2024 detailed valuation review.
U.S. Excess Casualty We utilize various loss cost trend assumptions for different segments of the portfolio. In our judgment, after evaluating the historical loss cost trends from prior accident years since the early 1990s, it is reasonably possible that actual loss cost trends applicable to the year-end 2024 detailed valuation review for U.S. Excess Casualty may range 5 percentage points lower or higher than this estimated loss trend. The loss cost trend assumption is critical for the U.S. Excess Casualty line of business due to the long-tail nature of the losses, and it is applied across many accident years. Thus, there is the potential for the loss reserves with respect to a number of accident years (the expected loss ratio years) to be significantly affected by changes in loss cost trends that were initially relied upon in setting the loss reserves. These changes in loss trends could be attributable to changes in inflation or in the judicial environment, or in other social or economic conditions affecting losses.
U.S. Excess Casualty is a long-tail line of business and any deviation in loss development factors might not be discernible for an extended period of time subsequent to the recording of the initial loss reserve estimates for any accident year. Mass tort claims in particular may develop over a very extended period and impact multiple accident years, so we usually select a separate pattern for them. Thus, there is the potential for the loss reserves with respect to a number of accident years to be significantly affected by changes in loss development factors that were initially relied upon in setting the reserves.
In our judgment, after evaluating the historical loss development factors from prior accident years since the early 1990s, it is reasonably possible that the actual loss development factors could vary by an amount equivalent to a six month shift from those actually utilized in the year-end 2024 detailed valuation review. This would impact projections both for accident years where the selections were directly based on loss development methods as well as the a priori loss ratio assumptions for accident years with selections based on Bornhuetter Ferguson or Cape Cod methods. Similar to loss cost trends, these changes in loss development factors could be attributable to changes in inflation or in the judicial environment, or in other social or economic conditions affecting losses.
Given the very long-tail nature of this business, the tail factor selection can also have material impact on our carried reserves. The sensitivity around tail selection may also be a proxy for the sensitivity of a calendar year impact of monetary inflation on unpaid losses. It is reasonably possible for the tail factors for Excess Casualty could vary by 2 percentage points below to 3.5 percentage points above those indicated in the 2024 detailed valuation review.U.S. Other Casualty
The key assumptions for other casualty lines are similar to U.S. Excess Casualty, as the underlying business is long-tailed and can be subject to variability in loss cost trends and changes in loss development factors. These may differ significantly by line of business as coverages such as general liability, medical malpractice and environmental may be subject to different risk drivers.U.S. Financial LinesThe loss cost trends for U.S. D&O liability business vary by year and subset. After evaluating the historical loss cost levels from prior accident years since the early 1990s, including the potential effect of losses relating to the credit crisis, in our judgment, it is reasonably possible that the actual variation in loss cost levels for these subsets could vary by approximately 10 percentage points lower or higher on a year-over-year basis than the assumptions actually utilized in the year-end 2024 reserve review. Because the U.S. D&O business has exhibited highly volatile loss trends from one accident year to the next, there is the possibility of an exceptionally high deviation. In our analysis, the effects of loss cost trend assumptions affect the results through the a priori loss ratio assumptions used for the Bornhuetter Ferguson and Cape Cod methods, which impact the projections for the more recent accident years.
The selected loss development factors are also an important assumption, but are less critical than for U.S. Excess Casualty. Because these lines are written on a claims made basis, the loss reporting and development tail is much shorter than for U.S. Excess Casualty. However, the high severity nature of the losses does create the potential for significant deviations in loss development patterns from one year to the next. Similar to U.S. Excess Casualty, after evaluating the historical loss development factors from prior accident years since the early 1990s, in our judgment, it is reasonably possible that actual loss development factors could change by an amount equivalent to a shift by six months from those actually utilized in the year-end 2024 reserve review.UK/Europe Casualty and
Financial Lines
Similar to U.S. business, UK/Europe Casualty and Financial Lines can be significantly impacted by loss cost trends and changes in loss development factors. The variation in such factors can differ significantly by product and region, however the range of potential impacts is much lower than that of other lines of business noted above.
U.S. and UK/Europe
Property and Special
Risks
For shorter-tail lines such as Property and Special Risks, variance in outcomes for individual large claims or events typically has a greater impact on results than does changes in actuarial assumptions or methodology. This is because a greater proportion of the ultimate loss, at any stage of development, is composed of reported losses than IBNR reserves. These outcomes generally relate to unique characteristics of events such as catastrophes or losses with significant business interruption claims.
U.S., UK/Europe and Japan Personal Insurance Personal Insurance is short-tailed in nature similar to Property and Special Risks but less volatile. Variance in estimates can result from unique events such as catastrophes. In addition, some subsets of this business, such as auto liability, can be impacted by changes in loss development factors and loss cost trends.44
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ITEM 7 | Critical Accounting Estimates
The following sensitivity analysis table summarizes the effect on the loss reserve position of using certain alternative loss cost trend (for accident years where we use expected loss ratio methods) or loss development factor assumptions rather than the assumptions actually used in determining our estimates in the year-end loss reserve analyses in 2024:
December 31, 2024 Increase (Decrease) to Loss Reserves Increase (Decrease) to Loss Reserves(in millions)
Loss cost trends: Loss development factors:
U.S. Excess Casualty: U.S. Excess Casualty:5.0 percentage points increase $ 850 3.5 percentage points tail factor increase $ 1,200
5.0 percentage points decrease (600) 2.0 percentage points tail factor decrease (750)U.S. Excess Casualty:6-months slower 600
6-months faster (550)U.S. Financial Lines (D&O) U.S. Financial Lines (D&O)10.0 percentage points increase 850 6-months slower 600
10.0 percentage points decrease (600) 6-months faster (500)U.S. Workers' Compensation:
Tail factor increase (a)
900
Tail factor decrease (b)(550)(a) Tail factor increase of 2.5 percentage points for guaranteed cost business and 3 percentage points for deductible business.
(b) Tail factor decrease of 1 percentage point for guaranteed cost business and 1.5 percentage points for deductible business.
For additional information on our reserving process and methodology, see Note 13 to the Consolidated Financial Statements.
REINSURANCE ASSETSIn the ordinary course of business, our insurance companies may use both treaty and facultative reinsurance to minimize their net loss exposure to any single catastrophic loss event or to an accumulation of losses from a number of smaller events or to provide greater diversification of our businesses. Reinsurance assets include the balances due from reinsurance and insurance companies under the terms of our reinsurance agreements for paid and unpaid losses and loss adjustment expenses incurred, ceded unearned premiums and ceded future policy benefits for life and accident and health insurance contracts and benefits paid and unpaid. The estimation of reinsurance recoverables involves a significant amount of judgment. Reinsurance assets include reinsurance recoverables on unpaid losses and loss adjustment expenses that are estimated as part of our loss reserving process and, consequently, are subject to similar judgments and uncertainties as the estimation of gross loss reserves. For additional information on reinsurance, see Note 8 to the Consolidated Financial Statements.
ALLOWANCE FOR CREDIT LOSSES ON CERTAIN INVESTMENTS
We maintain an allowance for the expected lifetime credit losses of commercial and residential mortgage loans and available for sale securities. The sufficiency of this allowance is reviewed quarterly using both quantitative and qualitative considerations, which are subject to risks and uncertainties. These considerations and the overall methodology used to estimate the allowance for credit losses are discussed in more detail in Note 6 and Note 7 to the Consolidated Financial Statements for available for sale securities and Commercial and residential loans, respectively.FAIR VALUE MEASUREMENTS OF CERTAIN FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure the fair value. We classify fair value measurements for certain assets and liabilities as Level 3 when they require significant unobservable inputs in their valuation. We consider unobservable inputs to be those for which market data is not available. Our assessment of the significance of a particular input to the fair value measurement of an asset or liability requires judgment.
For additional information about the valuation methodologies of financial instruments measured at fair value, see Note 5 to the Consolidated Financial Statements.AIG | 2024 Form 10-K
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ITEM 7 | Critical Accounting EstimatesINCOME TAXES
Deferred income taxes represent the tax effect of the differences between the amounts recorded in our Consolidated Financial Statements and the tax basis of assets and liabilities. Our assessment of net deferred income taxes represents management’s best estimate of the tax consequences of various events and transactions, which can themselves be based on other accounting estimates, resulting in incremental uncertainty in the estimation process.
Deferred Tax Asset Recoverability
The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As such, changes in tax laws in countries where we transact business can impact our deferred tax asset valuation allowance. We consider multiple factors to reliably estimate future taxable income so we can determine the extent of our ability to realize net operating losses, foreign tax credits, realized capital loss and other carryforwards. These factors include forecasts of future income for each of our businesses, which incorporate forecasts of future statutory income for our insurance companies, and actual and planned business and operational changes, both of which include assumptions about future macroeconomic and AIG-specific conditions and events. We subject the forecasts to stresses of key assumptions and evaluate the effect on tax attribute utilization. We also apply stresses to our assumptions about the effectiveness of relevant prudent and feasible tax planning strategies. In performing our assessment of recoverability, we consider tax laws governing the utilization of net operating loss, capital loss and foreign tax credit carryforwards in each applicable jurisdiction. These tax laws are subject to change, resulting in incremental uncertainty in our assessment of recoverability.
Uncertain Tax Positions
Uncertain tax positions represent AIG’s liability for income taxes on tax years subject to review by the Internal Revenue Service (IRS) or other tax authorities. We determine whether it is more likely than not that a tax position will be sustained, based on technical merits, upon examination by the relevant taxing authorities before any part of the benefit can be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. The completion of review, or the expiration of federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes.
For a discussion of our framework for assessing the recoverability of our deferred tax asset and other tax topics, see Note 21 to the Consolidated Financial Statements.GOODWILL IMPAIRMENT
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested for impairment annually, or more frequently if circumstances indicate an impairment may have occurred. A qualitative assessment may be performed, considering whether events or circumstances exist that lead to a determination that it is not more likely than not that the fair value of a segment is less than its carrying value. If management elects to perform a quantitative assessment to determine recoverability of carrying value or is compelled to do so based on the results of a qualitative assessment, the estimate of fair value involves applying one or a combination of common valuation approaches. These include discounted expected future cash flows, market-based earnings multiples and external appraisals, among other methods, all of which require management judgment and are subject to uncertainty, primarily as it relates to assumptions around business growth, earnings projections, and cost of capital.
For additional information on goodwill impairment, see Part I, Item 1A. Risk Factors – Estimates and Assumptions and Note 12 to the Consolidated Financial Statements.
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AIG | 2024 Form 10-KTABLE OF CONTENTSITEM 7 | Executive Summary
Executive Summary
OVERVIEW
This overview of the MD&A highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. You should read this Annual Report in its entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.
REGULATORY, INDUSTRY AND ECONOMIC FACTORS
Regulatory Environment
Our operations around the world are subject to regulation by many different types of regulatory authorities, including insurance and securities regulators in the United States and abroad. The insurance and financial services industries are generally subject to close regulatory scrutiny and supervision.
For information regarding our regulation and supervision by different regulatory authorities in the United States and abroad, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation and Note 21 to the Consolidated Financial Statements.
Impact of Changes in the Interest Rate E nvironment
Certain U.S. benchmark rates continued to fluctuate in 2024 as markets reacted to change in inflation trends, geopolitical risk and the decisions of the Board of Federal Reserve System. Our Net investment income is impacted by market interest rates as well as the deployment of asset allocation strategies to enhance yield, manage duration and interest rate risk. The changes in interest rates and credit spreads impact our ability to reinvest future cash flows at rates equal or greater than the rates on sales and maturities. For additional information on our investment and asset-liability management strategies, see Investments.
Impact of Currency Volatility
Currency volatility remains acute. Strengthening of the U.S. dollar against the Euro, British pound and the Japanese yen (the Major Currencies) impacts income for our businesses with substantial international operations. In particular, growth trends in net premiums written reported in U.S. dollars can differ significantly from those measured in original currencies. The net effect on underwriting results, however, is significantly mitigated, as both revenues and expenses are similarly affected.
These currencies may continue to fluctuate, especially as a result of central bank responses to inflation, concerns regarding future economic growth and other macroeconomic factors, and such fluctuations will affect net premiums written growth trends reported in U.S. dollars, as well as financial statement line item comparability.
General Insurance businesses are transacted in most major foreign currencies. The following table presents the average of the quarterly weighted average exchange rates of the Major Currencies, which have the most significant impact on our businesses:
Years Ended December 31, Percentage Change
Rate for 1 USD 2024 2023 2022 2024 vs 2023 2023 vs 2022
Major Currency:
GBP 0.78 0.81 0.81 (4) % — %
EUR 0.92 0.93 0.95 (1) % (2) %
JPY 150.61 139.79 129.67 8 % 8 %
Unless otherwise noted, references to the effects of foreign exchange in the General Insurance discussion of results of operations are with respect to movements in the Major Currencies included in the preceding table.
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TABLE OF CONTENTSITEM 7 | Consolidated Results of Operations
Consolidated Results of OperationsThe following section provides a comparative discussion of our consolidated results of operations on a reported basis for the three-year period ended December 31, 2024. Factors that relate primarily to a specific business are discussed in more detail within the business segment operations section.
For information regarding the critical accounting estimates that affect our results of operations, see Critical Accounting Estimates above.The following table presents our consolidated results of operations and other key financial metrics:
Years Ended December 31, Percentage Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Revenues:Premiums $ 23,537 $ 25,564 $ 26,765 (8) % (4) %Net investment income:Net investment income - excluding Fortitude Re funds withheld assets 4,111 3,266 2,317 26 41
Net investment income - Fortitude Re funds withheld assets 144 180 53 (20) 240
Total net investment income 4,255 3,446 2,370 23 45
Net realized gains (losses):
Net realized losses - excluding Fortitude Re funds withheld assets and embedded derivative (434) (734) (207) 41 (255)
Net realized losses on Fortitude Re funds withheld assets (39) (71) (99) 45 28
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative (75) (273) 1,133 73 NM
Total net realized gains (losses) (548) (1,078) 827 49 NM
Other income 7 6 34 17 (82)
Total revenues 27,251 27,938 29,996 (2) (7)Benefits, losses and expenses:Losses and loss adjustment expenses incurred 14,567 15,393 15,461 (5) —
Amortization of deferred policy acquisition costs 3,425 3,771 3,545 (9) 6
General operating and other expenses 5,529 5,399 6,159 2 (12)
Interest expense 462 516 603 (10) (14)
(Gain) loss on extinguishment of debt 14 (37) 303 NM NM
Net (gain) loss on divestitures and other (616) 29 153 NM (81)
Total benefits, losses and expenses 23,381 25,071 26,224 (7) (4)
Income from continuing operations before income tax expense 3,870 2,867 3,772 35 (24)
Income tax expense:
Current 657 176 (452) 273 NM
Deferred 513 (50) 1,334 NM NM
Income tax expense 1,170 126 882 NM (86)
Income from continuing operations 2,700 2,741 2,890 (1) (5)
Income (loss) from discontinued operations, net of income taxes (3,626) 1,137 8,383 NM (86)
Net income (loss) (926) 3,878 11,273 NM (66)
Less: Net income attributable to noncontrolling interests 478 235 1,046 103 (78)
Net income (loss) attributable to AIG (1,404) 3,643 10,227 NM (64)
Less: Dividends on preferred stock and preferred stock redemption premiums 22 29 29 (24) —
Net income (loss) attributable to AIG common shareholders $ (1,426) $ 3,614 $ 10,198 NM % (65) %
Years Ended December 31, 2024 2023 2022
Return on equity (3.2) % 8.6 % 20.7 %
Adjusted return on equity 6.6 5.6 3.6
Return on tangible equity 8.1 8.5 N/A
Core operating return on equity 9.1 9.6 N/A
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ITEM 7 | Consolidated Results of Operations(in millions, except per share data) December 31, 2024 December 31, 2023
Balance sheet data:
Total assets $ 161,322 $ 539,306
Long-term debt 8,764 10,375
Debt of consolidated investment entities 158 231
Total AIG shareholders’ equity 42,521 45,351
Book value per share 70.16 65.14
Adjusted book value per share 73.79 78.50
Tangible book value per share 63.98 59.60
Adjusted tangible book value per share 67.62 72.96
Core operating book value per share 61.75 52.74NET INCOME (LOSS) ATTRIBUTABLE TO AIG COMMON SHAREHOLDERSYears Ended December 31, 2024 and 2023 Comparison
Net income (loss) attributable to AIG common shareholders decreased $5.0 billion due to the following:
• a decrease in Income (loss) from discontinued operations, net of income taxes of $4.8 billion as a result of the deconsolidation of Corebridge;
• a decrease in underwriting income driven by unfavorable prior year reserve development of $254 million, which does not reflect the benefit of recoveries under a retroactive adverse development cover, as well as the sales of AIG Re and Crop Risk Services, Inc. (CRS), partially offset by improved portfolio performance and growth;
• an increase in net income attributable to noncontrolling interest of $243 million primarily driven by Corebridge; and
• an increase in income tax expense of $1.0 billion as a result of higher income before taxes and discrete tax benefits in the prior year primarily related to a reduction in the valuation allowance and developments related to the potential resolution of an IRS audit matter.
The decrease in Net income (loss) attributable to AIG common shareholders was partially offset by the following:
• an increase in Net investment income of $809 million primarily driven by dividends received from Corebridge of $162 million and changes in its stock price and gain on sale of shares of $439 million, higher income on available for sale fixed maturity securities of $121 million and an increase in the fair value of equity securities of $96 million; and
• an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $300 million, primarily driven by a $85 million decrease in losses from sales of securities, lower derivative and hedge activity losses of $103 million and a $132 million increase in foreign exchange gains, partially offset by lower sales on alternative investments of $45 million.
Years Ended December 31, 2023 and 2022 Comparison
Net income (loss) attributable to AIG common shareholders decreased $6.6 billion due to the following:
• decrease in Income (loss) from discontinued operations, net of income taxes of $7.2 billion as a result of the decrease in net income of Corebridge;
• decrease in Net realized gains on Fortitude Re funds withheld embedded derivative of $1.4 billion driven by interest rate movements;
• decrease in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $527 million, driven by $324 million decrease in other derivative and hedge accounting, $142 million decrease in foreign exchange transactions and losses on sales of securities of $103 million; and
• decrease in Income tax expense of $756 million primarily attributable to lower income from continuing operations.
The decrease in Net income (loss) attributable to AIG common shareholders was partially offset by the following:
• higher net investment income of $1.1 billion primarily driven by higher income on available for sale fixed maturity securities of $884 million and an increase in fair value of fixed maturity securities where we elected the fair value option of $420 million as a result of the higher rate environment;
• lower income attributable to noncontrolling interest of $811 million driven by the decline in net income at Corebridge; and
• higher underwriting income in General Insurance of $387 million, including $86 million attributable to eliminating the international reporting lag, reflecting the continued earn-in of positive rate change, strong renewal retentions and new business production, as well as increased favorable prior year development and lower catastrophe losses. Underwriting income was negatively impacted by unfavorable movements in foreign exchange. For additional information on the elimination of the international reporting lag, see Note 1 to the to the Consolidated Financial Statements.
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ITEM 7 | Consolidated Results of Operations
INCOME TAX EXPENSE ANALYSIS
For the years ended December 31, 2024, 2023 and 2022, the effective tax rate on income (loss) from continuing operations was 30.2 percent, 4.4 percent and 23.4 percent, respectively.
For additional information, see Note 21 to the Consolidated Financial Statements.
NON-GAAP RECONCILIATIONS
The following table presents reconciliations of Book value per share to Adjusted book value per share, Tangible book value per share and Core operating book value per share, which are non-GAAP measures. For additional information, see Use of Non-GAAP Measures.
December 31,
(in millions, except per share data) 2024 2023 2022
Total AIG shareholders' equity $ 42,521 $ 45,351 $ 40,970
Preferred equity — 485 485
Total AIG common shareholders' equity 42,521 44,866 40,485
Less: Investments related AOCI (2,872) (10,994) (20,811)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (667) (1,791) (2,862)
Subtotal: Investments AOCI (2,205) (9,203) (17,949)
AIG adjusted common shareholders' equity $ 44,726 $ 54,069 $ 58,434
Total AIG common shareholders' equity $ 42,521 $ 44,866 $ 40,485
Less Intangible Assets:
Goodwill 3,373 3,422 3,751
Value of distribution channel acquired 127 145 273
Other intangibles 243 249 415
Total intangibles assets 3,743 3,816 4,439
AIG tangible common shareholders' equity $ 38,778 $ 41,050 $ 36,046
AIG adjusted common shareholders' equity $ 44,726 $ 54,069 $ 58,434
Total intangibles assets 3,743 3,816 4,439
AIG adjusted tangible common shareholders' equity $ 40,983 $ 50,253 $ 53,995
Total AIG common shareholders' equity $ 42,521 $ 44,866 $ 40,485
Less: AIG's ownership interest in Corebridge 3,810 6,738 8,690
Less: Investments related AOCI - AIG (2,872) (3,084) (1,693)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets - AIG (667) (573) (682)
Subtotal: Investments AOCI - AIG (2,205) (2,511) (1,011)
Less: Deferred tax assets 3,489 4,313 4,518
AIG core operating shareholders' equity $ 37,427 $ 36,326 $ 28,288
Total common shares outstanding 606.1 688.8 734.1
Book value per share $ 70.16 $ 65.14 $ 55.15
Adjusted book value per share 73.79 78.50 79.60
Tangible book value per share 63.98 59.60 49.10
Adjusted tangible book value per share 67.62 72.96 73.55
Core operating book value per share 61.75 52.74 38.53
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ITEM 7 | Consolidated Results of Operations
The following table presents reconciliations of Return on equity to Adjusted return on equity, Tangible return on equity and Core operating return on equity, which are non-GAAP measures. For additional information, see Use of Non-GAAP Measures.
Years Ended December 31,
(dollars in millions) 2024 2023 2022
Actual or annualized net income (loss) attributable to AIG common shareholders $ (1,426) $ 3,614 $ 10,198
Actual or annualized adjusted after-tax income attributable to AIG common shareholders $ 3,254 $ 3,205 $ 2,121
Average AIG common shareholders' equity $ 44,051 $ 41,930 $ 49,338
Less: Average investments AOCI (5,132) (14,836) (9,003)
Average AIG adjusted common shareholders' equity $ 49,183 $ 56,766 $ 58,341
Average AIG common shareholders' equity $ 44,051 $ 41,930
Less: Average intangibles 3,797 4,070
Average AIG tangible common shareholders' equity $ 40,254 $ 37,860
Average AIG common shareholders' equity $ 44,051 $ 41,930
Less: Average AIG's ownership interest in Corebridge 6,770 7,376
Less: Average Investments AOCI - AIG (2,351) (3,254)
Less: Average deferred tax assets 3,998 4,322
Average AIG core operating shareholders' equity $ 35,634 $ 33,486
Return on equity (3.2) % 8.6 % 20.7 %
Adjusted return on equity 6.6 5.6 3.6
Return on tangible equity 8.1 8.5 N/A
Core operating return on equity 9.1 9.6 N/A
The following table presents a reconciliation of pre-tax income (loss)/net income (loss) attributable to AIG to adjusted pre-tax income (loss)/adjusted after-tax income (loss) attributable to AIG:
Years Ended December 31, 2024 2023 2022
(in millions, except per common share data) Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax
Pre-tax income/net income (loss), including noncontrolling interests $ 3,870 $ 1,170 $ — $ (926) $ 2,867 $ 126 $ — $ 3,878 $ 3,772 $ 882 $ — $ 11,273
Noncontrolling interests (a)
(478) (478) (235) (235) (1,046) (1,046)
Pre-tax income/net income (loss) attributable to AIG - including discontinued operations $ 3,870 $ 1,170 $ (478) $ (1,404) $ 2,867 $ 126 $ (235) $ 3,643 $ 3,772 $ 882 $ (1,046) $ 10,227
Dividends on preferred stock and preferred stock redemption premiums 22 29 29
Net income (loss) attributable to AIG common shareholders $ (1,426) $ 3,614 $ 10,198
Changes in uncertain tax positions and other tax adjustments
(239) — 239 176 — (176) (147) — 147
Deferred income tax valuation allowance releases (b)
30 — (30) 365 — (365) 174 — (174)
Changes in the fair values of equity securities, AIG's investment in Corebridge and gain on sale of shares (586) (123) — (463) (53) (11) — (42) (29) (6) — (23)
(Gain) loss on extinguishment of debt and preferred stock redemption premiums 14 3 — 26 (37) (8) — (29) 303 64 — 239
Net investment income on Fortitude Re funds withheld assets (144) (30) — (114) (180) (38) — (142) (53) (11) — (42)
Net realized losses on Fortitude Re funds withheld assets 39 8 — 31 71 15 — 56 99 21 — 78
Net realized losses on Fortitude Re funds withheld embedded derivative 75 16 — 59 273 57 — 216 (1,133) (238) — (895)
Net realized losses (c)
428 95 — 333 743 128 — 615 268 56 — 212
(Income) loss from discontinued operations 3,626 (1,137) (8,383)
Net gain on divestitures and other (616) (128) — (488) 29 149 — (120) 153 32 — 121
Non-operating litigation reserves and settlements — — — — 1 — — 1 (16) (3) — (13)
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements 105 22 — 83 (62) (13) — (49) (160) (34) — (126)
Net loss reserve discount (benefit) charge 226 47 — 179 195 41 — 154 (703) (148) — (555)
Net results of businesses in run-off (d)
111 24 — 87 31 7 — 24 (25) (5) — (20)
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ITEM 7 | Consolidated Results of Operations
Years Ended December 31, 2024 2023 2022
(in millions, except per common share data) Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax
Pension expense related to lump sum payments to former employees — — — — 71 15 — 56 59 12 — 47
Integration and transaction costs associated with acquiring or divesting businesses 39 8 — 31 6 1 — 5 12 3 — 9
Restructuring and other costs (e)
745 156 — 589 356 75 — 281 423 89 — 334
Non-recurring costs related to regulatory or accounting changes 18 4 — 14 22 5 — 17 26 5 — 21
Net impact from elimination of international reporting lag (f)
— — — — (12) (3) — (9) (127) (27) — (100)
Noncontrolling interests (a)
478 478 235 235 1,046 1,046
Adjusted pre-tax income/Adjusted after-tax income attributable to AIG common shareholders $ 4,324 $ 1,063 $ — $ 3,254 $ 4,321 $ 1,087 $ — $ 3,205 $ 2,869 $ 719 $ — $ 2,121
Weighted average diluted shares outstanding
657.3 725.2 787.9
Income (loss) per common share attributable to AIG common shareholders (diluted)
$ (2.17) $ 4.98 $ 12.94
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)
$ 4.95 $ 4.42 $ 2.69
(a) Noncontrolling interest primarily relates to Corebridge and is the portion of Corebridge earnings that AIG did not own. Corebridge is consolidated until June 9, 2024. The historical results of Corebridge owned by AIG are reflected in the Income (loss) from discontinued operations, net of income taxes.
(b) The year ended December 31, 2023 includes a valuation allowance release related to a portion of certain tax attribute carryforwards of AIG's U.S. federal consolidated income tax group, as well as valuation allowance changes in certain foreign jurisdictions.
(c) Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.
(d) In the fourth quarter of 2024, AIG realigned and began excluding the net results of run-off businesses previously reported in Other Operations from Adjusted pre-tax income. Historical results have been recast to reflect these changes.
(e) In the year ended December 31, 2024, Restructuring and other costs increased primarily as a result of employee-related costs, including severance, and real estate impairment charges.
(f) For additional information, see Note 1 to the Consolidated Financial Statements.
PRE-TAX INCOME (LOSS) COMPARISON
Pre-tax income (loss) was $3.9 billion, $2.9 billion and $3.8 billion in the years ended December 31, 2024, 2023 and 2022, respectively.
For the main drivers impacting AIG’s results of operations, see – Net Income (Loss) Attributable to AIG Common Shareholders above.
ADJUSTED PRE-TAX INCOME (LOSS) COMPARISON
Adjusted pre-tax income (loss) was $4.3 billion, $4.3 billion and $2.9 billion in the years ended December 31, 2024, 2023 and 2022, respectively.
For the main drivers impacting AIG’s adjusted pre-tax income (loss), see Business Segment Operations.
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ITEM 7 | Consolidated Results of Operations
The following table presents a reconciliation of General Insurance and Other Operations Net investment income and other/pre-tax income (loss) to Net investment income and other, APTI basis/adjusted pre-tax income (loss):
Years Ended December 31, 2024 2023 2022
General Insurance Other Operations General Insurance Other Operations General Insurance Other Operations
(in millions) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss)
Net investment income and other/Pre-tax income (loss) $ 3,215 $ 4,474 $ 1,047 $ (604) $ 3,150 $ 4,308 $ 302 $ (1,441) $ 2,474 $ 5,175 $ (70) $ (1,403)
Consolidation and Eliminations — — — — — — 13 — — — (14) —
Other income (expense) - net (31) — 18 — (49) — 39 — (51) — 1 —
Changes in the fair values of equity securities, AIG's investment in Corebridge and gain on sale of shares (73) (73) (513) (513) (84) (84) 31 31 (9) (9) (20) (20)
(Gain) loss on extinguishment of debt — — — 14 — — — (37) — — — 303
Net investment income on Fortitude Re funds withheld assets (44) (44) (100) (100) (4) (4) (176) (176) (6) (6) (47) (47)
Net realized losses on Fortitude Re funds withheld assets — 8 — 31 — 1 — 70 — — — 99
Net realized (gains) losses on Fortitude Re funds withheld embedded derivative — — — 75 — (18) — 291 — (70) — (1,063)
Net realized (gains) losses (7) 330 (1) 98 10 731 2 12 15 136 46 132
Net loss (gain) on divestitures and other — (522) — (94) — 18 — 11 — 15 — 138
Non-operating litigation reserves and settlements — — — — — — — 1 — (14) — (2)
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements — 101 — 4 — (42) — (20) — (197) — 37
Net loss reserve discount (benefit) charge — 226 — — — 195 — — — (703) — —
Net results of businesses in run-off — — (17) 111 — — (21) 31 — — (6) (25)
Pension expense related to lump sum payments to former employees — — — — — 60 — 11 — 31 — 28
Integration and transaction costs associated with acquiring or divesting businesses — — — 39 — 1 — 5 — 1 — 11
Restructuring and other costs — 459 — 286 — 195 — 161 — 172 — 251
Non-recurring costs related to regulatory or accounting changes — 18 — — — 22 — — — 26 — —
Net impact from elimination of international reporting lag — — — — (1) (12) — — (41) (127) — —
Net investment income and other, APTI basis/Adjusted pre-tax income (loss) $ 3,060 $ 4,977 $ 434 $ (653) $ 3,022 $ 5,371 $ 190 $ (1,050) $ 2,382 $ 4,430 $ (110) $ (1,561)Business Segment OperationsIn the fourth quarter of 2024, the Company realigned its organizational structure and the composition of its reportable segments to reflect changes in how the Company manages its operations, specifically the level at which its chief operating decision makers (CODMs) regularly review operating results and allocate resources. Our CODMs are the chief executive officer (CEO) and chief financial officer (CFO). The CODMs evaluate performance of the segments based on underwriting income (loss). The CODMs use this measure to benchmark AIG’s performance, assessing performance of the segments and in establishing management’s compensation.
As of December 31, 2024, AIG reports the results of its businesses through three segments and Other Operations. The three segments are North America Commercial, International Commercial and Global Personal. Other Operations predominantly consists of Net Investment Income from our AIG Parent liquidity portfolio, Corebridge dividend income, corporate General operating expenses, and Interest expense. Prior years’ presentations have been recast to conform to the new reportable segments. Our General Insurance business (General Insurance) consists of our three segments and the Net investment income related to our insurance operations.
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ITEM 7 | Business Segment Operations | General InsuranceGeneral InsuranceCommercial Lines is managed by our geographic markets of North America and International, while Personal Insurance is managed globally. Our global presence is underpinned by our multinational capabilities to provide Commercial Lines and Personal Insurance products within these geographic markets.
PRODUCTS AND DISTRIBUTION
North America Commercial consists of insurance businesses in the United States, Canada and Bermuda.
International Commercial consists of insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International Commercial also includes the results of Talbot Holdings Ltd. (Talbot) as well as AIG’s Global Specialty business.
Global Personal consists primarily of insurance businesses in the United States as well as Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China.
Commercial Lines
Property & Short Tail: Products include commercial and industrial property, including business interruption, as well as package insurance products and services that cover exposures to man-made and natural disasters.
Casualty: Products include general liability, environmental, commercial automobile liability, workers’ compensation, excess casualty and crisis management insurance products. Casualty also includes risk-sharing and other customized structured programs for large corporate and multinational customers.
Financial Lines: Products include professional liability insurance for a range of businesses and risks, including directors and officers, mergers and acquisitions, fidelity, employment practices, fiduciary liability, cyber risk, kidnap and ransom, and errors and omissions insurance.
Global Specialty: Products include marine, energy-related property insurance products, aviation, political risk, trade credit, trade finance and portfolio solutions.
On July 3, 2023, AIG completed the sale of CRS to American Financial Group, Inc. and in substance, AIG exited the crop business. For periods prior to the sale of CRS, the underwriting results are included in adjusted pre-tax income of General Insurance – North America Commercial.
On November 1, 2023, AIG completed the sale of Validus Reinsurance, Ltd. (Validus Re), including AlphaCat Managers Ltd. and Talbot Treaty reinsurance business to RenaissanceRe Holdings Ltd. (RenaissanceRe). For periods prior to the sale of Validus Re, the underwriting results are included in adjusted pre-tax income of General Insurance – North America Commercial.
For additional information, see Note 1 to the Consolidated Financial Statements.
Personal Insurance
Global Accident & Health: Products include group personal accident and business travel products for employees, associations and other organizations, and voluntary and sponsor-paid personal accident and supplemental health products for individuals.
On December 2, 2024, AIG completed the sale of its global individual personal travel insurance and assistance business to Zurich Insurance Group. The agreement includes the Travel Guard business and its servicing capabilities, excluding our travel insurance businesses in Japan and our AIG joint venture arrangement in India. Travel coverages offered through AIG’s Global Accident & Health business are also excluded from this agreement. For additional information, see Note 4 to the Consolidated Financial Statements.
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ITEM 7 | Business Segment Operations | General Insurance
Personal Lines: Products include personal auto and homeowners in selected markets, comprehensive extended warranty, device protection insurance, home warranty and related services, and insurance for high net-worth individuals offered through Private Client Select (PCS) in the U.S. that covers auto, homeowners, umbrella, yacht, fine art and collections.
General Insurance products in North America and International markets are distributed through various channels, including captive and independent agents, brokers, affinity partners, airlines and travel agents, and retailers. Our global platform enables writing multinational and cross-border risks in both Commercial Lines and Personal Insurance.
BUSINESS STRATEGY
Profitable Growth: Build on our high-quality portfolio by focusing on targeted growth through continued underwriting discipline, improved retentions and new business development. Deploy capital efficiently to act opportunistically and achieve growth in profitable lines, geographies and customer segments, while taking a disciplined underwriting approach to exposure management, terms and conditions and rate change to achieve our risk/return hurdles. Continue to be open to inorganic growth opportunities in profitable markets and segments to expand our capabilities and footprint.
Underwriting Excellence: Continue to enhance portfolio optimization through strength of underwriting framework and guidelines as well as clear communication of risk appetite and rate adequacy. Empower and increase accountability of the underwriter and continue to integrate underwriting, claims and actuarial to enable better decision making. Focus on enhancing risk selection, driving consistent underwriting best practices and building robust monitoring standards to improve underwriting results.
Reinsurance Optimization: Strategically partner with reinsurers to effectively manage exposure to losses arising from frequency of large catastrophic events and severity from individual risk losses. We strive to optimize our reinsurance program to manage volatility and protect the balance sheet from tail events and unpredictable net losses in support of our profitable growth objectives.
COMPETITION AND CHALLENGES
General Insurance operates in a highly competitive industry against global, national and local insurers and reinsurers and underwriting syndicates in specific market areas and product types. Insurance companies compete through a combination of risk acceptance criteria, product pricing, service levels and terms and conditions. We serve our business and individual customers on a global basis – from the largest multinational corporations to local businesses and individuals. General Insurance seeks to differentiate itself in the markets where we participate by providing leading expertise and insight to clients, distribution partners and other stakeholders, delivering underwriting excellence and value-driven insurance solutions and providing high quality, tailored end-to-end support to stakeholders. In doing so, we leverage our world-class global franchise, multinational capabilities, balance sheet strength and financial flexibility.
Our challenges include:
• ensuring adequate business pricing given passage of time to reporting and settlement for insurance business, particularly with respect to long-tail Commercial Lines exposures;
• impact of social and economic inflation on claim frequency and severity; and
• volatility in claims arising from natural and man-made catastrophes and other aggregations of risk exposure.
INDUSTRY AND ECONOMIC FACTORS
The results of General Insurance for the year ended December 31, 2024 reflect continued strong performance from our Commercial Lines portfolio and focused execution on our portfolio management strategies within Personal Insurance. Across North America Commercial and International Commercial we have seen increased demand for our insurance products and strong growth in new business. We continue to monitor the impact of inflation and other economic factors on rate adequacy and loss cost trends. Similarly, we are monitoring monetary policy actions taken or anticipated to be taken by central banks and the corresponding impact on market interest rates.
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ITEM 7 | Business Segment Operations | General Insurance
General Insurance – North America Commercial
North America Commercial continues to pursue profitable growth. While market discipline continues to support price increases across most lines, we are seeing capacity move back into the market in certain segments given pricing levels which is putting pressure on rates. We have focused on retaining our best accounts which has led to strong retention across the portfolio. These retention rates are often coupled with an exposure limit management strategy to reduce volatility within the portfolio. We continue to proactively identify segment growth areas as market conditions warrant through effective portfolio management, while non-renewing unprofitable business.
General Insurance – International Commercial
We are continuing to pursue growth in our most profitable lines of business and diversify our portfolio across all regions by expanding key business lines while remaining a market leader in key developed and developing markets. We are maintaining our underwriting discipline, reducing gross and net limits where appropriate, utilizing reinsurance to reduce volatility, as well as continuing our risk selection strategy to improve profitability.
General Insurance – Global Personal
Global Personal serves individuals as well as group and corporate clients across a broad range of products, markets, and client profiles. Amid competitive market conditions, we continue to benefit from improved underwriting quality and portfolio diversity, as well as investment in expanded capabilities and strategic distribution partnerships.
GENERAL INSURANCE RESULTSYears Ended December 31, Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Underwriting results:Net premiums written $ 23,902 $ 26,719 $ 25,512 (11) % 5 %
Increase in unearned premiums (445) (1,628) (172) 73 NM
Net premiums earned 23,457 25,091 25,340 (7) (1)Losses and loss adjustment expenses incurred (a)14,038 14,775 15,407 (5) (4)Acquisition expenses:Amortization of deferred policy acquisition costs 3,413 3,623 3,533 (6) 3
Other acquisition expenses 1,137 1,279 1,365 (11) (6)
Total acquisition expenses 4,550 4,902 4,898 (7) —
General operating expenses 2,952 3,065 2,987 (4) 3
Underwriting income 1,917 2,349 2,048 (18) 15
Net investment income 3,060 3,022 2,382 1 27
Adjusted pre-tax income $ 4,977 $ 5,371 $ 4,430 (7) % 21 %Loss ratio (a)59.8 58.9 60.8 0.9 (1.9)
Acquisition ratio 19.4 19.5 19.3 (0.1) 0.2
General operating expense ratio 12.6 12.2 11.8 0.4 0.4
Expense ratio 32.0 31.7 31.1 0.3 0.6Combined ratio (a)91.8 90.6 91.9 1.2 (1.3)Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (5.0) (4.3) (5.0) (0.7) 0.7Prior year development, net of reinsurance and prior year premiums1.4 1.4 1.8 — (0.4)
Accident year loss ratio, as adjusted 56.2 56.0 57.6 0.2 (1.6)
Accident year combined ratio, as adjusted 88.2 87.7 88.7 0.5 (1.0)(a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.56
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ITEM 7 | Business Segment Operations | General Insurance
The following table presents General Insurance net premiums written by segment, showing change on both reported and constant dollar basis:
Years Ended December 31, Percentage Change in U.S. dollars Percentage Change in Original Currency
(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022 2024 vs 2023 2023 vs 2022
North America Commercial $ 8,452 $ 11,432 $ 10,899 (26) % 5 % (26) % 5 %
International Commercial 8,364 8,168 7,877 2 4 3 5
Global Personal 7,086 7,119 6,736 — 6 2 10
Total net premiums written $ 23,902 $ 26,719 $ 25,512 (11) % 5 % (10) % 6 %
The following tables present General Insurance accident year catastrophes (a) by segment and number of events:
(dollars in millions) # of Events North America Commercial InternationalCommercial
Global Personal TotalYears Ended December 31, 2024Flooding, rainstorms and other 3 $ 2 $ 98 $ — $ 100
Windstorms and hailstorms 17 700 133 135 968
Winter storms 2 44 1 7 52
Wildfires 1 41 — — 41
Earthquakes 1 — 7 — 7Reinstatement premiums 12 (2) — 10Total catastrophe-related charges 24 $ 799 $ 237 $ 142 $ 1,178Years Ended December 31, 2023Flooding, rainstorms and other 3 $ 10 $ 72 $ 20 $ 102
Windstorms and hailstorms 26 396 186 126 708
Winter storms 2 24 4 17 45
Wildfires 2 131 19 13 163
Earthquakes 1 20 29 — 49Reinstatement premiums 31 (1) 1 31Total catastrophe-related charges 34 $ 612 $ 309 $ 177 $ 1,098
Years Ended December 31, 2022
Flooding, rainstorms and other 3 $ 53 $ 103 $ 2 $ 158
Windstorms and hailstorms 18 484 137 116 737
Winter storms 5 141 21 45 207
Earthquakes 1 — 16 3 19
Russia / Ukraine N/A (b)
10 97 — 107
Reinstatement premiums 51 31 2 84
Total catastrophe-related charges 27 $ 739 $ 405 $ 168 $ 1,312(a) Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil unrest that exceed the $10 million threshold.(b) As the Russia/Ukraine conflict continues to evolve the number of events is yet to be determined.
NORTH AMERICA COMMERCIAL RESULTSYears Ended December 31, Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Underwriting results:Net premiums written $ 8,452 $ 11,432 $ 10,899 (26) % 5 %
Increase in unearned premiums (280) (1,199) (455) 77 (164)
Net premiums earned 8,172 10,233 10,444 (20) (2)Losses and loss adjustment expenses incurred (a)5,713 6,323 7,218 (10) (12)Acquisition expenses:Amortization of deferred policy acquisition costs 824 1,371 1,381 (40) (1)
Other acquisition expenses 222 231 174 (4) 33
Total acquisition expenses 1,046 1,602 1,555 (35) 3
General operating expenses 865 953 927 (9) 3
Underwriting income $ 548 $ 1,355 $ 744 (60) % 82 %
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ITEM 7 | Business Segment Operations | General Insurance
Years Ended December 31, Change
(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Loss ratio (a)69.9 61.8 69.1 8.1 (7.3)
Acquisition ratio 12.8 15.7 14.9 (2.9) 0.8
General operating expense ratio 10.6 9.3 8.9 1.3 0.4
Expense ratio 23.4 25.0 23.8 (1.6) 1.2Combined ratio (a)93.3 86.8 92.9 6.5 (6.1)Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums(9.7) (5.9) (6.9) (3.8) 1.0Prior year development, net of reinsurance and prior year premiums1.5 3.7 0.7 (2.2) 3.0
Accident year loss ratio, as adjusted 61.7 59.6 62.9 2.1 (3.3)
Accident year combined ratio, as adjusted 85.1 84.6 86.7 0.5 (2.1)(a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.Business and Financial Highlights
Net Premiums Written Comparison for the Years Ended December 31, 2024 and 2023
Net premiums written decreased by $3.0 billion driven by the sales of AIG Re and CRS, partially offset by growth in Casualty.
Net Premiums Written Comparison for the Years Ended December 31, 2023 and 2022
Net premiums written increased by $533 million, particularly in AIG Re and Property driven by continued positive rate change, higher renewal retentions and strong new business production, partially offset by decreases in Crop as a consequence of the CRS sale and Financial Lines.
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2024 and 2023
Underwriting income decreased by $807 million primarily due to:
• lower net favorable prior year development (2.2 points or $252 million), primarily from Casualty which turned unfavorable driven by a large settlement of a legacy mass tort claim with most of the gross loss in accident years covered under the adverse development cover, partially offset by Financial Lines which turned favorable and higher favorable development in Property;
• higher Catastrophe losses (3.8 points or $187 million); and
• the sales of AIG Re and CRS.
This decrease was partially offset by a lower expense ratio (1.6 points) reflecting a lower acquisition ratio (2.9 points), partially offset by an increase in general operating expense ratio (1.3 points), primarily driven by changes in business mix including the impact from the sales of AIG Re and CRS.
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2023 and 2022
Underwriting income increased by $611 million primarily due to:
• improvement in the accident year loss ratio, as adjusted (3.3 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions;
• higher net favorable prior year reserve development (3.0 points or $327 million), primarily due to lower unfavorable development in Financial Lines, partially offset by lower favorable development in Casualty; and
• lower catastrophe losses (1.0 points or $127 million).
This increase was partially offset by:
• a higher expense ratio (1.2 points) reflecting a higher acquisition ratio (0.8 points) primarily driven by changes in business mix as well as an increase in general operating expense ratio (0.4 points).
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ITEM 7 | Business Segment Operations | General InsuranceINTERNATIONAL COMMERCIAL RESULTSYears Ended December 31, Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Underwriting results:Net premiums written $ 8,364 $ 8,168 $ 7,877 2 % 4 %
Increase in unearned premiums (219) (204) (176) (7) (16)
Net premiums earned 8,145 7,964 7,701 2 3
Losses and loss adjustment expenses incurred 4,463 4,641 4,301 (4) 8Acquisition expenses:Amortization of deferred policy acquisition costs 1,018 943 938 8 1
Other acquisition expenses 342 350 378 (2) (7)
Total acquisition expenses 1,360 1,293 1,316 5 (2)
General operating expenses 1,095 1,028 945 7 9
Underwriting income $ 1,227 $ 1,002 $ 1,139 22 % (12) %
Loss ratio 54.8 58.3 55.8 (3.5) 2.5
Acquisition ratio 16.7 16.2 17.1 0.5 (0.9)
General operating expense ratio 13.4 12.9 12.3 0.5 0.6
Expense ratio 30.1 29.1 29.4 1.0 (0.3)
Combined ratio 84.9 87.4 85.2 (2.5) 2.2Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (2.9) (3.9) (5.0) 1.0 1.1
Prior year development, net of reinsurance and prior year premiums 1.0 (1.8) 1.6 2.8 (3.4)
Accident year loss ratio, as adjusted 52.9 52.6 52.4 0.3 0.2
Accident year combined ratio, as adjusted 83.0 81.7 81.8 1.3 (0.1)
Business and Financial Highlights
Net Premiums Written Comparison for the Years Ended December 31, 2024 and 2023
Net premiums written, excluding the unfavorable impact of foreign exchange ($16 million), increased by $212 million primarily due to growth in Property, Specialty and Casualty driven by strength of renewal retentions and new business production, partially offset by the sale of AIG Re and lower production in Financial Lines.
Net Premiums Written Comparison for the Years Ended December 31, 2023 and 2022
Net premiums written, excluding the unfavorable impact of foreign exchange ($79 million), increased by $370 million primarily due to growth in Property and Specialty driven by continued positive rate change and strong new business production, partially offset by a decrease in Financial Lines.
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2024 and 2023
Underwriting income increased by $225 million primarily due to:
• net favorable prior year reserve development of $73 million in 2024 compared to net unfavorable prior year reserve development of $140 million in 2023 (2.8 points or $213 million), primarily as a result of Specialty and Property which turned favorable and lower unfavorable development within Casualty, partially offset by Financial Lines development which turned unfavorable; and
• lower catastrophe losses (1.0 points or $72 million).
This increase was partially offset by:
• a higher expense ratio (1.0 points) reflecting an acquisition ratio (0.5 points) and general operating expense ratio (0.5 points) primarily driven by changes in business mix; and
• a higher accident year loss ratio, as adjusted (0.3 points) due to changes in business mix.
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2023 and 2022
Underwriting income decreased by $137 million primarily due to:
• net unfavorable prior year reserve development of $140 million in 2023 compared to net favorable development in 2022 of $135 million (3.4 points or $275 million), primarily as a result of lower favorable development in Specialty, unfavorable development in Property and higher unfavorable development in Casualty, partially offset by favorable development in Financial Lines; and
• a higher accident year loss ratio, as adjusted (0.2 points) due to changes in business mix.
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ITEM 7 | Business Segment Operations | General InsuranceThis decrease was partially offset by:
• lower catastrophe losses (1.1 points or $96 million); and
• a lower expense ratio (0.3 points) reflecting a lower acquisition ratio (0.9 points) primarily driven by changes in business mix and improved commission terms, partially offset by an increase in the general operating expense ratio (0.6 points).
GLOBAL PERSONAL RESULTSYears Ended December 31, Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022Underwriting results:Net premiums written $ 7,086 $ 7,119 $ 6,736 — % 6 %
(Increase) decrease in unearned premiums 54 (225) 459 NM NM
Net premiums earned 7,140 6,894 7,195 4 (4)
Losses and loss adjustment expenses incurred 3,862 3,811 3,888 1 (2)Acquisition expenses:Amortization of deferred policy acquisition costs 1,571 1,309 1,214 20 8
Other acquisition expenses 573 698 813 (18) (14)
Total acquisition expenses 2,144 2,007 2,027 7 (1)
General operating expenses 992 1,084 1,115 (8) (3)
Underwriting income (loss) $ 142 $ (8) $ 165 NM % NM %
Loss ratio 54.1 55.3 54.0 (1.2) 1.3
Acquisition ratio 30.0 29.1 28.2 0.9 0.9
General operating expense ratio 13.9 15.7 15.5 (1.8) 0.2
Expense ratio 43.9 44.8 43.7 (0.9) 1.1
Combined ratio 98.0 100.1 97.7 (2.1) 2.4Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (2.0) (2.6) (2.3) 0.6 (0.3)
Prior year development, net of reinsurance and prior year premiums 1.6 1.8 3.8 (0.2) (2.0)
Accident year loss ratio, as adjusted 53.7 54.5 55.5 (0.8) (1.0)
Accident year combined ratio, as adjusted 97.6 99.3 99.2 (1.7) 0.1
Business and Financial Highlights
Net Premiums Written Comparison for the Years Ended December 31, 2024 and 2023
Net premiums written, excluding the unfavorable impact of foreign exchange ($199 million), increased by $166 million primarily due to Personal Auto and PCS, partially offset by lower production in Warranty.
Net Premiums Written Comparison for the Years Ended December 31, 2023 and 2022
Net premiums written, excluding the unfavorable impact of foreign exchange ($240 million), increased by $623 million primarily due to PCS resulting from changes in our reinsurance program.
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2024 and 2023
Underwriting income increased by $150 million primarily due to:
• improvement in the accident year loss ratio, as adjusted (0.8 points) primarily driven by changes in business mix along with continued positive rate change;
• a lower expense ratio (0.9 points) reflecting a lower general operating expense ratio (1.8 points), partially offset by higher acquisition ratio (0.9 points) primarily driven by change in business mix; and
• lower catastrophe losses (0.6 points or $35 million).
Underwriting Income (Loss) Comparison for the Years Ended December 31, 2023 and 2022
Underwriting income decreased by $173 million primarily due to:
• lower net favorable prior year reserve development (2.0 points or $156 million), primarily in Personal Auto;
• a higher expense ratio of (1.1 points) reflecting a higher acquisition ratio (0.9 points) as well as increase in general operating expense ratio (0.2 points) primarily driven by changes in business mix; and
• higher catastrophe losses (0.3 points or $9 million).
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AIG | 2024 Form 10-KTABLE OF CONTENTSITEM 7 | Business Segment Operations | General Insurance
This decrease was partially offset by:
• improvement in the accident year loss ratio, as adjusted (1.0 points) primarily driven by changes in business mix along with continued positive rate change, focused risk selection and improved terms and conditions.Other Operations
Other Operations predominantly consists of Net Investment Income from our AIG Parent liquidity portfolio, Corebridge dividend income, corporate General operating expenses, and Interest expense.OTHER OPERATIONS RESULTSYears Ended December 31, Change(in millions) 2024 2023 2022 2024 vs 2023 2023 vs 2022
Net investment income and other $ 434 $ 190 $ (110) 128 % NM %Benefits, losses and expenses:Corporate and other general operating expenses 623 698 850 (11) (18)
Amortization of intangible assets 18 27 40 (33) (33)
Interest expense 445 498 624 (11) (20)
Total benefits, losses and expenses 1,086 1,223 1,514 (11) (19)
Adjusted pre-tax loss before consolidation and eliminations (652) (1,033) (1,624) 37 36
Consolidation and eliminations (1) (17) 63 94 NM
Adjusted pre-tax loss* $ (653) $ (1,050) $ (1,561) 38 % 33 %* In the fourth quarter of 2024, AIG realigned and began excluding the net results of run-off businesses previously reported in Other Operations from Adjusted pre-tax income. Historical results have been recast to reflect these changes.YEARS ENDED DECEMBER 31, 2024 AND 2023 COMPARISON
Adjusted pre-tax loss before consolidation and eliminations was $652 million in 2024 compared to $1.0 billion in 2023, a decrease of $381 million, primarily due to:
• higher net investment income and other of $244 million due to dividend income from Corebridge in 2024 compared to $0 in 2023 and on AIG Parent portfolio due to higher yields and higher average balance;
• lower corporate general operating expenses of $75 million primarily driven by employee related costs and other operating expenses; and
• lower interest expense of $53 million primarily driven by interest savings from $3.5 billion debt repurchases, through cash tender offers and debt redemption and maturity in 2023 and 2024, offset by interest expense of $10 million on $750 million Senior unsecured debt issued in the first quarter of 2023.
YEARS ENDED DECEMBER 31, 2023 AND 2022 COMPARISON
Adjusted pre-tax loss before consolidation and eliminations of $1.0 billion in 2023 compared to $1.6 billion in 2022, a decrease of $591 million, was primarily due to:
• higher net investment income and other of $300 million primarily driven by AIG Parent portfolio due to higher yields and higher average balance;
• lower corporate general operating expenses of $152 million primarily driven by a reduction in employee related costs and other operating expenses; and
• lower interest expense of $126 million primarily driven by interest savings from $11.0 billion debt repurchases, through cash tender offers and debt redemption and maturity in 2022 and 2023.
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61TABLE OF CONTENTSITEM 7 | Investments
Investments
OVERVIEW
Our investment strategies are tailored to the specific business needs of each segment by targeting an asset allocation mix that supports estimated cash flow needs of our outstanding liabilities and provides diversification from an asset class, sector, issuer, and geographic perspective. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus. The majority of assets backing our insurance liabilities consist of fixed maturity securities.Our Investment Management Agreements with BlackRock, Inc.
Since April 2022, AIG insurance company subsidiaries have entered into separate investment management agreements with BlackRock, Inc. and its investment advisory affiliates (BlackRock). As of December 31, 2024, BlackRock manages $62 billion of our investment portfolio, consisting of liquid fixed income, certain private placements and private equity assets. In addition, liquid fixed income assets associated with the Fortitude Re funds withheld asset portfolio were separately transferred to BlackRock for management in 2022.
INVESTMENT HIGHLIGHTS IN 2024
• Blended investment yields on new investments are higher than blended rates on investments that were sold, matured or called during this period. We continued to make investments in structured securities and other fixed maturity securities with attractive risk-adjusted return characteristics to improve yields and increase net investment income.
• Total Net investment income increased for the year ended December 31, 2024 compared to the same period in the prior year, primarily due to dividend income from AIG's equity in Corebridge, higher income on available for sale fixed maturity securities and short term instruments, partially offset by mortgage loans.INVESTMENT STRATEGIES
Investment strategies are assessed at the segment level and involve considerations that include local and general market and economic conditions, duration and cash flow management, risk appetite and volatility constraints, rating agency and regulatory capital considerations, tax, regulatory and legal investment limitations, and, as applicable, environmental, social and governance considerations.
Some of our key investment strategies are as follows:
• Our fundamental strategy across the portfolios is to seek investments with similar duration and cash flow characteristics to the associated insurance liabilities to the extent practicable.• We seek to purchase investments that offer enhanced yield through illiquidity premiums, such as private placements and commercial mortgage loans, which also add portfolio diversification. These assets typically afford credit protections through covenants, ability to customize structures that meet our insurance liability needs, and deeper due diligence given information access.• Given our global presence, we seek investments that provide diversification from investments available in local markets. To the extent we purchase these investments, we generally hedge any currency risk using derivatives, which could provide opportunities to earn higher risk adjusted returns compared to investments in the functional currency.
• AIG Parent, included in Other Operations, actively manages its assets and liabilities, counterparties and duration. AIG Parent’s liquidity sources are held primarily in the form of cash and short-term investments. This strategy allows us to both diversify our sources of liquidity and reduce the cost of maintaining sufficient liquidity.
• Within the U.S., General Insurance investments are generally split between reserve backing and surplus portfolios.
– Insurance reserves are backed mainly by investment grade fixed maturity securities that meet our duration, risk-return, capital, tax, liquidity, credit quality and diversification objectives. We assess asset classes based on their fundamental underlying risk factors, including credit (public and private), commercial real estate and residential real estate, regardless of whether such investments are bonds, loans, or structured products.– Surplus investments seek to enhance portfolio returns and are generally comprised of a mix of fixed maturity investment grade and below investment grade securities and various alternative asset classes, including private equity, real estate equity, and hedge funds. Over the past few years, hedge fund investments have been reduced.
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ITEM 7 | Investments• Outside of the U.S., fixed maturity securities held by our insurance companies consist primarily of investment-grade securities generally denominated in the currencies of the countries in which we operate.
• We also utilize derivatives to manage our asset and liability duration as well as currency exposures.Asset-Liability ManagementThe investment strategy within the General Insurance companies focuses on growth of surplus, maintenance of sufficient liquidity for unanticipated insurance claims, and preservation of capital. General Insurance invests primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans. Fixed maturity securities of the General Insurance companies have an average duration of 3.8 years, with an average of 4.2 years for North America and 3.0 years for International.
While invested assets backing reserves of the General Insurance companies are primarily invested in conventional liquid fixed maturity securities, we have continued to allocate to asset classes that offer higher yields through structural and illiquidity premiums, particularly in our North America operations. In addition, we continue to invest in both fixed rate and floating rate asset-backed investments to manage our exposure to potential changes in interest rates and inflation. We seek to diversify the portfolio across asset classes, sectors and issuers to mitigate idiosyncratic portfolio risks.In addition, a portion of the surplus of General Insurance companies is invested in a diversified portfolio of alternative investments that seek to balance liquidity, volatility and growth of surplus. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields and have provided added diversification to the broader portfolio.
Available-for-Sale Investments
The following table presents the fair value of our available-for-sale securities:(in millions) December 31, 2024 December 31, 2023Bonds available for sale:U.S. government and government sponsored entities $ 3,267 $ 4,395
Obligations of states, municipalities and political subdivisions 3,143 4,833
Non-U.S. governments 8,107 8,396
Corporate debt 31,826 32,346Mortgage-backed, asset-backed and collateralized:RMBS 8,604 6,207
CMBS 3,926 4,147
CLO/ABS 5,133 4,918
Total mortgage-backed, asset-backed and collateralized 17,663 15,272
Total bonds available for sale* $ 64,006 $ 65,242
* At December 31, 2024 and 2023, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $3.6 billion and $5.2 billion, respectively.The following table presents the fair value of our aggregate credit exposures to non-U.S. governments for our fixed maturity securities:(in millions) December 31, 2024 December 31, 2023
Canada $ 1,384 $ 1,340
Germany 834 929
Japan 555 699
United Kingdom 416 478
France 360 430
Australia 335 314
Israel 312 201
Korea, Republic of 268 293
Malaysia 220 183
Denmark 205 227
Other 3,242 3,326
Total $ 8,131 $ 8,420
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ITEM 7 | Investments
The following table presents the fair value of our aggregate European credit exposures by major sector for our fixed maturity securities:December 31, 2024 December 31, 2023 Total(in millions) Sovereign Financial Institution Non-Financial Corporates Structured Products Total
Euro-Zone countries:France $ 360 $ 1,136 $ 481 $ 12 $ 1,989 $ 2,068
Germany 834 223 750 56 1,863 2,042
Netherlands 164 448 297 26 935 940
Ireland 9 57 112 406 584 231
Italy 21 88 260 — 369 420
Spain 9 149 110 53 321 353
Denmark 205 45 7 — 257 297
Belgium 33 123 73 13 242 276
Luxembourg 17 60 80 — 157 227
Finland 9 63 6 1 79 95
Other Euro-Zone 226 24 35 14 299 194
Total Euro-Zone $ 1,887 $ 2,416 $ 2,211 $ 581 $ 7,095 $ 7,143Remainder of Europe:United Kingdom $ 416 $ 1,228 $ 1,379 $ 239 $ 3,262 $ 3,696
Switzerland 15 186 283 — 484 589
Sweden 117 144 30 — 291 342
Norway 64 37 9 — 110 150
Jersey (Channel Islands) 3 11 9 71 94 5
Other - Remainder of Europe 37 3 8 2 50 31
Total - Remainder of Europe $ 652 $ 1,609 $ 1,718 $ 312 $ 4,291 $ 4,813
Total $ 2,539 $ 4,025 $ 3,929 $ 893 $ 11,386 $ 11,956Investments in Municipal BondsAt December 31, 2024, the U.S. municipal bond portfolio was composed primarily of essential service revenue bonds and high-quality tax-exempt bonds with 98 percent of the portfolio rated A or higher.The following table presents the fair values of our available for sale U.S. municipal bond portfolio by state and municipal bond type:December 31, 2024
(in millions) State General Obligation Local General Obligation Revenue Total Fair Value December 31, 2023 Total Fair Value
California $ 196 $ 135 $ 385 $ 716 $ 903
New York 37 72 313 422 746
Texas 1 138 126 265 490
Massachusetts 50 13 136 199 209
Florida 1 — 142 143 227
Pennsylvania 51 — 82 133 203
Connecticut 42 3 80 125 109
Illinois 5 33 72 110 301
Georgia 50 4 25 79 159
Hawaii 68 — 6 74 89
Oregon 13 41 17 71 83
Washington 5 11 45 61 140
New Jersey 1 2 55 58 200All other states54 20 613 687 974Total$ 574 $ 472 $ 2,097 $ 3,143 $ 4,833
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ITEM 7 | Investments
Investments in Corporate Debt Securities
The following table presents the fair value of our available for sale corporate debt securities by industry categories:
Industry Category(in millions) December 31, 2024 December 31, 2023Financial institutions:Money center/Global bank groups $ 3,642 $ 5,153
Regional banks – other 2,129 222
Life insurance 728 617
Securities firms and other finance companies 669 296
Insurance non-life 494 938
Regional banks – North America 1,314 2,029
Other financial institutions 4,116 3,152
Utilities 2,659 2,989
Communications 1,844 2,111
Consumer noncyclical 2,715 3,436
Capital goods 1,715 1,552
Energy 1,702 1,672
Consumer cyclical 3,284 3,049
Basic materials 1,838 1,141
Other 2,977 3,989
Total* $ 31,826 $ 32,346
* At December 31, 2024 and 2023, approximately 88 percent and 90 percent, respectively, of these investments were rated investment grade.
Investments in RMBS
The following table presents the fair value of AIG’s RMBS available for sale securities:
(in millions) December 31, 2024 December 31, 2023
Agency RMBS $ 4,978 $ 2,827
Alt-A RMBS 1,620 1,338
Subprime RMBS 291 323
Prime non-agency 850 580
Other housing related 865 1,139
Total RMBS (a)(b)
$ 8,604 $ 6,207
(a) Includes approximately $1.3 billion at both December 31, 2024 and 2023, of certain RMBS that had experienced deterioration in credit quality since their origination. This excludes impact of U.S. debt downgrade of Fannie Mae and Freddie Mac. For additional information on purchased credit deteriorated securities, see Note 6 to the Consolidated Financial Statements.
(b) The weighted average expected life was six years and seven years at December 31, 2024 and December 31, 2023, respectively.
Our investments guidelines for investing in RMBS, collateralized loan obligations (CLO) and other asset-backed securities (ABS) take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying characteristics of the mortgages, borrower characteristics, and the level of credit enhancement in the transaction.
Investments in CMBS
The following table presents the fair value of our CMBS available for sale securities:
(in millions) December 31, 2024 December 31, 2023
CMBS (traditional) $ 3,102 $ 3,604
Agency 574 488
Other 250 55
Total $ 3,926 $ 4,147
The fair value of CMBS holdings remained stable during the year ended December 31, 2024. The majority of our investments in CMBS are in tranches that contain substantial credit protection features through collateral subordination. The majority of CMBS holdings are traditional conduit transactions, broadly diversified across property types and geographical areas.
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Investments in CLO/ABS
The following table presents the fair value of our CLO/ABS available for sale securities by collateral type:
(in millions) December 31, 2024 December 31, 2023
Collateral Type:
ABS $ 2,445 $ 1,827
Bank loans 2,688 3,090
Other — 1
Total $ 5,133 $ 4,918
Unrealized Losses of Fixed Maturity Securities
The following table shows the aging of the unrealized losses of fixed maturity securities, the extent to which the fair value is less than amortized cost or cost, and the number of respective items in each category:
December 31, 2024 Less Than or Equal Greater Than 20% Greater Than 50%
to 20% of Cost (b)
to 50% of Cost (b)
of Cost (b)
Total
Aging (a)
Unrealized Unrealized Unrealized Unrealized
(dollars in millions) Cost (c)
Loss Items (d)
Cost (c)
Loss Items (d)
Cost (c)
Loss Items (d)
Cost (c)
Loss Items (d)
Investment grade bonds
0-6 months $ 19,725 $ 343 5,027 $ 100 $ 26 5 $ — $ — 1 $ 19,825 $ 369 5,033
7-11 months 399 13 159 29 7 4 — — — 428 20 163
12 months or more 17,254 1,537 4,879 2,970 854 537 294 171 24 20,518 2,562 5,440
Total $ 37,378 $ 1,893 10,065 $ 3,099 $ 887 546 $ 294 $ 171 25 $ 40,771 $ 2,951 10,636
Below investment grade bonds
0-6 months $ 2,078 $ 36 1,179 $ 3 $ 1 7 $ 2 $ 2 11 $ 2,083 $ 39 1,197
7-11 months 57 3 34 2 1 5 1 1 2 60 5 41
12 months or more 998 79 572 121 32 38 8 7 6 1,127 118 616
Total $ 3,133 $ 118 1,785 $ 126 $ 34 50 $ 11 $ 10 19 $ 3,270 $ 162 1,854
Total bonds
0-6 months $ 21,803 $ 379 6,206 $ 103 $ 27 12 $ 2 $ 2 12 $ 21,908 $ 408 6,230
7-11 months 456 16 193 31 8 9 1 1 2 488 25 204
12 months or more 18,252 1,616 5,451 3,091 886 575 302 178 30 21,645 2,680 6,056
Total
$ 40,511 $ 2,011 11,850 $ 3,225 $ 921 596 $ 305 $ 181 44 $ 44,041 $ 3,113 12,490
(a) Represents the number of consecutive months that fair value has been less than cost by any amount.
(b) Represents the percentage by which fair value is less than cost.
(c) For bonds, represents amortized cost net of allowance.
(d) Item count is by CUSIP by subsidiary.
The allowance for credit losses was $4 million for investment grade bonds and $34 million for below investment grade bonds as of December 31, 2024.Commercial Mortgage LoansAt December 31, 2024, we had direct commercial mortgage loan exposure of $3.3 billion.The following table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost:
Number of Loans Class Percent of Total
(dollars in millions) Apartments Offices Retail Industrial Hotel Others TotalDecember 31, 2024
State:
California 21 $ 97 $ 247 $ 30 $ 56 $ 32 $ — $ 462 14 %
New York 19 43 217 70 20 32 — 382 12
Texas 19 78 201 2 31 22 — 334 10
Massachusetts 9 94 156 49 7 — — 306 9
Florida 11 68 — 62 8 38 — 176 5New Jersey 18 78 — 43 — 10 131 4
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Number of Loans Class Percent of Total
(dollars in millions) Apartments Offices Retail Industrial Hotel Others Total
Pennsylvania 10 18 52 29 18 — 117 4Illinois 6 88 20 — — — — 108 3
Ohio 5 62 — 29 — — — 91 3
Washington 5 49 — — — 11 — 60 2
Other states 31 134 33 63 49 6 — 285 8
Foreign 36 278 182 98 69 117 109 853 26
Total* 190 $ 1,087 $ 1,108 $ 432 $ 301 $ 258 $ 119 $ 3,305 100 %December 31, 2023
State:
California 21 $ 89 $ 277 $ 32 $ 58 $ 33 $ — $ 489 13 %
New York 19 43 208 77 20 32 — 380 10
Texas 21 77 255 2 44 — — 378 10
Massachusetts 9 96 128 50 7 — — 281 7
New Jersey 21 111 8 20 55 — 10 204 5
Florida 11 60 — 64 9 38 — 171 4
Illinois 6 88 26 — — — — 114 3
Ohio 6 63 3 30 — — — 96 4
Pennsylvania 8 14 39 36 5 — — 94 2
Colorado 7 17 32 32 — 6 — 87 2
Other states 37 206 20 64 40 16 — 346 9
Foreign 47 403 227 111 222 122 111 1,196 31
Total* 213 $ 1,267 $ 1,223 $ 518 $ 460 $ 247 $ 121 $ 3,836 100 %* Does not reflect allowance for credit losses.For additional information on commercial mortgage loans, see Note 7 to the Consolidated Financial Statements.
Net Realized Gains and Losses
The following table presents the components of Net realized gains (losses):Years Ended December 31, 2024 2023 2022
(in millions) Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total
Sales of fixed maturity securities $ ( 583 ) $ ( 36 ) $ ( 619 ) $ ( 668 ) $ ( 67 ) $ ( 735 ) $ ( 565 ) $ ( 83 ) $ ( 648 )
Intent to sell — — — — — — ( 66 ) — ( 66 )
Change in allowance for credit losses on fixed maturity securities ( 25 ) — ( 25 ) ( 44 ) — ( 44 ) ( 72 ) — ( 72 )
Change in allowance for credit losses on loans ( 23 ) — ( 23 ) ( 28 ) 3 ( 25 ) 19 ( 3 ) 16
Foreign exchange transactions 256 ( 9 ) 247 124 5 129 266 ( 10 ) 256
All other derivatives and hedge accounting ( 62 ) 7 ( 55 ) ( 165 ) ( 8 ) ( 173 ) 159 ( 3 ) 156
Sales of alternative investments ( 16 ) — ( 16 ) 29 — 29 15 — 15
Other 19 ( 1 ) 18 18 ( 4 ) 14 37 — 37
Net realized losses – excluding Fortitude Re funds withheld embedded derivative ( 434 ) ( 39 ) ( 473 ) ( 734 ) ( 71 ) ( 805 ) ( 207 ) ( 99 ) ( 306 )
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative — ( 75 ) ( 75 ) — ( 273 ) ( 273 ) — 1,133 1,133
Net realized gains (losses) $ ( 434 ) $ ( 114 ) $ ( 548 ) $ ( 734 ) $ ( 344 ) $ ( 1,078 ) $ ( 207 ) $ 1,034 $ 827
Lower Net realized losses excluding Fortitude Re funds withheld assets in the year ended December 31, 2024 compared to 2023 were primarily due to lower losses on sales of fixed maturity securities and lower derivatives losses compared to the prior year period. Higher Net realized losses excluding Fortitude Re funds withheld assets in the year ended December 31, 2023 compared to 2022 were primarily due to lower derivative gains in 2023 compared to 2022.
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ITEM 7 | InvestmentsNet realized gains (losses) on Fortitude Re funds withheld assets primarily reflect changes in the valuation of the modified coinsurance and funds withheld assets. Increases in the valuation of these assets result in losses to AIG as the appreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. Decreases in valuation of the assets result in gains to AIG as the depreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. For additional information on the impact of the funds withheld arrangements with Fortitude Re, see Note 8 to the Consolidated Financial Statements.For additional information on our investment portfolio, see Note 6 to the Consolidated Financial Statements.Change in Unrealized Gains and Losses on Investments
The change in net unrealized gains and losses on investments in the year ended December 31, 2024 was primarily attributable to a change in the fair value of fixed maturity securities. For the year ended December 31, 2024, net unrealized gains were $692 million due to lower interest rates and narrowing of credit spreads.
The change in net unrealized gains and losses on investments in the year ended December 31, 2023 was primarily attributable to a change in the fair value of fixed maturity securities. For the year ended December 31, 2023, net unrealized gains were $2.5 billion primarily due to widening of credit spreads.
For additional information on our investment portfolio, see Note 6 to the Consolidated Financial Statements.CREDIT RATINGSAt December 31, 2024, approximately 61 percent of our fixed maturity securities were held by our U.S. entities. Approximately 90 percent of these securities were rated investment grade by one or more of the principal rating agencies.
Moody’s Investors Service Inc. (Moody’s), Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc. (S&P), or similar foreign rating services rate a significant portion of our foreign entities’ fixed maturity securities portfolio. Rating services are not available for some foreign-issued securities. We closely monitor the credit quality of the foreign portfolio’s non-rated fixed maturity securities. At December 31, 2024, approximately 94 percent of such investments were either rated investment grade or, on the basis of analysis of our investment managers, were equivalent from a credit standpoint to securities rated investment grade. Approximately 24 percent of the foreign entities’ fixed maturity securities portfolio is comprised of sovereign fixed maturity securities supporting policy liabilities in the country of issuance.Composite AIG Credit RatingsWith respect to our fixed maturity securities, the credit ratings in the table below and in subsequent tables reflect: (i) a composite of the ratings of the three major rating agencies, or when agency ratings are not available, the NAIC Designation assigned by the NAIC SVO (96 percent of total fixed maturity securities), or (ii) our internal ratings when these investments have not been rated by any of the major rating agencies or the NAIC. The “Non-rated” category in those tables consists of fixed maturity securities that have not been rated by any of the major rating agencies, the NAIC or us.
For information regarding credit risks associated with Investments, see Enterprise Risk Management – Credit Risk Management.The following table presents the composite AIG credit ratings of our fixed maturity securities calculated on the basis of their fair value:Available for Sale Other Total
(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023Rating:
Other fixed maturity securitiesAAA $ 5,254 $ 5,625 $ 13 $ 16 $ 5,267 $ 5,641
AA 9,599 12,775 80 145 9,679 12,920
A 14,420 14,758 114 73 14,534 14,831
BBB 12,839 12,992 145 96 12,984 13,088
Below investment grade 4,171 3,653 4 — 4,175 3,653
Non-rated 60 167 — — 60 167
Total $ 46,343 $ 49,970 $ 356 $ 330 $ 46,699 $ 50,300Mortgage-backed, asset-backed and collateralizedAAA $ 8,757 $ 6,650 $ 134 $ 77 $ 8,891 $ 6,727
AA 6,765 6,065 89 108 6,854 6,173
A 482 614 49 29 531 643
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ITEM 7 | Investments
Available for Sale Other Total
(in millions) December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023
BBB 470 517 88 81 558 598
Below investment grade 1,189 1,426 29 30 1,218 1,456
Non-rated — — — 8 — 8
Total $ 17,663 $ 15,272 $ 389 $ 333 $ 18,052 $ 15,605TotalAAA $ 14,011 $ 12,275 $ 147 $ 93 $ 14,158 $ 12,368
AA 16,364 18,840 169 253 16,533 19,093
A 14,902 15,372 163 102 15,065 15,474
BBB 13,309 13,509 233 177 13,542 13,686
Below investment grade 5,360 5,079 33 30 5,393 5,109
Non-rated 60 167 — 8 60 175
Total $ 64,006 $ 65,242 $ 745 $ 663 $ 64,751 $ 65,905
National Association of Insurance Commissioners (NAIC) Designations of Fixed Maturity Securities
The Securities Valuation Office (SVO) of the NAIC evaluates the investments of U.S. insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called NAIC Designations. In general, NAIC Designations of ‘1’ highest quality, or ‘2’ high quality, include fixed maturity securities considered investment grade, while NAIC Designations of ‘3’ through ‘6’ generally include fixed maturity securities referred to as below investment grade. NAIC Designations for non-agency Residential Mortgage Backed Securities (RMBS) and Commercial Mortgage Backed Securities (CMBS) are calculated using third party modeling results provided through the NAIC. These methodologies result in an improved NAIC Designation for such securities compared to the rating typically assigned by the three major rating agencies. The following tables summarize the ratings distribution of AIG subsidiaries’ fixed maturity security portfolio by NAIC Designation, and the distribution by composite AIG credit rating, which is generally based on ratings of the three major rating agencies. For fixed maturity securities where no NAIC Designation is assigned or able to be calculated using third-party data, the NAIC Designation category used in the first table below reflects an internal rating.
The NAIC Designations presented below do not reflect the added granularity to the designation categories adopted by the NAIC in 2020, which further subdivide each category of fixed maturity securities by appending letter modifiers to the numerical designations.
The following table presents the fixed maturity security portfolio categorized by NAIC Designation, at fair value:
December 31, 2024
(in millions)
NAIC Designation 1 2 Total Investment Grade 3 4 5 6 Total Below Investment Grade Total
Other fixed maturity securities $ 29,357 $ 13,063 $ 42,420 $ 2,430 $ 1,552 $ 171 $ 65 $ 4,218 $ 46,638
Mortgage-backed, asset-backed and collateralized 17,249 535 17,784 102 128 — 38 268 18,052
Total* $ 46,606 $ 13,598 $ 60,204 $ 2,532 $ 1,680 $ 171 $ 103 $ 4,486 $ 64,690
* Excludes $61 million of fixed maturity securities for which no NAIC Designation is available.
The following table presents the fixed maturity security portfolio categorized by composite AIG credit rating, at fair value:
December 31, 2024
(in millions)
Composite AIG Credit Rating AAA/AA/A BBB Total Investment Grade BB B CCC and Lower Total Below Investment Grade Total
Other fixed maturity securities $ 29,481 $ 12,983 $ 42,464 $ 2,208 $ 1,765 $ 201 $ 4,174 $ 46,638
Mortgage-backed, asset-backed and collateralized 16,275 558 16,833 48 103 1,068 1,219 18,052
Total* $ 45,756 $ 13,541 $ 59,297 $ 2,256 $ 1,868 $ 1,269 $ 5,393 $ 64,690
* Excludes $61 million of fixed maturity securities for which no NAIC Designation is available.
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ITEM 7 | Insurance Reserves
Insurance Reserves
LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)
The following table presents the components of our gross and net loss reserves by segment and major lines of business (a) :December 31, 2024 December 31, 2023(in millions) Net Loss Reserves Reinsurance Recoverable Gross Loss Reserves Net Loss Reserves Reinsurance Recoverable Gross Loss Reserves
General Insurance:
North America Commercial:U.S. Workers' Compensation (net of discount) $ 2,293 $ 3,916 $ 6,209 $ 2,655 $ 4,099 $ 6,754
U.S. Excess Casualty 3,208 3,139 6,347 3,321 3,272 6,593
U.S. Other Casualty 4,387 3,416 7,803 4,112 3,676 7,788
U.S. Financial Lines 5,422 1,614 7,036 5,672 1,622 7,294
U.S. Property and Special Risks 4,297 1,233 5,530 4,403 1,494 5,897Other product lines (b)3,747 2,947 6,694 2,776 2,656 5,432
Total North America Commercial 23,354 16,265 39,619 22,939 16,819 39,758International Commercial:UK/Europe Casualty and Financial Lines 7,280 1,952 9,232 7,447 1,951 9,398
UK/Europe Property and Special Risks 2,355 1,761 4,116 2,913 1,665 4,578Other product lines (b)1,630 1,230 2,860 1,726 1,652 3,378
Total International Commercial 11,265 4,943 16,208 12,086 5,268 17,354Global Personal:U.S. Personal Insurance 836 2,048 2,884 767 2,163 2,930
UK/Europe and Japan Personal Insurance 1,269 670 1,939 1,483 671 2,154Other product lines (b)983 776 1,759 914 874 1,788
Total Global Personal 3,088 3,494 6,582 3,164 3,708 6,872Unallocated loss adjustment expenses (b)1,804 744 2,548 1,298 841 2,139
Total General Insurance 39,511 25,446 64,957 39,487 26,636 66,123
Other Operations 631 3,580 4,211 617 3,653 4,270
Total $ 40,142 $ 29,026 $ 69,168 $ 40,104 $ 30,289 $ 70,393
(a) Includes net loss reserve discount of $1.2 billion and $1.2 billion at December 31, 2024 and 2023, respectively. For information regarding loss reserve discount, see Note 13 to the Consolidated Financial Statements.
(b) Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $2.7 billion and $2.9 billion at December 31, 2024 and 2023, respectively.Prior Year Development
The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment and major lines of business:
Years Ended December 31,(in millions) 2024 2023 2022General Insurance:
North America Commercial:U.S. Workers' Compensation $ (261) $ (190) $ (419)
U.S. Excess Casualty 228 (48) (8)
U.S. Other Casualty (25) (134) (167)
U.S. Financial Lines (43) 37 658
U.S. Property and Special Risks 8 (7) (106)
Other Product Lines (63) (65) (94)
Total North America Commercial $ (156) $ (407) $ (136)International Commercial:UK/Europe Casualty and Financial Lines $ 170 $ 165 $ 82
UK/Europe Property and Special Risks (35) 81 (153)
Other Product Lines (234) (98) (38)
Total International Commercial $ (99) $ 148 $ (109)
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ITEM 7 | Insurance Reserves
Years Ended December 31,(in millions) 2024 2023 2022Global Personal:U.S. Personal Insurance $ (27) $ (66) $ (33)
UK/Europe and Japan Personal Insurance (47) (57) (111)
Other Product Lines (39) (9) (129)
Total Global Personal $ (113) $ (132) $ (273)
Total General Insurance* $ (368) $ (391) $ (518)
Other Operations Run-Off 1 (7) (5)
Total prior year favorable development $ (367) $ (398) $ (523)
* Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $136 million, $164 million and $167 million for the years ended December 31, 2024, 2023 and 2022, respectively. Consistent with our definition of APTI, the amount excludes the portion of (favorable)/unfavorable prior year reserve development for which we have ceded the risk under the NICO reinsurance agreements of $289 million, $(158) million and $(174) million for the years ended December 31, 2024, 2023 and 2022, respectively. Also excludes the related changes in amortization of the deferred gain, which were $268 million, $(83) million and $85 million over those same periods.Net Loss Development – 2024In the year ended December 31, 2024, we recognized favorable prior year loss reserve development of $367 million. The key components of this development were:North America Commercial
• Favorable development on our U.S. Workers' Compensation reflecting continued favorable loss experience.
• Adverse development on U.S. Excess Casualty driven by a large settlement of a legacy mass tort claim with the gross loss in accident years covered under the Adverse Development Cover and increased reserves related to claims emergence.
• Adverse development on U.S. Property and Special Risks reflecting development on prior year catastrophes offset by favorable loss experience in Retail and Wholesale Property.
• Favorable development on U.S. Financial Lines, reflecting favorable experience across most reserving classes, offset by unfavorable development in M&A and High Excess classes.
• Favorable development on U.S. Other Casualty, reflecting favorability across numerous Casualty reserving classes, partially offset by unfavorable development on Commercial Auto and Wholesale Primary General Liability.
• Amortization benefit related to the deferred gain on the adverse development cover.International Commercial
• Favorable development on Other Product Lines, primarily driven by Global Specialty which saw favorable development across multiple lines.
• Adverse development on UK/Europe Casualty and Financial Lines driven by unfavorable development in UK Financial Lines partially offset by favorable development in EMEA Financial Lines, and unfavorable development in European Excess Casualty driven by claim-specific emergence on accident year 2016.
• Favorable development on UK/Europe Property and Special Risks reflecting favorable development across most segments and geographies.
Global Personal
• Favorable development on UK/Europe and Japan Personal Insurance primarily driven by Japan A&H and Auto, partially offset by unfavorable development in Personal Auto in EMEA.
• Favorable development in U.S. Personal Insurance and Other Product Lines due to favorable development on prior year catastrophes across several events, primarily in the 2019-2023 accident years.Our analyses and conclusions about prior year reserves also help inform our judgments about the current accident year loss and loss adjustment expense ratios we selected.
For additional information on prior year development by line of business, see Note 13 to the Consolidated Financial Statements. For information regarding actuarial methods employed for major classes of business, see Critical Accounting Estimates.
Net Loss Development – 2023
In the year ended December 31, 2023, we recognized favorable prior year loss reserve development of $398 million. The key components of this development were:
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ITEM 7 | Insurance Reserves
North America Commercial
• Favorable development on U.S. Workers' Compensation business reflecting a continuation of favorable loss cost trends in guaranteed cost and excess segments across most accident years.
• Favorable development in U.S. Excess Casualty driven by favorable development on the Excess Construction Runoff Portfolio.
• Favorable development in U.S. Other Casualty reflecting favorable experience in construction defect and construction wraps as well as guaranteed cost auto and general liability.
• Favorable development in U.S. Property and Special risks reflecting favorable development on prior year catastrophes in the 2017-2021 accident years, offset by adverse development on prior year catastrophes in the 2022 accident year.
• Unfavorable development in U.S. Financial Lines due to unfavorable development on High Attaching Excess D&O, M&A, Primary National D&O, Cyber data privacy claims, and Architects & Engineers, partially offset by favorable development on Primary Private Not for Profit D&O and Financial Institutions D&O.
• Amortization benefit related to the deferred gain on the adverse development cover.
International Commercial
• Unfavorable development in UK/Europe Casualty and Financial Lines reflecting unfavorable development in auto liability in Europe and UK and in UK D&O and Commercial Professional Indemnity business, partially offset by favorable development in Financial Institutions Professional Indemnity and D&O in Europe and UK and Cyber and Commercial Personal Indemnity in Europe.
• Unfavorable development in UK/Europe Property and Special Risks driven by unfavorable development on prior year catastrophes.
• Favorable development in Other product lines driven primarily by Global Specialty.
Global Personal
• Favorable development, primarily in U.S. Personal Insurance, due to favorable development on prior year catastrophes across several events, primarily in the 2017-2020 accident years.
• Favorable development on Japan Personal Insurance driven by personal auto and A&H business.
Net Loss Development – 2022
In the year ended December 31, 2022, we recognized favorable prior year loss reserve development of $523 million. The key components of this development were:
North America Commercial
• Favorable development in U.S Workers' Compensation reflecting continued favorable loss experience across most accident years particularly for excess and guaranteed cost segments.
• Favorable development in U.S. Excess Casualty particularly in lead and mid-excess retail segments.
• Favorable development in U.S. Other Casualty in the Commercial Auto, General Liability and Construction Wraps business.
• Amortization benefit related to the deferred gain on the adverse development cover.
• Unfavorable development driven by U.S. Financial Lines driven by unfavorable severity trends in Excess and Primary D&O and Excess and Financial Institutions Errors and Omissions (E&O), partially offset by favorable results in Employment Practices Liability Insurance (EPLI).
International Commercial
• Favorable development on Global Specialty across all products in all regions.
• Unfavorable development in Casualty in Europe Excess Casualty and French Auto as well as large loss experience in the UK, partially offset by favorable experience in Asia Pacific Casualty.
• Unfavorable development in Financial Lines primarily in the UK for M&A, Commercial PI and Commercial D&O.
Global Personal
• Favorable development in International Personal Lines, particularly with Auto and A&H coverages in Japan, as well as favorable experience recognized in Europe and the UK.
• Favorable development, primarily in U.S. Personal Insurance, due to favorable development on prior year catastrophes across several events, primarily in the 2017-2019 accident years.
We note that for certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us.
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ITEM 7 | Insurance ReservesSignificant Reinsurance AgreementsIn the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.For a description of AIG’s catastrophe reinsurance protection for 2024, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – Natural Catastrophe Risk.The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement, the effect of discounting of loss reserves and amortization of the deferred gain.(in millions) December 31, 2024 December 31, 2023 December 31, 2022Gross Covered LossesCovered reserves before discount $ 9,823 $ 10,849 $ 12,537
Inception to date losses paid 31,545 30,157 28,667Attachment point (25,000) (25,000) (25,000)Covered losses above attachment point $ 16,368 $ 16,006 $ 16,204Deferred Gain DevelopmentCovered losses above attachment ceded to NICO (80%) $ 13,094 $ 12,805 $ 12,963Consideration paid including interest (10,188) (10,188) (10,188)Pre-tax deferred gain before discount and amortization 2,906 2,617 2,775Discount on ceded losses (a)(936) (1,104) (1,254)
Pre-tax deferred gain before amortization 1,970 1,513 1,521
Inception to date amortization of deferred gain at inception (1,564) (1,428) (1,264)Inception to date amortization attributed to changes in deferred gain (b)(122) 64 (52)
Deferred gain liability reflected in AIG's balance sheet $ 284 $ 149 $ 205(a) The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries.
(b) Excluded from APTI.The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:
Years Ended December 31,(in millions) 2024 2023 2022
Balance at beginning of year, net of discount $ 149 $ 205 $ 869(Favorable) unfavorable prior year reserve development ceded to NICO (a)289 (158) (174)Amortization attributed to deferred gain at inception (b)(136) (164) (167)Amortization attributed to changes in deferred gain (c)(186) 116 (22)
Changes in discount on ceded loss reserves 168 150 (301)
Balance at end of year, net of discount $ 284 $ 149 $ 205(a) Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP.
(b) Represents amortization of the deferred gain recognized in APTI.
(c) Excluded from APTI.
The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of both favorable and unfavorable prior year development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time.Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our insurance run-off lines into a single legal entity. As of December 31, 2024, $3.4 billion of reserves related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.
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ITEM 7 | Liquidity and Capital ResourcesLiquidity and Capital Resources
OVERVIEW
Liquidity refers to the ability to generate sufficient cash resources to meet the cash requirements of our business operations and payment obligations.
Capital refers to the long-term financial resources available to support the operation of our businesses, fund business growth and cover financial and operational needs that arise from adverse circumstances. Our primary source of ongoing capital generation is derived from the profitability of our insurance subsidiaries. We must comply with numerous constraints on our capital positions. These constraints drive the requirements for capital adequacy at AIG and the individual businesses and are based on internally defined risk tolerances, regulatory requirements, rating agency and creditor expectations and business needs.For information regarding our liquidity risk framework, see Enterprise Risk Management – Liquidity Risk Management.We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to policyholders, customers, creditors and debt-holders, including those arising from reasonably foreseeable contingencies or events. Nevertheless, some circumstances may cause our cash or capital needs to exceed projected liquidity or readily deployable capital resources.For information regarding risks associated with our liquidity and capital resources, see Part I, Item 1A. – Risk Factors – Liquidity, Capital and Credit .Depending on market conditions, regulatory and rating agency considerations and other factors, we may take various liability and capital management actions. Liability management actions may include, but are not limited to, repurchasing or redeeming outstanding debt, issuing new debt or engaging in debt exchange offers. Capital management actions may include, but are not limited to, issuing preferred stock, paying dividends to our shareholders on AIG Common Stock, par value $2.50 per share (AIG Common Stock) and repurchases of AIG Common Stock.LIQUIDITY AND CAPITAL RESOURCES HIGHLIGHTSSOURCESLiquidity to AIG Parent from SubsidiariesDuring the year ended December 31, 2024, our General Insurance companies distributed dividends of $4.1 billion to AIG Parent or applicable intermediate holding companies.Sales of Corebridge Shares by AIGIn June and July 2024, we sold an aggregate of approximately 31.9 million shares of Corebridge common stock in a secondary offering at a public offering price of $29.20 per share, which included 30 million shares initially offered and the partial exercise by the underwriters of their option to purchase additional shares. The aggregate gross proceeds to AIG Parent were approximately $932 million.
In August 2024, we sold approximately 8 million shares of Corebridge common stock to Corebridge at the per share purchase price of $24.90. The aggregate proceeds to AIG Parent were $200 million.
In September 2024, we sold 5 million shares of Corebridge common stock in a Rule 144 transaction at the per share purchase price of $26.86. The aggregate proceeds to AIG Parent were approximately $134 million.
In November 2024, we sold 30 million shares of Corebridge common stock in a secondary offering at a public offering price of $31.20 per share. The aggregate gross proceeds to AIG Parent were approximately $936 million.
In December 2024, we sold approximately 120 million shares of Corebridge common stock to Nippon Life Insurance Company at the per share purchase price of $31.47 per share. The aggregate proceeds to AIG Parent were approximately $3.8 billion.
Senior Notes Offering
In November 2024, AIG issued ¥77.1 billion aggregate principal amount of 1.580% Notes Due 2028, ¥10.3 billion aggregate principal amount of 1.757% Notes Due 2029 and ¥12.6 billion aggregate principal amount of 2.137% Notes Due 2034, which was equivalent to approximately $660 million at the time of the offering.
Sale of AIG's Travel Business
On December 2, 2024, AIG completed the sale of its global individual personal travel insurance and assistance business to Zurich Insurance Group and received $600 million cash, plus additional earn-out consideration.
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ITEM 7 | Liquidity and Capital Resources
USESGeneral BorrowingsDuring the year ended December 31, 2024, $2.0 billion of debt categorized as general borrowings matured, was repaid or redeemed, including:
• Repayment of $459 million aggregate principal amount of our 4.125% Notes due February 15, 2024.
• Redemption of €41.55 million aggregate principal amount of our Series A-3 Junior Subordinated Debentures, equivalent to approximately $46 million at the time of repayment.
• Redemption of $400 million face amount of our Zero Coupon Callable Notes Due 2047, for a redemption price of 135.631 percent of the face amount, which totaled approximately $543 million .
• Repurchased, through cash tender offers, approximately $1.13 billion aggregate principal amount of certain notes and debentures issued by AIG for an aggregate purchase price of approximately $1.14 billion .
We made interest payments on our general borrowings totaling $611 million during the year ended December 31, 2024.DividendsDuring the year ended December 31, 2024:
• We made a cash dividend payment of $365.625 per share on our Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) for the three months ended March 31, 2024 totaling $7 million.
• We made cash dividend payments in the amount of $0.40 per share on AIG Common Stock for each of the three month periods ended December 31, 2024, September 30, 2024 and June 30, 2024 (an increase of 11 percent from prior dividend payments), and $0.36 per share for the three months ended March 31, 2024, totaling $1.0 billion.
Repurchases of Common Stock (a) and Redemption of Preferred Stock
During the year ended December 31, 2024, AIG Parent repurchased approximately 89 million shares of AIG Common Stock, for an aggregate purchase price of approximately $6.6 billion.
On March 15, 2024, we redeemed all 20,000 outstanding shares of our Series A Preferred Stock and all 20,000,000 of the corresponding Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock for an aggregate redemption price of $500 million, paid in cash.
(a) Pursuant to a Securities Exchange Act of 1934 (the Exchange Act) Rule 10b5-1 repurchase plan, from January 1, 2025 to February 7, 2025, AIG Parent repurchased approximately 13 million shares of AIG Common Stock for an aggregate purchase price of approximately $952 million.ANALYSIS OF SOURCES AND USES OF CASH
Operating Cash Flow Activities
Insurance companies generally receive most premiums in advance of the payment of claims or policy benefits. The ability of insurance companies to generate positive cash flow is affected by the frequency and severity of losses under their insurance policies, policy retention rates, effective management of their investment portfolio and operating expense discipline.Interest payments totaled $858 million, $1.1 billion and $1.1 billion in the years ended December 31, 2024, 2023 and 2022 , respectively. Excluding interest payments, AIG had operating cash inflows of $4.1 billion, $7.3 billion and $5.3 billion in the years ended December 31, 2024, 2023 and 2022, respectively, including outflows of $104 million, $710 million and $488 million from discontinued operations in the years ended December 31, 2024, 2023 and 2022, respectively.Investing Cash Flow ActivitiesNet cash provided by investing activities in the year ended December 31, 2024 was $1.7 billion, including $4.2 billion used in discontinued operations, compared to net cash used in investing activities of $7.0 billion, including $4.5 billion from discontinued operations, in 2023 and $3.6 billion, including $6.5 billion from discontinued operations, in 2022 .Financing Cash Flow ActivitiesNet cash used in financing activities in the year ended December 31, 2024 totaled $5.1 billion , reflecting:
• $1.0 billion to pay dividends of $0.40 per share in each of the three month periods ended December 31, 2024, September 30, 2024 and June 30, 2024, and $0.36 per share for the three months ended March 31, 2024 on AIG Common Stock;
• $22 million to pay a first quarter dividend of $365.625 per share on AIG’s Series A Preferred Stock and redemption premiums;• $6.7 billion to repurchase approximately 90 million shares of AIG Common Stock;
• $1.4 billion in net outflows from the issuance and repayment of long-term debt; andAIG | 2024 Form 10-K
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ITEM 7 | Liquidity and Capital Resources• $3.9 billion in net inflows from discontinued operations.Net cash provided by financing activities in the year ended December 31, 2023 totaled $782 million reflecting:
• $997 million to pay dividends of $0.36 per share in the three months ended December 31, 2023, September 30, 2023 and June 30, 2023, and $0.32 per share for the three months ended March 31, 2023 on AIG Common Stock;
• $29 million to pay quarterly dividends of $365.625 per share on AIG’s Series A Preferred Stock;
• $3.0 billion to repurchase approximately 51 million shares of AIG Common Stock;
• $1.6 billion in net outflows from the issuance and repayment of long-term debt;
• $45 million in net outflows from the issuance and repayment of debt of consolidated investment entities; and
• $3.5 billion in net inflows from discontinued operations.
Net cash used in financing activities in the year ended December 31, 2022 totaled $602 million reflecting:
• $982 million to pay quarterly dividends of $0.32 per share on AIG Common Stock;
• $29 million to pay quarterly dividends of $365.625 per share on AIG’s Series A Preferred Stock;
• $5.2 billion to repurchase approximately 90 million shares of AIG Common Stock;
• $9.4 billion in net outflows from the issuance, repayment and cash tender of long-term debt;
• $234 million in net outflows from the issuance and repayment of debt of consolidated investment entities; and
• $13.9 billion in net inflows from discontinued operations.LIQUIDITY AND CAPITAL RESOURCES OF AIG PARENT AND SUBSIDIARIES
AIG ParentAs of December 31, 2024 and 2023, respectively, AIG Parent and applicable intermediate holding companies had approximately $10.7 billion and $12.1 billion in liquidity sources held in the form of cash, short-term investments and AIG Parent's committed, revolving syndicated credit facility of $3.0 billion as of December 31, 2024 and $4.5 billion as of December 31, 2023. AIG Parent’s primary sources of liquidity are dividends, distributions, loans and other payments from subsidiaries and credit facilities. AIG Parent’s primary uses of liquidity are for debt service, capital and liability management, operating expenses and dividends on AIG Common Stock.We expect to access the debt and preferred equity markets from time to time to meet funding requirements as needed.
We utilize our capital resources to support our businesses, with the majority of capital allocated to our insurance operations. Should we have or generate more capital than is needed to support our business strategies (including organic or inorganic growth opportunities) or mitigate risks inherent to our business, we may develop plans to distribute such capital to shareholders via dividends or AIG Common Stock repurchase authorizations or deploy such capital towards liability management.
Insurance Companies
We expect that our insurance companies will be able to continue to satisfy reasonably foreseeable future liquidity requirements and meet their obligations, including those arising from reasonably foreseeable contingencies or events, through cash from operations and, to the extent necessary, monetization of invested assets.Our insurance companies’ liquidity resources are primarily held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities. Each of our material insurance companies’ liquidity is monitored through various internal liquidity risk measures. The primary sources of liquidity are premiums, fees, reinsurance recoverables and investment income and maturities. Certain of our insurance companies have access to Federal Home Loan Bank (FHLB) borrowings as an additional source of funding. The primary uses of liquidity are paid losses, reinsurance payments, interest payments, dividends, expenses, investment purchases and collateral requirements.Our insurance companies may require additional funding to meet capital or liquidity needs under certain circumstances. For example, large catastrophes may require us to provide additional support to the affected operations of our insurance companies.We are party to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time in support of our insurance companies. These letters of credit are subject to reimbursement by us in the event of a drawdown of these letters of credit. Letters of credit issued in support of our insurance companies totaled approximately $2.3 billion at December 31, 2024.
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ITEM 7 | Liquidity and Capital ResourcesCREDIT FACILITIESWe maintain a syndicated, multicurrency revolving credit facility as a potential source of liquidity for general corporate purposes. On September 27, 2024, we amended and restated the five-year syndicated credit facility that was entered into on November 19, 2021 (the Previous Facility). The amended and restated five-year syndicated credit facility (the Facility) provides for aggregate commitments by the bank syndicate to provide AIG Parent with unsecured revolving loans and/or standby letters of credit of up to $3.0 billion (the Previous Facility was up to $4.5 billion). The Facility is scheduled to expire in September 2029 (the Previous Facility was scheduled to expire in November 2026).Our ability to utilize the Facility is conditioned on the satisfaction of certain legal, operating, administrative and financial covenants and other requirements contained in the Facility. These include covenants relating to our maintenance of a specified total consolidated net worth and total consolidated debt to total consolidated capitalization. Failure to satisfy these and other requirements contained in the Facility would restrict our access to the Facility and could have a material adverse effect on our financial condition, results of operations and liquidity.As of December 31, 2024, a total of $3.0 billion remained available under the Facility.CONTRACTUAL OBLIGATIONS
The following table summarizes material contractual obligations in total, and by remaining maturity:December 31, 2024 Payments due by Period
(in millions) Total Payments 2025 2026 - 2027 ThereafterLoss reserves (a)$ 71,279 $ 19,667 $ 20,308 $ 31,304Long-term debt (b)8,764 398 1,120 7,246
Interest payments on long-term debt 4,924 369 697 3,858
Total $ 84,967 $ 20,434 $ 22,125 $ 42,408(a) Represents loss reserves, undiscounted and gross of reinsurance.(b) Does not reflect $158 million of debt of consolidated investment entities, for which recourse is limited to the assets of the respective investment entities and for which there is no recourse to the general credit of AIG.Loss ReservesLoss reserves relate to our General Insurance companies and represent estimates of future loss and loss adjustment expense payments based on historical loss development payment patterns. The amounts presented in the above table are undiscounted and therefore exceed the liability for unpaid losses and loss adjustment expenses, including allowance for credit losses, as presented on the Consolidated Balance Sheets. Due to the significance of the assumptions used, the payments by period presented above could be materially different from actual required payments. We believe that our General Insurance companies maintain adequate financial resources to meet the actual required payments under these obligations.For additional information on loss reserves, see Critical Accounting Estimates – Loss Reserves and Note 13 to the Consolidated Financial Statements.
Long-Term Debt and Interest Payments on Long-Term Debt
The amounts presented in the above table represent AIG's total long-term debt outstanding and associated future interest payments due on such debt.
For additional information on outstanding debt, see – Debt.AIG | 2024 Form 10-K
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ITEM 7 | Liquidity and Capital ResourcesOFF-BALANCE SHEET ARRANGEMENTS AND COMMERCIAL COMMITMENTS
In the normal course of business, AIG and our subsidiaries enter into commitments under which we may be required to make payments in the future on a contingent basis.The following table summarizes Off-Balance Sheet Arrangements and Commercial Commitments in total, and by remaining maturity:December 31, 2024 Total AmountsCommitted(in millions) 2025 2026 - 2027 ThereafterCommitments:Investment commitments $ 1,773 $ 1,084 $ 592 $ 97
Commitments to extend credit 258 125 102 31
Letters of credit 295 91 — 204Total (a)(b)$ 2,326 $ 1,300 $ 694 $ 332
(a) Excludes guarantees, CMAs or other support arrangements between AIG consolidated entities.
(b) Excludes commitments with respect to pension plans. The annual pension contribution for 2025 is expected to be approximately $53 million.Investment commitmentsWe enter into investment commitments in the normal course of business that are aligned with and support our investment strategies. These represent commitments to investment in private equity funds as well as commitments to purchase and develop real estate in the United States and abroad. The commitments to invest are called at the discretion of each fund, as needed for funding new investments or expenses of the fund, the timing of which is estimated based on the expected life cycle of the related funds, consistent with past trends of requirements for funding. These commitments are primarily made by insurance subsidiaries of the Company.We also enter into arrangements with variable interest entities (VIEs) and consolidate a VIE when we are the primary beneficiary of the entity.
For additional information on investment commitments and VIEs, see Note 10 to the Consolidated Financial Statements.
Commitments to extend credit
As part of our normal course of business lending operations, we enter into commitments to fund mortgage loans at certain interest rates and various other terms, within a stated period of time. Such commitments are legally binding and generally made by insurance subsidiaries of the Company.
Letters of credit
AIG is party to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time for the benefit of third parties in support of our businesses. These letters of credit are subject to reimbursement by AIG in the event of a drawdown.
Indemnification agreements
For information regarding our indemnification agreements, see Note 15 to the Consolidated Financial Statements.78
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ITEM 7 | Liquidity and Capital ResourcesDEBT
We expect to service and repay general borrowings through maturing investments and dispositions of invested assets, future cash flows from operations, cash flows generated from invested assets, future debt or preferred stock issuances and other financing arrangements.
The following table provides the rollforward of our total debt outstanding:Year Ended December 31, 2024 Balance, Beginning of Year Issuances Maturities and Repayments Effect of Foreign Exchange Other Changes Balance, End of Year(in millions)
General borrowings:Notes and bonds payable $ 9,079 $ 660 $ (1,653) $ (85) $ (116) $ 7,885
Junior subordinated debt 992 — (393) — 3 602
AIG Japan Holdings Kabushiki Kaisha 267 — — (28) — 239
Total general borrowings 10,338 660 (2,046) (113) (113) 8,726
Borrowings supported by assets 37 — (1) — 1 37
Other subsidiaries' notes, bonds, loans and mortgages payable - not guaranteed by AIG — 1 — — — 1
Total long-term debt $ 10,375 $ 661 $ (2,047) $ (113) $ (112) $ 8,764Debt of consolidated investment entities - not guaranteed by AIG (a)$ 231 $ — (1) — (72) (b)
$ 158
(a) At December 31, 2024, includes debt of consolidated investment entities primarily related to real estate investments of $158 million. At December 31, 2023, includes debt of consolidated investment entities related to real estate investments of $79 million and other securitization vehicles of $152 million.
(b) Includes the effect of consolidating previously unconsolidated partnerships.Debt MaturitiesThe following table summarizes maturing long-term debt at December 31, 2024 of AIG for the next four quarters:First Quarter Second Quarter Third Quarter Fourth Quarter(in millions) 2025 2025 2025 2025 Total
General borrowings $ 239 $ 146 $ — $ — $ 385
Borrowings supported by assets — — — 12 12
Other subsidiaries' notes, bonds, loans and mortgages payable — — — 1 1
Total $ 239 $ 146 $ — $ 13 $ 398CREDIT RATINGS
Credit ratings estimate a company’s ability to meet its obligations and may directly affect the cost and availability of financing to that company. The following table presents the credit ratings of AIG Parent as of the date of this filing. Figures in parentheses indicate the relative ranking of the ratings within the agency’s rating categories; that ranking refers only to the major rating category and not to the modifiers assigned by the rating agencies.Short-Term Debt Senior Long-Term DebtMoody's S&P Moody's (a)
S&P (b)
Fitch (c)
American International Group, Inc.P-2 (2nd of 4) A-2 (2nd of 5) Baa 2 (4th of 9) / Positive
BBB+ (4th of 9) /
Positive
BBB+ (4th of 9) /Stable(a) Moody’s appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within the rating categories.
(b) S&P ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.(c) Fitch Ratings Inc. (Fitch) ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.These credit ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at our request.We are party to some agreements that contain “ratings triggers.” Depending on the ratings maintained by one or more rating agencies, these triggers could result in (i) the termination or limitation of credit availability or a requirement for accelerated repayment, (ii) the termination of business contracts or (iii) a requirement to post collateral for the benefit of counterparties.
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ITEM 7 | Liquidity and Capital ResourcesIn the event of a downgrade of our long-term senior debt ratings, certain AIG entities would be required to post additional collateral under some derivative and other transactions, or certain of the counterparties of such entities would be permitted to terminate such transactions early.
The actual amount of collateral that we would be required to post to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at the time of the downgrade.FINANCIAL STRENGTH RATINGS
Financial Strength ratings estimate an insurance company’s ability to pay its obligations under an insurance policy. The following table presents the ratings of our significant insurance subsidiaries as of the date of this filing.
A.M. Best S&P Fitch Moody’s
National Union Fire Insurance Company of Pittsburgh, Pa. A A+ A+ A2
Lexington Insurance Company A A+ A+ A2
American Home Assurance Company A A+ A+ A2
AIG Europe S.A. NR A+ NR A2
American International Group UK Ltd. A A+ NR A2
AIG General Insurance Co. Ltd. NR A+ NR NR
In February 2024, S&P revised its outlook on AIG Parent and its core General Insurance subsidiaries to positive from stable and affirmed the ‘BBB+/A-2’ issuer credit ratings on AIG Parent and ‘A+’ financial strength ratings on the core General Insurance entities.
On January 26, 2024, A.M. Best upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) of AIG General Insurance subsidiaries to ‘a+’ from ‘a’, the Long-Term ICR of AIG Parent to ‘bbb+’ from ‘bbb’, and revised the outlook of the Long-Term ICRs to stable from positive. A.M. Best also affirmed the 'A' Financial Strength Rating of the AIG General Insurance subsidiaries with stable outlook.
These financial strength ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances.
For information regarding the effects of downgrades in our credit ratings and financial strength ratings, see Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit – “A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance or reinsurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity” and Note 11 to the Consolidated Financial Statements.REGULATION AND SUPERVISION
For a discussion of our regulation and supervision by different regulatory authorities in the United States and abroad, including with respect to our liquidity and capital resources, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation.
DIVIDENDSOn February 11, 2025, our Board of Directors declared a cash dividend on AIG Common Stock of $0.40 per share, payable on March 31, 2025 to shareholders of record on March 17, 2025.The payment of any future dividends will be at the discretion of our Board of Directors and will depend on various factors. For further detail on our dividends, see Note 16 to the Consolidated Financial Statements.
REPURCHASES OF AIG COMMON STOCKOur Board of Directors has authorized the repurchase of shares of AIG Common Stock through a series of actions. On April 30, 2024, the Board of Directors authorized the repurchase of $10.0 billion of AIG Common Stock (inclusive of the approximately $3.9 billion remaining under the Board's prior share repurchase authorization). During the year ended December 31, 2024, AIG Parent repurchased approximately 89 million shares of AIG Common Stock for an aggregate purchase price of $6.6 billion. Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from January 1, 2025 to February 7, 2025, we repurchased approximately 13 million shares of AIG Common Stock for an aggregate purchase price of approximately $952 million. As of February 7, 2025, $4.7 billion remained under the Board's authorization.The timing of any future share repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors, as discussed further in Note 16 to the Consolidated Financial Statements.80
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ITEM 7 | Liquidity and Capital Resources
DIVIDEND RESTRICTIONS
Payments of dividends to AIG Parent or intermediate holding companies by insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities.
For information regarding restrictions on payments of dividends by our subsidiaries, see Note 16 to the Consolidated Financial Statements.Enterprise Risk ManagementOVERVIEW
Risk management is an integral part of our business strategy and a key element of our approach to corporate governance. We have an integrated process for managing risks throughout our organization in accordance with our firm-wide risk appetite. Our Board of Directors has oversight responsibility for the management of risk. Our ERM Department oversees and integrates the risk management functions in our business entities and embeds risk management in our day-to-day business processes, providing senior management with a consolidated view of AIG’s major risk positions. Nevertheless, our risk management efforts may not always be successful and material adverse effects on our business, results of operations, cash flows, liquidity or financial condition may occur. For further information regarding the risks associated with our business and operations, see Part I, Item 1A. Risk Factors.
AIG employs a Three Lines model. AIG’s business leaders assume full accountability for the risks and controls in their segments, and ERM performs a review, challenge and oversight function. The third line consists of our Internal Audit Group that provides independent assurance to AIG’s Board of Directors.
RISK GOVERNANCE STRUCTURE
Our risk governance structure is designed to foster the development and maintenance of a risk and control culture that encompasses all significant risk categories impacting our lines of business and functions. Accountability for the implementation and oversight of risk policies is aligned with individual business leaders, with the risk committees' oversight.
Our Board of Directors oversees the management of risk through its Risk Committee and Audit Committee. Our Chief Risk Officer (CRO), a member of the Executive Leadership team, reports to both the Risk Committee and our Chairman and Chief Executive Officer. The AIG CRO chairs the Group Risk Committee (GRC), the senior management group responsible for assessing all significant risks on a global basis. The GRC is supported by management committees and Legal Entity Risk Committees.
RISK APPETITE, LIMITS, IDENTIFICATION AND MEASUREMENT
Risk Appetite Framework
Approved by our Board of Directors, AIG’s Risk Appetite Framework integrates stakeholder interests, strategic business goals and available financial resources. We balance these by seeking to take measured risks that are expected to generate repeatable, sustainable earnings and create long-term value for our shareholders. Our risk tolerances take into consideration regulatory requirements, rating agency expectations, and business needs.
Risk Limits
A key component of our Risk Appetite Framework is the establishment and maintenance of tolerances and limits on material risks to meet AIG’s objectives. As part of AIG's Risk Appetite Framework, AIG has defined, where relevant, a set of risk tolerances to ensure appropriate support of aggregate risk-taking. This includes identifying the appropriate set of metrics, and calibrating a specific tolerance level for each metric, as appropriate.
Risk Identification and Measurement
We conduct risk identification through multiple processes at the business entity and corporate level focused on capturing our material risks. A key initiative is our integrated bottom-up risk identification and assessment process which is conducted down to the product-line level. In addition, we perform an annual top-down risk assessment to identify top risks and assign owners to ensure these risks are appropriately addressed and managed. These processes are used as critical input to enhance and develop our analytics for measuring and assessing risks across the organization.
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ITEM 7 | Enterprise Risk ManagementThe internal capital framework quantifies our aggregate economic risk at a given confidence interval, after considering diversification benefits between risk factors and business lines. The stress testing framework assesses our aggregate exposure to our most significant financial and insurance risks. We use this information to support the assessment of resources needed by us to support our subsidiaries and capital resources required to maintain consolidated company target capitalization levels.
We evaluate and manage risk in material topics as discussed below.
• Credit Risk Management
• Liquidity Risk Management
• Business and Strategy Risks
• Market Risk Management
• Operational Risk Management
• Insurance Risks
CREDIT RISK MANAGEMENTCredit risk is defined as the risk that our customers or counterparties are unable or unwilling to repay their contractual obligations when they become due. Credit risk may also result from a downgrade of a counterparty’s credit ratings or a widening of its credit spreads.
Direct and indirect credit exposures may arise from, but are not limited to, fixed income investments, equity securities, deposits, commercial paper investments, securities purchased under agreements to resell and repurchase agreements, corporate and consumer loans, leases, reinsurance and retrocessional insurance recoverables, counterparty risk arising from derivatives activities, collateral extended to counterparties, insurance risk cessions to third parties, financial guarantees, letters of credit, and certain General Insurance businesses. AIG's credit risk management framework defines credit risk processes to identify, evaluate, risk rate, measure, manage and govern credit risk across the enterprise and to ensure the consistency of those processes.
We monitor and control our company-wide credit risk concentrations and attempt to avoid unwanted or excessive risk accumulations, whether funded or unfunded. To minimize the level of credit risk in some circumstances, we may require mitigants, such as parental or third-party guarantees, simultaneous payment provisions or collateral, including commercial bank-issued letters of credit, funds withheld accounts and cash or securities held in trust collateral accounts.
For additional information on our credit concentrations and credit exposures, see Investments – Investment Strategies – Available-for-Sale Investments.
Derivative TransactionsWe utilize derivatives principally to enable us to hedge exposure associated with changes in levels of interest rates, currencies, credit, commodities, equity prices and other risks. Credit risk associated with derivative counterparties exists for a derivative contract when that contract has a positive fair value to us. All derivative transactions must be transacted within counterparty limits that have been approved by ERM. We evaluate counterparty credit quality via an internal analysis that is consistent with the AIG Credit Policy and, where necessary, we require credit enhancements for certain transactions and enter into offsetting and netting arrangements.For additional information related to derivative transactions, see Note 11 to the Consolidated Financial Statements.MARKET RISK MANAGEMENTMarket risk is defined as the risk of adverse impact due to systemic movements in one or more of the following market risk drivers: interest rates, credit spreads, foreign exchange, equity and commodity prices, residential and commercial real estate values, inflation, and their respective levels of uncertainty. It can also be brought on by political turmoil, natural disasters, and terrorist attacks. We are exposed to market risks primarily within our insurance and capital markets activities, on both the asset and the liability sides of our balance sheet through on- and off-balance sheet exposures.Market risk is overseen at the corporate level within ERM through the CRO. Market risk is managed by our finance, treasury and investment management corporate functions, collectively, and in partnership with ERM. The scope and magnitude of our market risk exposures is monitored through multiple lenses that include economic, GAAP and statutory reporting frameworks at various levels of business consolidation, in a manner consistent with our risk appetite statement. This process aims to establish a comprehensive coverage of potential implications from adverse market risk developments. We use a number of approaches to measure market risk exposure including sensitivity analysis, scenario analysis and stress testing.
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ITEM 7 | Enterprise Risk ManagementMarket Risk SensitivitiesMost of our fixed income portfolio is reported as available-for-sale. Therefore, fair value changes will have a direct impact on Accumulated Other Comprehensive Income (Loss) (AOCI), but do not impact our net investment income revenue unless the assets are sold. Our short-term and long-term debt is reported at amortized cost and thus changes in interest rates do not impact the debt values reported on our financial statements. Their fair value, however, is sensitive to interest rates.
The following table provides estimates of sensitivity to changes in yield curves, equity prices and foreign exchange (FX) rates on our financial instruments. We aim to manage interest rate exposure of the investment portfolio such that valuation changes from interest rates are partially offset by changes in the economic value of insurance reserves. These exposures are regularly reviewed as part of AIG’s governance structure and limits are set accordingly. The table excludes $3.1 billion of interest rate sensitive assets supporting the Fortitude Re funds withheld arrangements as the contractual returns related to the assets are transferred to Fortitude Re, as well as $3.2 billion of related funds withheld payables.Balance Sheet Exposure Economic Effect
(dollars in millions)December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023Sensitivity factor
100 bps parallel increase in all yield curves
Interest rate sensitive assets:
Fixed maturity securities$ 61,408 $ 62,522 $ (2,248) $ (2,246)Mortgage and other loans receivable (a)3,057 3,670 (61) (87)Total interest rate sensitive assets (b)$ 64,465 $ 66,192 $ (2,309) $ (2,333)Interest rate sensitive liabilities:
Long-term debt (a)(c)(8,525) (10,108) 628 840Total interest rate sensitive liabilities$ (8,525) $ (10,108) $ 628 $ 840Sensitivity factor
20% decline in equity prices and alternative investments
Equity and alternative investments:
Real estate investments$ 259 $ 211 $ (52) $ (42)Private equity3,586 3,723 (717) (745)Hedge funds187 411 (37) (82)
Common equity 704 665 (141) (133)Other investments5,796 2,022 (1,159) (404)Total equity and alternative investments$ 10,532 $ 7,032 $ (2,106) $ (1,406)Sensitivity factor
10% depreciation of all FX rates against the U.S. dollar
Foreign currency-denominated net asset position:British pound $ 1,233 $ 1,350 $ (123) $ (135)
Japan Yen 627 1,105 (63) (110)Euro1,165 1,101 (116) (110)All other foreign currencies2,941 2,328 (294) (233)Total foreign currency-denominated net asset position (d)$ 5,966 $ 5,884 $ (596) $ (588)
(a) The economic effect is the difference between the estimated fair value with and without a 100 bps parallel increase in all yield curves. The estimated fair values for Mortgage and other loans receivable and Long-term debt, excluding assets supporting Fortitude Re funds withheld assets, were $2.8 billion and $8.2 billion at December 31, 2024, respectively. The estimated fair values for Mortgage and other loans receivable and Long-term debt, excluding assets supporting Fortitude Re funds withheld assets, were $4.1 billion and $9.6 billion at December 31, 2023, respectively.
(b) At December 31, 2024, $568 million of Fixed maturity securities and $492 million of Mortgage and other loans receivable were excluded due to modeling limitations. At December 31, 2023, this amount was $566 million for Fixed maturity securities and $459 million for Mortgage and other loans receivable.
(c) At December 31, 2024 and 2023 the analysis excluded $239 million and $267 million, respectively, of AIG Japan Holdings Kabushiki Kaisha loans.
(d) Most of the foreign currency exposure is reported on a one quarter lag. Foreign currency-denominated net asset position reflects our aggregated non-U.S. dollar assets less our aggregated non-U.S. dollar liabilities on a GAAP basis.
Interest rate sensitivity is defined as the change in value with respect to a 100 basis point parallel shift up in the interest rate environment, calculated as: scenario value minus base value, where base value is the value under the yield curves as of the period end and scenario value is the value reflecting a 100 basis point parallel increase in all yield curves. The hypothetical change is assumed to be instantaneous. This therefore also assumes that the interest rate risk profile of the company remains constant and doesn't reflect the impact of any potential portfolio duration repositioning while interest rates rise.
As a global company, AIG conducts business in multiple currencies. In general, we aim to match liabilities with assets of the same currency. For regulated insurance subsidiaries, we also try to mitigate statutory surplus or capital injection risk and capital surplus volatility in accordance with the entity’s statutory accounting framework. This often requires us to allocate capital in the liability’s currency mix or the functional currency of the entity. Derivatives may also be used.
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ITEM 7 | Enterprise Risk ManagementFor additional information on our three-tiered hierarchy of limits, see – Risk Appetite, Limits, Identification and Measurement – Risk Limits.
LIQUIDITY RISK MANAGEMENTLiquidity risk is defined as the risk that our financial condition will be adversely affected by the inability or perceived inability to meet our short-term cash, collateral or other financial obligations as they come due.AIG and its legal entities seek to maintain sufficient liquidity both during the normal course of business and under defined liquidity stress scenarios to ensure that sufficient cash will be available to meet the obligations as they come due.Liquidity risk drivers include market/monetization risk, cash flow mismatch risk, event funding risk, and financing risk.Liquidity risk is monitored through comprehensive cash flow projections over varying time horizons that incorporate all relevant liquidity sources and uses and include known and likely cash inflows and outflows. We use several approaches to measure liquidity risk exposure including coverage flow forecasts and stress testing.
OPERATIONAL RISK MANAGEMENT
Operational risk is defined as the risk of loss, or other adverse consequences, resulting from inadequate or failed internal processes, people, systems, or from external events. Operational risk includes legal, regulatory, technology, compliance, third-party and business continuity risks, but excludes business and strategy risks.
Operational risk is inherent in our business entities and can have many impacts, including but not limited to, unexpected economic losses or gains, reputational harm due to negative publicity, regulatory action from supervisory agencies and operational and business disruptions, and/or damage to customer relationships.
ERM, working together with other control and assurance functions and first line Risk Control Owners through the risk and control framework, provides an independent view of operational risks for each of the business areas.Cybersecurity Risk
AIG, like other global companies, continues to witness the increased sophistication and activities of unauthorized parties attempting cyber and other computer-related penetrations such as “denial of service” attacks, phishing, untargeted but sophisticated and automated attacks, and other disruptive software in an effort to compromise systems, networks and obtain sensitive information.ERM works closely with and supports the risk management practices of Information Technology, the Information Security Office and the business units and functions that form the lines of defense against the cybersecurity risks that we face.
For additional information regarding the privacy data protection and cybersecurity regulations to which we are subject, see Part I, Item 1. Business – Regulation – Privacy, Data Protection, Cybersecurity and Artificial Intelligence Requirements. For additional discussion of cybersecurity risks, see Part I, Item 1A. Risk Factors – Business and Operations. For additional information regarding our cybersecurity risk management as well as strategy and governance, please see Part 1, Item 1C. Cybersecurity.
BUSINESS AND STRATEGY RISKS
Business and strategy risk encompasses those risks that stem from strategy risk, risk of legal and regulatory actions, risk of rating agency actions, reputational risk and intercompany dependencies. The major AIG strategy risks capture risk of losses due to the inability to implement appropriate business plans and strategies, make decisions, allocate resources or adapt to changes in the business environment. These risks include, but are not limited to pricing, distribution channels, acquisitions, and dispositions. The risk of legal and regulatory actions is defined as the risk that legal action or a change in regulation in the regions in which AIG does business will materially impact business operations, financial performance, and/or capital requirements. Risk drivers include, but are not limited to, adverse actions in legal or regulatory environment, and adverse actions or added complexity of accounting/tax standards. A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of AIG’s insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition, and liquidity. Reputational risk events are typically linked to risk incidents, whether internal (e.g., data privacy breaches, fraud, etc.) or external (e.g., non-AIG insurance losses). The reputational impact may magnify the financial consequences of the original risk event (e.g., reduced sales in addition to fines).
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ITEM 7 | Enterprise Risk ManagementAIG generates multiple connections and dependencies among its affiliates and legal entities. Financial interconnections are utilized by AIG to support the funding requirements of the business units, optimize group capital deployment within the organization, offer comfort to policyholders, regulators, and rating agencies, provide credit support for higher financial strength ratings, manage exposures, distribute risk appropriately, and meet client or regulatory requirements. To conduct its businesses, AIG relies on operational capabilities of several AIG affiliates and corporate functions. The operational interconnections can be categorized as employees, management information systems, real estate, shared services, and intellectual property.
AIG monitors and reports on the above-mentioned risks through ongoing risk reporting to various committees, monitoring of capital positions, regular interaction with AIG businesses and functions, regulators, and rating agencies. AIG reputational risk protocols are incorporated into the overall risk management framework. On a regular basis, ERM performs Second Line Review and Challenge on many of these processes and approaches, including, but not limited to, budget and expense assumptions, pricing and reserving models, assumptions, and results. The Internal Audit Group performs audits on key processes and provides continuous monitoring on remediation of audit findings. Processes and controls are designed to respond proactively and in some cases, reactively, in an effective and consistent way.
INSURANCE RISKS
Insurance risk is defined as the risk of actual claims experience and/or policyholder behavior being materially different than initially expected at the inception of an insurance contract. Uncertainties related to insurance risk can lead to deviations in magnitude and/or timing of prospective cash flows associated with our liabilities compared to what we expected.
We manage our business risk oversight activities through our insurance operations. A primary goal in managing our insurance operations is to achieve an acceptable risk-adjusted return on equity. To achieve this goal, we must be disciplined in risk selection, premium adequacy, and appropriate terms and conditions to cover the risk accepted.
We operate our insurance businesses on a global basis, and we are exposed to a wide variety of risks with different time horizons. We manage these risks throughout the organization, both centrally and locally, through a number of processes and procedures, including but not limited to, pricing and risk selection models, pricing approval processes, pre-launch approval of product design, development, and distribution, underwriting approval processes and authorities, modeling and reporting of aggregations and limit concentrations at multiple levels, model risk management framework and validation processes, risk transfer tools, review and challenge of reserves, actuarial profitability and reserve reviews, management of the relationship between assets and liabilities, and experience monitoring and assumption updates.Risks primarily include loss reserves, underwriting, catastrophe exposure, single risk loss exposure, and reinsurance. The potential inadequacy of the liabilities we establish for unpaid losses and loss adjustment expenses is a key risk faced by the General Insurance companies, which we manage through internal controls and oversight of the loss reserve setting process, as well as reviews by external experts. For further information, see Critical Accounting Estimates – Loss Reserves.
The potential inadequacy of premiums charged for future risk periods on risks underwritten in our portfolios can impact the General Insurance companies’ ability to achieve an underwriting profit. We develop pricing based on our estimates of losses and expenses, but factors such as market pressures and the inherent uncertainty and complexity in estimating losses may result in premiums that are inadequate to generate underwriting profit.
Our business is exposed to various catastrophic events, including natural disasters, man-made catastrophes, or pandemic disease, in which multiple losses can occur and affect multiple lines of business in any calendar year, adversely affecting our business and operating results. Concentration of exposure in certain industries or geographies may cause us to suffer disproportionate losses.Our business is exposed to loss events, such as fires or explosions, that have the potential to generate losses from a single insured client. The net risk to us is managed to acceptable limits established by the Chief Underwriting Officer through a combination of internal underwriting standards and external reinsurance.Since we use reinsurance to limit our losses, we are exposed to risks associated with reinsurance including the recoverability of expected payments from reinsurers due to either an inability or unwillingness to pay, contracts that do not respond properly to the event or actual reinsurance coverage that is different than anticipated, which is monitored through our credit risk management framework.
We closely manage insurance risk by monitoring and controlling the nature and geographic location of the risks in each underwritten line of business, concentrations in industries, the terms and conditions of the underwriting and the premiums we charge for taking on the risk. We analyze concentrations of risks using various modeling techniques, including both probability distributions (stochastic) and/or single-point estimates (deterministic) approaches.AIG | 2024 Form 10-K
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ITEM 7 | Enterprise Risk Management
Risk Measurement, Monitoring and Limits
We use several approaches to measure our insurance risk exposure including sensitivity and scenario analyses, stochastic methods, and experience studies. Additionally, there are risk-specific assessment tools in place to appropriately manage the variety of insurance risks to which we are exposed.For additional information on our three-tiered hierarchy of limits, see – Risk Appetite, Limits, Identification and Measurement – Risk Limits.Natural Catastrophe Risk
We manage catastrophe exposure with multiple approaches such as setting risk limits based on aggregate Probable Maximum Loss (PML) modeling, monitoring overall exposures and risk accumulations, modifying our gross underwriting standards, and purchasing catastrophe reinsurance through both the traditional reinsurance and capital markets in addition to other reinsurance protections.
We use third-party catastrophe risk models and other tools to evaluate and simulate frequency and severity of catastrophic events and associated losses to our portfolios of exposures with adjustments applied to modeled losses to account for loss adjustment expenses, model biases, data quality and non-modeled risks.
We recognize that climate change has implications for insurance industry exposure to natural catastrophe risk. With multiple levels of risk management processes in place, we actively analyze the latest climate science and policies to anticipate potential changes to our risk profile, pricing models and strategic planning and will continue to adapt to and evolve with the developing risk exposures attributed to climate change. In addition, we provide insurance products and services to help our clients be proactive against the threat of climate change.The table below details our modeled estimates of PML, net of reinsurance, on an annual aggregate basis. The 1-in-100 and 1-in-250 PMLs are the annual aggregate probable maximum losses with probability of 1 percent and 0.4 percent in a year, respectively. Estimates as of December 31, 2024 reflect our in-force portfolio for exposures as of July 1, 2024, and all inuring reinsurance covers as of December 31, 2024, except for the catastrophe reinsurance programs, which are as of January 1, 2025 and reflected as of such date.The following table presents an overview of annual aggregate modeled losses for world-wide all perils and exposures arising from our largest primarily modeled perils:At December 31, 2024 Net of Reinsurance Net of Reinsurance,After Tax (f)
Percent of Total Shareholders' Equity Percent of Total Shareholders' Equity Excluding AOCI
(in millions)
Exposures:
World-wide all peril (1-in-250) (a)$ 2,535 $ 2,002 4.7 % 4.0 %U.S. Hurricane (1-in-100) (b)932 736 1.7 1.5U.S. Earthquake (1-in-250) (c)830 655 1.5 1.3Japanese Typhoon (1-in-100) (d)278 220 0.5 0.4Japanese Earthquake (1-in-250) (e)242 191 0.4 0.4(a) The world-wide all peril loss estimate includes wildfire exposure.
(b) The U.S. hurricane loss estimate includes losses to Commercial and Personal Property from hurricane hazards of wind and storm surge.
(c) The U.S. earthquake loss estimates represent exposure to Commercial and Personal Property, U.S. Workers’ Compensation and A&H lines of business.
(d) Japan Typhoon loss estimate represents exposure to Commercial and Personal Property.
(e) Japan Earthquake loss estimate represents exposure to Commercial and Personal Property and A&H lines of business.
(f) Taxed at the statutory tax rate of 21 percent for both the U.S. and Japanese modeled losses. The majority of Japan exposures are ceded to our U.S. Pool.
AIG, along with other property casualty insurance and reinsurance companies, uses industry-recognized catastrophe models and applies proprietary modeling processes and assumptions to arrive at loss estimates. The use of different methodologies and assumptions could materially change the projected losses, and our modeled losses may not be comparable to estimates made by other companies.
Also, the modeled results are based on the assumption that all reinsurers fulfill their obligations to us under the terms of the reinsurance arrangements. These estimates are inherently uncertain and may not accurately reflect our net exposure, inclusive of credit risk, to these events.Our 2025 property catastrophe reinsurance program is a worldwide program providing both aggregate and per occurrence protection, with differing per occurrence and aggregate retentions for North America, Japan, and rest of world. In 2025, for North America Commercial portfolio, we maintained the $500 million retention and increased the vertical limit purchased by $500 million. For the North America Personal Lines portfolio, as a consequence of increasing the US personal lines portfolio’s contribution to the aggregate cover, we increased the retention to $200 million. We also increased vertical limit purchased and achieved several coverage
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ITEM 7 | Enterprise Risk Managementenhancements. For the International portfolio, we retained our core attachment points for Japan of $200 million and $125 million for rest of world.We have also purchased property per risk covers that provide protection against large losses globally, which include those emanating from non-critical catastrophe events (all events except for named windstorm and earthquake) globally as well as critical catastrophe events (named windstorm and earthquake) outside North America.
Actual results in any period are likely to vary, perhaps materially, from the modeled scenarios. The occurrence of one or more severe events could have a material adverse effect on our financial condition, results of operations and liquidity. For additional information, see also Part 1, Item 1A. Risk Factors – Reserves and Exposures.
Terrorism Risk
We actively monitor terrorism risk and manage exposures to losses from terrorist attacks. Terrorism risks are modeled using a third-party vendor model for various terrorism attack modes and scenarios. Adjustments are made to account for vendor model gaps and the nature of the General Insurance companies’ exposures.
Our largest terrorism concentrations are in New York City, and estimated losses are largely driven by the Property and Workers’ Compensation lines of business. Our exposure to terrorism risk in the U.S. is mitigated by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) in addition to limited private reinsurance protections. TRIPRA covers certified terrorist attacks within the U.S. or U.S. missions and against certain U.S. carriers or vessels and excludes certain lines of business as specified by applicable law.
We offer terrorism coverage in many other countries through various insurance products and participate in country terrorism pools when applicable. International terrorism exposure is estimated using scenario-based modeling and exposure concentration is monitored routinely. Targeted reinsurance purchases are made for some lines of business to cover potential losses due to terrorist attacks. We also rely on the government-sponsored and government-arranged terrorism reinsurance programs, including pools, in force in applicable non-U.S. jurisdictions.
Reinsurance Activities
We purchase reinsurance for our insurance and reinsurance operations. Reinsurance facilitates insurance risk management (retention, volatility, concentrations) and capital planning. We may purchase reinsurance on a pooled basis.
Reinsurance is used primarily to manage overall capital adequacy and mitigate the insurance loss exposure related to certain events, such as natural and man-made catastrophes, death events, or single policy level events. Our subsidiaries operate worldwide primarily by underwriting and accepting risks for their direct account on a gross basis and reinsuring a portion of the exposure on either an individual risk or an aggregate basis to the extent those risks exceed the desired retention level. In addition, as a condition of certain direct underwriting transactions, we may be required by clients, agents or regulation to cede all or a portion of risks to specified reinsurance entities, such as captives, other insurers, local reinsurers and compulsory pools.Reinsurance contracts do not relieve our subsidiaries from their direct obligations to insureds. However, an effective reinsurance program substantially mitigates our exposure to potentially significant losses.
Reinsurance Recoverable
AIG’s reinsurance recoverable assets are comprised of paid losses recoverable, ceded loss reserves, ceded reserves for unearned premiums, and Life and Annuity reinsurance recoverables (ceded policy and claim reserves and policyholder contract deposits).
At December 31, 2024, total reinsurance recoverable assets were $38.0 billion. These assets include general reinsurance paid losses recoverable of $3.8 billion, ceded loss reserves of $29.1 billion including reserves for IBNR claims, and ceded reserves for unearned premiums of $4.3 billion, as well as life reinsurance recoverable of $0.8 billion. The methods used to estimate IBNR and to establish the resulting ultimate losses involve projecting the frequency and severity of losses over multiple years. These methods are continually reviewed and updated by management. Any adjustments are reflected in income. We believe that the amount recorded for ceded loss reserves at December 31, 2024 reflects a reasonable estimate of the ultimate losses recoverable. Actual losses may, however, differ from the reserves currently ceded.
At December 31, 2024, we held $20.1 billion of collateral, in the form of funds withheld, securities in reinsurance trust accounts and/or irrevocable letters of credit, in support of reinsurance recoverable assets from unaffiliated reinsurers.
At December 31, 2024, we had no significant reinsurance recoverable due from any individual reinsurer that was financially troubled. Reduced profitability associated with lower interest rates, market volatility and catastrophe losses (including COVID-19), could potentially result in reduced capacity or rating downgrades for some reinsurers. The Reinsurance Credit Department, in conjunction with the credit executives within ERM, reviews these developments, monitors compliance with credit triggers that may require AIG's reinsurer to post collateral, and seeks to use other appropriate means to mitigate any material risks arising from these developments.For additional information on reinsurance recoverable, see Critical Accounting Estimates – Reinsurance Assets.AIG | 2024 Form 10-K
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Glossary
Glossary
Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.
Accident year combined ratio, as adjusted (Accident year combined ratio, ex-CAT) The combined ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Accident year loss ratio, as adjusted (Accident year loss ratio, ex-CAT) The loss ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Acquisition ratio Acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to acquire new and renewal insurance contracts and also include the amortization of VOBA and DAC. Acquisition costs vary with sales and include, but are not limited to, commissions, premium taxes, direct marketing costs and certain costs of personnel engaged in sales support activities such as underwriting.
Attritional losses are losses recorded in the current accident year, which are not catastrophe losses.Book Value per share, excluding Goodwill, Value of business acquired (VOBA), Value of distribution channel acquired (VODA) and Other intangible assets (Tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis. Tangible book value per share is derived by dividing Total AIG common shareholders’ equity, excluding intangible assets (AIG tangible common shareholders’ equity) by total common shares outstanding.Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs), corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.Book Value per share, excluding Investments AOCI, Goodwill, VOBA, VODA and Other intangible assets (Adjusted tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions and Fortitude Re funds withheld assets since these fair value movements are economically transferred to Fortitude Re. Adjusted tangible book value per share is derived by dividing AIG adjusted common equity, excluding intangible assets, (AIG adjusted tangible common shareholders’ equity) by total common shares outstanding.Book value per share, excluding investments related cumulative unrealized gains and losses recorded in Accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI (AIG adjusted common shareholders' equity) by total common shares outstanding.
Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons, i.e., not the insured, and the legal liability imposed on the insured as a result.
Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios.
Credit Support Annex A legal document generally associated with an ISDA Master Agreement that provides for collateral postings which could vary depending on ratings and threshold levels.
DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful acquisition of new business or renewal of existing business.88
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GlossaryDeferred gain on retroactive reinsurance Retroactive reinsurance is a reinsurance contract in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events. If the amount of premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and amortized over the settlement period of the reserves. Any related development on the ceded loss reserves recoverable under the contract would increase the deferred gain if unfavorable, or decrease the deferred gain if favorable.
Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.
General operating expense ratio General operating expenses divided by net premiums earned. General operating expenses are those costs that are generally attributed to the support infrastructure of the organization and include but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude losses and loss adjustment expenses incurred, acquisition expenses, and investment expenses.
IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.ISDA Master Agreement An agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, that generally provides for the net settlement of all or a specified group of these derivative transactions, as well as pledged collateral, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions.
Loan-to-value ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.
Loss Adjustment Expenses The expenses directly attributed to settling and paying claims of insureds and include, but are not limited to, legal fees, adjuster’s fees and the portion of general expenses allocated to claim settlement costs.
Loss ratio Losses and loss adjustment expenses incurred divided by net premiums earned.
Loss reserve development The increase or decrease in incurred losses and loss adjustment expenses related to prior years as a result of the re-estimation of loss reserves at successive valuation dates for a given group of claims.
Loss reserves Liability for unpaid losses and loss adjustment expenses. The estimated ultimate cost of settling claims relating to insured events that have occurred on or before the balance sheet date, whether or not reported to the insurer at that date.
Master netting agreement An agreement between two counterparties who have multiple derivative contracts with each other that provides for the net settlement of all contracts covered by such agreement, as well as pledged collateral, through a single payment, in a single currency, in the event of default on or upon termination of any one such contract.
Natural catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold.
Net premiums written represent the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during a given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net premiums written are a measure of performance for a sales period, while net premiums earned are a measure of performance for a coverage period.
Noncontrolling interests The portion of equity ownership in a consolidated subsidiary not attributable to the controlling parent company.
Pool A reinsurance arrangement whereby all of the underwriting results of the pool members are combined and then shared by each member in accordance with its pool participation percentage.
Prior year development See Loss reserve development .RBC Risk-Based Capital A formula designed to measure the adequacy of an insurer’s statutory surplus compared to the risks inherent in its business.Reinstatement premiums Premiums on an insurance policy over and above the initial premium imposed at the beginning of the policy payable to reinsurers or receivable from insurers to restore coverage limits that have been reduced or exhausted as a result of reinsured losses under certain excess of loss reinsurance contracts.
Reinsurance The practice whereby one insurer, the reinsurer, in consideration of a premium paid to that insurer, agrees to indemnify another insurer, the ceding company, for part or all of the liability of the ceding company under one or more policies or contracts of insurance which it has issued.
Reinsurance recoverables are comprised of paid losses recoverable, ceded loss reserves, ceded reserves for unearned premiums.
Retroactive reinsurance See Deferred gain on retroactive reinsurance .Return on Equity – Adjusted After-tax Income, Excluding Goodwill, VOBA, VODA and Other Intangible assets (Return on tangible equity) is used to show the return on AIG tangible common shareholder’s equity, which we believe is a useful measure of realizable shareholder value. We exclude Goodwill, VOBA, VODA and Other intangible assets from AIG common shareholders’ equity to derive AIG tangible common shareholders’ equity. Return on AIG tangible common equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG tangible common shareholders' equity.
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GlossaryReturn on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates the fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to NOLs, CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. We believe this metric will provide investors with greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.Subrogation The amount of recovery for claims we have paid our policyholders, generally from a negligent third party or such party’s insurer.
Unearned premium reserve Liabilities established by insurers and reinsurers to reflect unearned premiums, which are usually refundable to policyholders if an insurance or reinsurance contract is canceled prior to expiration of the contract term.
VOBA Value of Business Acquired Present value of future pre-tax profits from in-force policies of acquired businesses discounted at yields applicable at the time of purchase. VOBA is reported in DAC in the Consolidated Balance Sheets.AcronymsA&H Accident and Health Insurance ISDA International Swaps and Derivatives Association, Inc.ABS Asset-Backed Securities Moody's Moody's Investors' Service Inc.APTI Adjusted pre-tax income NAIC National Association of Insurance Commissioners
CDS Credit Default Swap NM Not Meaningful
CLO Collateralized Loan Obligations ORR Obligor Risk Ratings
CMBS Commercial Mortgage-Backed Securities RMBS Residential Mortgage-Backed Securities
ERM Enterprise Risk Management S&P Standard & Poor's Financial Services LLC
FASB Financial Accounting Standards Board SEC Securities and Exchange Commission
GAAP Accounting Principles Generally Accepted in the United States of America VIE Variable Interest Entity
FY 2025-12-31 (later)
ITEM 7 | Management’s Discussion and Analysis of Financial Condition and Results of OperationsCautionary Note on Forward-Looking Statements
This Annual Report on Form 10-K and other publicly available documents may include, and members of management may from time to time make and discuss, statements which, to the extent they are not statements of historical or present fact, may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward‑looking statements are intended to provide management’s current expectations or plans for future operating and financial performance, based on assumptions currently believed to be valid and accurate. Forward-looking statements are often preceded by, followed by or include words such as “will,” “believe,” “anticipate,” “expect,” “expectations,” “intend,” “plan,” “strategy,” “prospects,” “project,” “anticipate,” “should,” “guidance,” “outlook,” “view,” “target,” “goal,” “estimate” and other words of similar meaning in connection with a discussion of future operating or financial performance. These statements may include, among other things, projections, goals and assumptions that relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expense reduction efforts, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, the effect of catastrophic events, both natural and man-made, and macroeconomic and/or geopolitical events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, the successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results, and other statements that are not historical facts.
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All forward-looking statements involve risks, uncertainties and other factors that may cause actual results and financial condition to differ, possibly materially, from the results and financial condition expressed or implied in the forward-looking statements. Factors that could cause actual results to differ, possibly materially, from those in specific projections, targets, goals, plans, assumptions and other forward-looking statements include, without limitation:• the impact of adverse developments affecting economic conditions in the markets in which we operate, including financial market conditions, a U.S. federal government shutdown, macroeconomic trends, changes in trade policies, including tariffs, fluctuations in interest rates and foreign currency exchange rates, inflationary pressures, including social inflation, pressures on the commercial real estate market, pandemics, and geopolitical events or conflicts;• the occurrence of catastrophic events, both natural and man-made, which may be exacerbated by the effects of climate change;
• disruptions in the availability or accessibility of our or a third party’s information technology systems, including hardware and software, infrastructure or networks, and the inability to safeguard the confidentiality and integrity of customer, employee or company data due to cyberattacks, data security breaches or infrastructure vulnerabilities;
• our ability to effectively implement technological advancements, including the use of artificial intelligence (AI), and respond to competitors' AI and other technology initiatives;• our ability to successfully complete strategic transactions, including to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses, and the anticipated benefits thereof;• the effects of changes in laws and regulations, including those relating to privacy, data protection, cybersecurity and AI, and the regulation of insurance, in the U.S. and other countries in which we operate;• concentrations in our investment portfolios;• changes in the valuation of our investments;• our reliance on third-party investment managers;
• nonperformance or defaults by counterparties;• our reliance on third parties to provide certain business and administrative services;• our ability to adequately assess risk and estimate related losses as well as the effectiveness of our enterprise risk management policies and procedures;
• changes in judgments or assumptions concerning insurance underwriting and insurance liabilities;
• concentrations of our insurance, reinsurance and other risk exposures;• availability of adequate reinsurance or access to reinsurance on acceptable terms;
• changes to tax laws in the countries in which we operate;• the effectiveness of strategies to retain and recruit key personnel and to implement effective succession plans;• the effects of sanctions and the failure to comply with those sanctions;• difficulty in marketing and distributing products through current and future distribution channels;
• actions by rating agencies with respect to our credit and financial strength ratings as well as those of its businesses and subsidiaries;
• changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill;• our ability to address evolving global stakeholder expectations and regulatory requirements including with respect to environmental, social and governance matters and to effectively execute on sustainability targets and standards;• our ability to effectively implement restructuring initiatives and potential cost-savings opportunities;
• changes to sources of or access to liquidity;
• changes in accounting principles and financial reporting requirements or their applicability to us;• the outcome of significant legal, regulatory or governmental proceedings; and• such other factors discussed in:
– Part I, Item 1A. Risk Factors of this Annual Report;
– this Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) of this Annual Report; and
– our other filings with the Securities and Exchange Commission (SEC).
Forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We are not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in any forward-looking statements is disclosed from time to time in other filings with the SEC.AIG | 2025 Form 10-K
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INDEX TO ITEM 7
PageExecutive Summary37Overview37
Critical Accounting Estimates
38Consolidated Results of Operations43Business Segment Operations44General Insurance44Other Operations49
Use of Non-GAAP Measures
49Investments54Overview54
Investment Highlights in 2025
54Investment Strategies54Credit Ratings59Insurance Reserves60Loss Reserves60Liquidity and Capital Resources63Overview63Liquidity and Capital Resources Highlights64Analysis of Sources and Uses of Cash64Liquidity and Capital Resources of AIG Parent and Subsidiaries65Credit Facilities66Contractual Obligations66Off-Balance Sheet Arrangements and Commercial Commitments66Debt67Financial Strength Ratings68
Credit Ratings
68Regulation and Supervision69Dividends69Repurchases of AIG Common Stock69Enterprise Risk Management69
Credit Risk
70
Market Risk
70
Liquidity Risk
72
Operational Risk
72
Technology Risk
72
Business and Strateg ic Risk
73
Insurance Risk
73Glossary76Acronyms78Throughout the MD&A, we use certain terms and abbreviations, which are summarized in the Glossary and Acronyms.
We have incorporated into this discussion a number of cross-references to additional information included throughout this Annual Report to assist readers seeking additional information related to a particular subject.36
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ITEM 7 | Executive Summary
Executive Summary
OVERVIEW
This overview of the MD&A highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. You should read this Annual Report in its entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.
FINANCIAL HIGHLIGHTS
Results of Operations
• Generated Net income attributable to AIG common shareholders per diluted share of $5.43 and Adjusted after-tax income attributable to AIG common shareholders per diluted share of $7.09, an increase of 43 percent from the prior year.
• Delivered $2.3 billion of underwriting income, a 22 percent increase from the prior year.
• Produced strong combined ratio of 90.1.
• Achieved Return on equity of 7.5 percent and Core operating return on equity of 11.1 percent.
Financial Condition
• Returned approximately $6.8 billion of capital to shareholders in 2025 through approximately $5.8 billion of stock repurchases, reducing outstanding shares by 11 percent, and approximately $1.0 billion in AIG Common Stock dividends.
• Received upgrades to financial strength ratings of AIG’s significant insurance subsidiaries by Fitch, S&P and Moody's and affirmation by A.M. Best.
Strategic Transactions
• Acquired the renewal rights of Everest Group, Ltd. (Everest) global retail commercial insurance portfolios for an aggregate purchase price of $301 million. For additional information, see Note 1 to the Consolidated Financial Statements.
• Announced strategic investments in Convex Group Limited (Convex), a privately held global specialty insurer for approximately $2.1 billion as well as a 9.9 percent ownership stake in Onex Corporation (Onex), a global asset manager, for approximately $646 million. For additional information, see Note 1 to the Consolidated Financial Statements.
• Announced strategic partnership with CVC Capital Partners plc (CVC) to establish large-scale separately managed accounts (SMAs) across CVC’s credit strategies and the launch of CVC’s private equity secondaries evergreen platform with AIG as a cornerstone investor, contributing up to $1.5 billion from AIG’s existing private equity portfolio. In parallel, AIG intends to allocate up to $2 billion to SMAs and funds managed by CVC, with an initial $1 billion to be deployed through 2026.
• Announced a strategic collaboration with Amwins Group, Inc. and Blackstone Inc. to form Lloyd’s Syndicate 2479, providing capacity for portfolio solutions.
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TABLE OF CONTENTSITEM 7 | Critical Accounting EstimatesCritical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment.
The accounting policies that we believe are most dependent on the application of estimates and assumptions, which are critical accounting estimates, are related to the determination of:
• loss reserves;• reinsurance assets;
• fair value measurements of certain financial assets and financial liabilities; and
• income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.
LOSS RESERVES
Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Because these estimates are subject to the outcome of future events and because loss trends vary and time is often required for changes in trends to be recognized and confirmed, changes in estimates are common.
The estimate of loss reserves relies on several key judgments:
• the determination of the actuarial methods used as the basis for these estimates;
• the relative weights given to these models by product line;
• the underlying assumptions used in these models; and
• the determination of the appropriate groupings of similar product lines and, in some cases, the disaggregation of dissimilar losses within a product line.Numerous assumptions are made in determining the best estimate of reserves for each line of business, in consideration of expected ultimate losses, loss cost trends and loss development factors, where appropriate. The importance of any one assumption can vary by both line of business and accident year. Because such assumptions may differ from actual experience, there could be significant variation in the development of loss reserves. This estimation uncertainty is particularly relevant for long-tail lines of business.All of our methods to calculate net reserves include assumptions about estimated reinsurance recoveries and their collectability. Reinsurance collectability is evaluated independently of the reserving process and appropriate allowances for uncollectible reinsurance are established.Overview of Loss Reserving Process and Methods
Our loss reserves can generally be categorized into two distinct groups: short-tail reserves and long-tail reserves. Short-tail reserves consist principally of U.S. Property and Special Risks, UK/Europe Property and Special Risks, U.S. Personal Insurance, and UK/Europe and Japan Personal Insurance. Long-tail reserves include U.S. Workers’ Compensation, U.S. Excess Casualty, U.S. Other Casualty, U.S. Financial Lines, and UK/Europe Casualty and Financial Lines.
Short-Tail ReservesIn short-tail lines of business, where the nature of these claims tends to be higher frequency with short reporting periods, with volatility arising from occasional severe events, the actual losses reported make up a greater proportion of the ultimate loss estimate. During the first few development quarters of an accident year, the expected ultimate losses generally reflect the average loss costs from a period of preceding accident quarters that have been adjusted for changes in rate and loss cost trends, mix of business, known exposure to unreported losses, or other factors affecting the particular line of business. For more mature quarters, specific loss development methods and/or frequency/severity methods may be used to determine the incurred but not reported (IBNR). IBNR for claims arising from catastrophic events or events of unusual severity would be determined taking into account information known by
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ITEM 7 | Critical Accounting Estimates
the claims department, using alternative techniques or expected percentages of ultimate loss emergence based on historical emergence of similar events or claim types.Long-Tail ReservesEstimation of loss reserves for our long-tail business depends on a number of factors, including the product line and volume of business, as well as estimates of reinsurance recoveries. Experience in more recent accident years generally provides limited statistical credibility of reported net losses. IBNR reserves constitute a relatively higher proportion of the ultimate net loss incurred in more recent accident years because of the lower level of reported net losses earlier in the development period.For our long-tail lines, we generally make actuarial and other assumptions with respect to the following:
• Loss cost trend factors, which are used to establish expected loss ratios for subsequent accident years based on the projected loss ratios for prior accident years.
• Expected loss ratios, which are used for the latest accident year and, in some cases, for accident years prior to the latest accident year. The expected loss ratio also generally reflects the average loss ratio from prior accident years, adjusted for the loss cost trend and the effect of rate changes and other quantifiable factors on the loss ratio.
• Loss development factors, which are used to project the reported losses for each accident year to an ultimate basis. Generally, the actual loss development factors observed from prior accident years would be used as a basis to determine the loss development factors for the subsequent accident years.• Tail factors, which are development factors used for certain long-tail lines of business to project future loss development for periods that extend beyond the available development data.
Differences between actual loss emergence in a given period and our expectations based on prior loss reserve estimates are used to monitor reserve adequacy between reserve reviews and may also influence our judgment with respect to adjusting reserve estimates.Details of the Loss Reserving ProcessThe process of determining the current loss ratio for each product line of business is based on a variety of factors. These include considerations such as: prior accident year and policy year loss ratios; rate changes; and changes in coverage, reinsurance, or mix of business. Other considerations include actual and anticipated changes in external factors such as trends in loss costs, inflation, employment rates or unemployment duration or in the legal and claims environment. The current loss ratio for each product line of business is intended to represent our best estimate after reflecting all relevant factors. At the close of each quarter, the assumptions and data underlying the loss ratios are reviewed to determine whether they remain appropriate. This process includes a review of the actual loss experience in the quarter, actual rate changes achieved, actual changes in reinsurance, quantifiable changes in coverage or mix of business, and changes in other factors that may affect the loss ratio.
We conduct a comprehensive reserve review at least annually for each product line of business in accordance with Actuarial Standards of Practice. Our actuarial central estimate for each product line of business represents an expected value generally considering a range of reasonably possible outcomes.
The reserve analysis, globally, for each product line of business is performed by a credentialed actuarial team in collaboration with claims, underwriting, business unit management, risk management and senior management. Our actuaries aggregate the data into reserve segments, balancing considerations of homogeneity and credibility. They update numerous assumptions, including the analysis and selection of loss development and loss trend factors. They also determine and select the appropriate actuarial or other methods used to develop our best estimate for each business product line, and may employ multiple methods and assumptions for each product line. These data groupings, accident year weights, method selections and assumptions necessarily change over time as business mix changes, development factors mature and become more credible and loss characteristics evolve. We seek input from third-party specialists to help inform our judgments as needed.
A critical component of our reserve reviews is an internal peer review of our reserving analyses and conclusions, where actuaries independent of the initial review evaluate the reasonableness of assumptions used, methods selected, and weightings given to different methods. In addition, each detailed valuation review is subjected to a review and challenge process by specialists in our Enterprise Risk Management (ERM) group.
For certain product lines, we measure sensitivities and determine explicit ranges around the actuarial best estimate using multiple methodologies and varying assumptions. Where we have ranges, we use them to inform our selection of best estimates of loss reserves by product line of business. Our range of reasonable estimates is not intended to cover all possibilities or extreme values and is based on known data and facts at the time of estimation.
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ITEM 7 | Critical Accounting EstimatesActuarial and Other Methods for Our Lines of BusinessOur actuaries determine the appropriate actuarial methods and segmentation. This determination is based on a variety of factors including the nature of the losses associated with the product line of business, such as the frequency or severity of the claims. In addition to determining the actuarial methods, the actuaries determine the appropriate loss reserve groupings of data. The groupings may change to reflect observed or emerging patterns within and across product lines, or to differentiate risk characteristics (for example, size of deductibles and extent of third-party claims specialists used by our insureds). This determination of data segmentation and related actuarial methods is assessed, reviewed and updated at least annually.The actuarial methods we use most commonly include paid and incurred loss development methods, expected loss ratio methods, including “Bornhuetter Ferguson” and “Cape Cod,” and frequency/severity models. Loss development methods utilize the actual loss development patterns from prior accident years updated through the current year to project the reported losses to an ultimate basis for all accident years. We also use this information to update our current accident year loss selections. Loss development methods are generally most appropriate for lines of business that exhibit a stable pattern of loss development from one accident year to the next, and for which the components of the product line have similar development characteristics. Expected loss ratio methods rely on the application of an expected loss ratio to the earned premium for the product line of business to determine the liability for loss reserves and loss adjustment expenses. We generally use expected loss ratio methods in cases where the reported loss data lacked sufficient credibility to utilize loss development methods, such as for new product lines of business or for long-tail product lines at early stages of loss development. Frequency/severity models may be used where sufficient frequency counts are available to apply such approaches.The estimation of liability for loss reserves and loss adjustment expenses relating to asbestos and environmental pollution losses on insurance policies written many years ago is typically subject to greater uncertainty than other types of losses. This is due to inconsistent court decisions, as well as judicial interpretations and legislative actions that in some cases have tended to broaden coverage beyond the original intent of such policies or have expanded theories of liability. In addition, reinsurance recoverable balances relating to asbestos and environmental loss reserves are subject to greater uncertainty due to the underlying age of the claim, underlying legal issues surrounding the nature of the coverage, and determination of proper policy period. For these reasons, these balances tend to be subject to increased levels of disputes and legal collection activity when actually billed.Key Assumptions of our Actuarial Methods by Line of Business
Line of Business or Category
Key Assumptions
U.S. Workers’
Compensation
We generally use a combination of loss development and expected loss ratio methods for U.S. Workers’ Compensation as this is a long-tail line of business.The tail factor is typically the most critical assumption, and small changes in the selected tail factor can have a material effect on our carried reserves. For example, the tail factors beyond twenty years for guaranteed cost business could vary by 1 percentage point below to 2.5 percentage points above those indicated in our reserve estimates. For excess of deductible business, in our judgment, it is reasonably possible that tail factors beyond twenty years could vary by 1.5 percentage points below to 3 percentage points above those indicated in our reserve estimates.
U.S. Excess Casualty The loss cost trend assumption is critical for U.S. Excess Casualty due to the long-tail nature of the losses. We utilize various loss cost trend assumptions for different segments of the portfolio. In our judgment, after evaluating historical loss cost trends, it is reasonably possible that actual loss cost may range 5 percentage points lower or higher than the estimated loss trend utilized in our reserve estimates. These changes in loss trends could be attributable to changes in inflation or in the judicial environment, or in other social or economic conditions affecting losses.
Loss development factors are also a key assumption for U.S. Excess Casualty. Due to the long-tail nature of the business, any deviation in loss development factors might not be discernible for an extended period of time subsequent to the recording of the initial loss reserve estimates for any accident year.
In our judgment, it is reasonably possible that the actual loss development factors could vary by an amount equivalent to a six month shift from those actually utilized in our reserve estimates. Similar to loss cost trends, these changes in loss development factors could be attributable to changes in inflation or in the judicial environment, or in other social or economic conditions affecting losses.
Given the very long-tail nature of this business, the tail factor selection can also have material impact on our carried reserves. The sensitivity around tail selection may also be a proxy for the sensitivity of a calendar year impact of monetary inflation on unpaid losses. It is reasonably possible for the tail factors for Excess Casualty could vary by 2 percentage points below to 3.5 percentage points above those indicated in our reserve estimates.U.S. Other Casualty
The key assumptions for other casualty lines are similar to U.S. Excess Casualty, as the underlying business is long-tailed and can be subject to variability in loss cost trends and changes in loss development factors. These may differ significantly by line of business as coverages such as general liability, medical malpractice and environmental may be subject to different risk drivers.40
AIG | 2025 Form 10-K
TABLE OF CONTENTS
ITEM 7 | Critical Accounting Estimates
Line of Business or Category
Key AssumptionsU.S. Financial LinesThe loss cost trends for U.S. D&O liability business vary by year and subset. In our judgment, after evaluating the historical loss cost levels from prior accident years, it is reasonably possible that the actual variation in loss cost levels for these subsets could vary by approximately 10 percentage points lower or higher on a year-over-year basis than the assumptions actually utilized in our reserve estimates.
The selected loss development factors are also an important assumption. Because these lines are written on a claims made basis, the loss reporting and development tail is much shorter than for other lines, however, the high severity nature of the losses does create the potential for significant deviations in loss development patterns from one year to the next. After evaluating the historical loss development factors, in our judgment, it is reasonably possible that actual loss development factors could change by an amount equivalent to a shift by six months from those actually utilized in our reserve estimates.UK/Europe Casualty and
Financial Lines
Similar to U.S. business, UK/Europe Casualty and Financial Lines can be significantly impacted by loss cost trends and changes in loss development factors. The variation in such factors can differ significantly by product and region, however the range of potential impacts is much lower than that of other lines of business noted above.
U.S. and UK/Europe
Property and Special
Risks
For shorter-tail lines such as Property and Special Risks, variance in outcomes for individual large claims or events typically has a greater impact on results than does changes in actuarial assumptions or methodology. This is because a greater proportion of the ultimate loss, at any stage of development, is composed of reported losses than IBNR reserves. These outcomes generally relate to unique characteristics of events such as catastrophes or losses with significant business interruption claims.
U.S., UK/Europe and Japan Personal Insurance Personal Insurance is short-tailed in nature similar to Property and Special Risks but less volatile. Variance in estimates can result from unique events such as catastrophes. In addition, some subsets of this business, such as auto liability, can be impacted by changes in loss development factors and loss cost trends.The following sensitivity analysis table summarizes the effect on the loss reserve position of using certain alternative loss cost trend (for accident years where we use expected loss ratio methods) or loss development factor assumptions rather than the assumptions actually used in determining our estimates in the year-end loss reserve analyses in 2025:
December 31, 2025 Increase (Decrease) to Loss Reserves Increase (Decrease) to Loss Reserves(in millions)
Loss cost trends: Loss development factors:
U.S. Excess Casualty: U.S. Excess Casualty:5.0 percentage points increase $ 900 3.5 percentage points tail factor increase $ 1,150
5.0 percentage points decrease (650) 2.0 percentage points tail factor decrease (700)U.S. Excess Casualty:6-months slower 750
6-months faster (700)U.S. Financial Lines (D&O) U.S. Financial Lines (D&O)10.0 percentage points increase 750 6-months slower 600
10.0 percentage points decrease (550) 6-months faster (500)U.S. Workers' Compensation:
Tail factor increase (a)
900
Tail factor decrease (b)(600)(a) Tail factor increase of 2.5 percentage points for guaranteed cost business and 3 percentage points for deductible business.
(b) Tail factor decrease of 1 percentage point for guaranteed cost business and 1.5 percentage points for deductible business.
For additional information on our reserving process and methodology, see Note 13 to the Consolidated Financial Statements.
REINSURANCE ASSETSIn the ordinary course of business, our insurance companies may use both treaty and facultative reinsurance to minimize their net loss exposure to any single catastrophic loss event or to an accumulation of losses from a number of smaller events or to provide greater diversification of our businesses. Reinsurance assets include the balances due from reinsurance and insurance companies under the terms of our reinsurance agreements for paid and unpaid losses and loss adjustment expenses incurred and ceded unearned premiums. The estimation of reinsurance recoverables involves a significant amount of judgment. Reinsurance assets include reinsurance recoverables on unpaid losses and loss adjustment expenses that are estimated as part of our loss reserving process and, consequently, are subject to similar judgments and uncertainties as the estimation of gross loss reserves. For additional information on reinsurance, see Note 8 to the Consolidated Financial Statements.
AIG | 2025 Form 10-K
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TABLE OF CONTENTS
ITEM 7 | Critical Accounting EstimatesFAIR VALUE MEASUREMENTS OF CERTAIN FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure the fair value. We classify fair value measurements for certain assets and liabilities as Level 3 when they require significant unobservable inputs in their valuation. We consider unobservable inputs to be those for which market data is not available. Our assessment of the significance of a particular input to the fair value measurement of an asset or liability requires judgment.
For additional information about the valuation methodologies of financial instruments measured at fair value, see Note 5 to the Consolidated Financial Statements.INCOME TAXES
Deferred income taxes represent the tax effect of the differences between the amounts recorded in our Consolidated Financial Statements and the tax basis of assets and liabilities. Our assessment of net deferred income taxes represents management’s best estimate of the tax consequences of various events and transactions, which can themselves be based on other accounting estimates, resulting in incremental uncertainty in the estimation process.
Deferred Tax Asset Recoverability
The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As such, changes in tax laws in countries where we transact business can impact our deferred tax asset valuation allowance. We consider multiple factors to reliably estimate future taxable income so we can determine the extent of our ability to realize net operating losses, foreign tax credits, realized capital loss and other carryforwards. These factors include forecasts of future income for each of our businesses, which incorporate forecasts of future statutory income for our insurance companies, and actual and planned business and operational changes, both of which include assumptions about future macroeconomic and AIG-specific conditions and events. We subject the forecasts to stresses of key assumptions and evaluate the effect on tax attribute utilization. We also apply stresses to our assumptions about the effectiveness of relevant prudent and feasible tax planning strategies. In performing our assessment of recoverability, we consider tax laws governing the utilization of net operating loss, capital loss and foreign tax credit carryforwards in each applicable jurisdiction. These tax laws are subject to change, resulting in incremental uncertainty in our assessment of recoverability.
Uncertain Tax Positions
Uncertain tax positions represent AIG’s liability for income taxes on tax years subject to review by the Internal Revenue Service (IRS) or other tax authorities. We determine whether it is more likely than not that a tax position will be sustained, based on technical merits, upon examination by the relevant taxing authorities before any part of the benefit can be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. The completion of review, or the expiration of federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes.
For a discussion of our framework for assessing the recoverability of our deferred tax asset and other tax topics, see Note 21 to the Consolidated Financial Statements.42
AIG | 2025 Form 10-KTABLE OF CONTENTSITEM 7 | Consolidated Results of Operations
Consolidated Results of OperationsThe following section provides a comparative discussion of our consolidated results of operations on a reported basis for the three-year period ended December 31, 2025. Factors that relate primarily to a specific business are discussed in more detail within the business segment operations section.
For information regarding the critical accounting estimates that affect our results of operations, see Critical Accounting Estimates. For information regarding AIG’s results of operations for the year ended December 31, 2024 compared with the year ended December 31, 2023, see Part II, Item 7. MD&A – Consolidated Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024 (the 2024 Annual Report).The following table presents our consolidated results of operations and other key financial metrics:
Years Ended December 31, Percentage Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023Revenues:Premiums $ 23,751 $ 23,537 $ 25,564 1 % (8) %Net investment income:Net investment income - excluding Fortitude Re funds withheld assets 4,066 4,111 3,266 (1) 26
Net investment income - Fortitude Re funds withheld assets 149 144 180 3 (20)
Total net investment income 4,215 4,255 3,446 (1) 23
Net realized losses:
Net realized losses - excluding Fortitude Re funds withheld assets and embedded derivative (966) (434) (734) (123) 41
Net realized losses on Fortitude Re funds withheld assets (70) (39) (71) (79) 45
Net realized losses on Fortitude Re funds withheld embedded derivative (166) (75) (273) (121) 73
Total net realized losses (1,202) (548) (1,078) (119) 49
Other income 11 7 6 57 17
Total revenues 26,775 27,251 27,938 (2) (2)Benefits, losses and expenses:Losses and loss adjustment expenses incurred 14,162 14,567 15,393 (3) (5)
Amortization of deferred policy acquisition costs 3,371 3,425 3,771 (2) (9)
General operating and other expenses 5,053 5,529 5,399 (9) 2
Interest expense 396 462 516 (14) (10)
(Gain) loss on extinguishment of debt (5) 14 (37) NM NM
Net (gain) loss on divestitures and other (81) (616) 29 87 NM
Total benefits, losses and expenses 22,896 23,381 25,071 (2) (7)
Income from continuing operations before income tax expense 3,879 3,870 2,867 — 35
Income tax expense (benefit):
Current 905 657 176 38 273
Deferred (123) 513 (50) NM NM
Income tax expense 782 1,170 126 (33) NM
Income from continuing operations 3,097 2,700 2,741 15 (1)
Income (loss) from discontinued operations, net of income taxes — (3,626) 1,137 NM NM
Net income (loss) 3,097 (926) 3,878 NM NM
Less: Net income attributable to noncontrolling interests 1 478 235 (100) 103
Net income (loss) attributable to AIG 3,096 (1,404) 3,643 NM NM
Less: Dividends on preferred stock and preferred stock redemption premiums — 22 29 NM (24)
Net income (loss) attributable to AIG common shareholders $ 3,096 $ (1,426) $ 3,614 NM % NM %
AIG | 2025 Form 10-K
43TABLE OF CONTENTS
ITEM 7 | Consolidated Results of OperationsNET INCOME (LOSS) ATTRIBUTABLE TO AIG COMMON SHAREHOLDERSYears Ended December 31, 2025 and 2024 Comparison
Net income (loss) attributable to AIG common shareholders increased $4.5 billion primarily driven by:
• higher underwriting income primarily driven by lower catastrophe losses of $258 million and higher net favorable prior year reserve development of $183 million. For additional information, see Business Segment Operations – General Insurance;
• lower Net investment income of $40 million primarily due to lower gains on the changes in the fair value, lower gains on sale of shares, and lower dividends from AIG's investment in Corebridge Financial, Inc. (Corebridge) partially offset by higher income from available for sale fixed maturity securities of $440 million. For additional information, see Note 6 to the Consolidated Financial Statements;
• higher Net realized losses of $654 million, primarily driven by impairments on investments in real estate funds, higher losses on derivative and hedge activity, lower gains on foreign exchange, partially offset by lower losses on fixed income securities. For additional information, see Investments – Investment Strategies – Net Realized Gains and Losses;
• lower General operating and other expenses primarily driven by lower restructuring and other related costs of $306 million;
• lower Income tax expense of $388 million primarily driven by a valuation allowance release related to our U.S. federal consolidated tax attribute carryforwards. For additional information, see Note 21 to the Consolidated Financial Statements ;
• absence of loss from discontinued operations, net of income taxes of $3.6 billion as a result of the deconsolidation of Corebridge in June 2024;
• lower Net income attributable to noncontrolling interest of $477 million primarily driven by the Corebridge accounting change post-deconsolidation.Business Segment OperationsWe report the results of our businesses through three segments and Other Operations. The three segments are North America Commercial, International Commercial and Global Personal. Other Operations predominantly consists of Net Investment Income from our AIG Parent liquidity portfolio, Corebridge dividend income, corporate General operating expenses, and Interest expense.
For information regarding AIG’s business segment operations for the year ended December 31, 2024 compared with the year ended December 31, 2023, see Part II, Item 7. MD&A – Business Segment Operations in the 2024 Annual Report.General InsuranceOur General Insurance business (General Insurance) consists of our three segments and the Net investment income related to our insurance operations.
GENERAL INSURANCEYears Ended December 31, Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023Underwriting results:Net premiums written $ 23,675 $ 23,902 $ 26,719 (1) % (11) %
Net premiums written, on constant dollar basis (1) (10)
(Increase) decrease in unearned premiums 3 (445) (1,628) NM 73
Net premiums earned 23,678 23,457 25,091 1 (7)Losses and loss adjustment expenses incurred (a)13,968 14,038 14,775 — (5)Acquisition expenses:Amortization of deferred policy acquisition costs 3,357 3,413 3,623 (2) (6)
Other acquisition expenses 938 1,137 1,279 (18) (11)
Total acquisition expenses 4,295 4,550 4,902 (6) (7)
General operating expenses 3,083 2,952 3,065 4 (4)
Underwriting income 2,332 1,917 2,349 22 (18)
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TABLE OF CONTENTS
ITEM 7 | Business Segment Operations | General Insurance
Years Ended December 31, Change
(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023
Net investment income 3,433 3,060 3,022 12 1
Adjusted pre-tax income $ 5,765 $ 4,977 $ 5,371 16 % (7) %Loss ratio (a)59.0 59.8 58.9 (0.8) 0.9
Acquisition ratio 18.1 19.4 19.5 (1.3) (0.1)
General operating expense ratio 13.0 12.6 12.2 0.4 0.4
Expense ratio 31.1 32.0 31.7 (0.9) 0.3Combined ratio (a)90.1 91.8 90.6 (1.7) 1.2Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (3.9) (5.0) (4.3) 1.1 (0.7)Prior year development, net of reinsurance and prior year premiums2.1 1.4 1.4 0.7 —
Accident year loss ratio, as adjusted 57.2 56.2 56.0 1.0 0.2
Accident year combined ratio, as adjusted 88.3 88.2 87.7 0.1 0.5(a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.The following tables present General Insurance accident year catastrophes (a) by segment:
(dollars in millions) North America Commercial InternationalCommercial
Global Personal TotalYears Ended December 31, 2025
Flooding, rainstorms and other $ — $ 10 $ 17 $ 27
Windstorms and hailstorms 226 94 46 366
Winter storms 40 — 1 41
Wildfires 207 48 185 440
Earthquakes — 39 2 41
Reinstatement premiums 5 (1) 1 5
Total catastrophe-related charges $ 478 $ 190 $ 252 $ 920Years Ended December 31, 2024Flooding, rainstorms and other $ 2 $ 98 $ — $ 100
Windstorms and hailstorms 700 133 135 968
Winter storms 44 1 7 52
Wildfires 41 — — 41
Earthquakes — 7 — 7Reinstatement premiums 12 (2) — 10Total catastrophe-related charges $ 799 $ 237 $ 142 $ 1,178Years Ended December 31, 2023Flooding, rainstorms and other $ 10 $ 72 $ 20 $ 102
Windstorms and hailstorms 396 186 126 708
Winter storms 24 4 17 45
Wildfires 131 19 13 163
Earthquakes 20 29 — 49Reinstatement premiums 31 (1) 1 31Total catastrophe-related charges $ 612 $ 309 $ 177 $ 1,098(a) Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil unrest that exceed the $10 million threshold.AIG | 2025 Form 10-K
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TABLE OF CONTENTS
ITEM 7 | Business Segment Operations | General Insurance
NORTH AMERICA COMMERCIAL
The North America Commercial segment consists of insurance businesses and operations in the United States, Canada and Bermuda. Products include Property, Casualty and Financial Lines, with clients ranging from small and medium-sized businesses to multinational companies.Years Ended December 31, Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023Underwriting results:Net premiums written $ 8,759 $ 8,452 $ 11,432 4 % (26) %
Net premiums written, on constant dollar basis
4 (26)
Increase in unearned premiums (133) (280) (1,199) 53 77
Net premiums earned 8,626 8,172 10,233 6 (20)Losses and loss adjustment expenses incurred (a)5,466 5,713 6,323 (4) (10)Acquisition expenses:Amortization of deferred policy acquisition costs 862 824 1,371 5 (40)
Other acquisition expenses 216 222 231 (3) (4)
Total acquisition expenses 1,078 1,046 1,602 3 (35)
General operating expenses 938 865 953 8 (9)
Underwriting income $ 1,144 $ 548 $ 1,355 109 % (60) %Loss ratio (a)63.4 69.9 61.8 (6.5) 8.1
Acquisition ratio 12.5 12.8 15.7 (0.3) (2.9)
General operating expense ratio 10.9 10.6 9.3 0.3 1.3
Expense ratio 23.4 23.4 25.0 — (1.6)Combined ratio (a)86.8 93.3 86.8 (6.5) 6.5Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums(5.6) (9.7) (5.9) 4.1 (3.8)Prior year development, net of reinsurance and prior year premiums4.6 1.5 3.7 3.1 (2.2)
Accident year loss ratio, as adjusted 62.4 61.7 59.6 0.7 2.1
Accident year combined ratio, as adjusted 85.8 85.1 84.6 0.7 0.5(a) Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.Premiums Years Ended December 31, 2025 and 2024 Comparison
Net premiums written increased by $307 million, or 4 percent, primarily due to growth in Programs, driven by new business, and Casualty, partially offset by lower production in Property. The increase in Net premiums earned is primarily driven by the same factors.
Underwriting Results Years Ended December 31, 2025 and 2024 Comparison
North America Commercial produced underwriting income of $1.1 billion from a combined ratio of 86.8, which was a 6.5 point improvement. This was driven by a lower loss ratio (6.5 points) from:
• lower catastrophe losses (4.1 points); and
• higher net favorable prior year reserve development (3.1 points), with favorable development driven by Casualty.
This was partially offset by a higher accident year loss ratio, as adjusted (0.7 points) due to changes in business mix.
The expense ratio was flat, as a lower acquisition ratio (0.3 points) primarily driven by changes in business mix offset the increase in the general operating expense ratio (0.3 points).
The accident year loss ratio, as adjusted, and general operating expense ratio were both impacted by higher reapportionment of corporate expenses from lean parent implementation.
For additional information on prior year development, see Insurance Reserves.
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AIG | 2025 Form 10-KTABLE OF CONTENTS
ITEM 7 | Business Segment Operations | General InsuranceINTERNATIONAL COMMERCIAL
The International Commercial segment consists of insurance businesses and operations in Middle East and Africa (EMEA region), the United Kingdom, Japan, Europe, Asia Pacific, Latin America and Caribbean, and China. The International Commercial segment also includes the results of Talbot Holdings Ltd. (Talbot) as well as AIG’s Global Specialty business. Products include Property, Casualty and Financial Lines, with clients ranging from small and medium-sized businesses to multinational companies. Global Specialty products include aviation, political risk, trade credit and trade finance.Years Ended December 31, Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023Underwriting results:Net premiums written $ 8,663 $ 8,364 $ 8,168 4 % 2 %
Net premiums written, on constant dollar basis
3 3
Increase in unearned premiums (83) (219) (204) 62 (7)
Net premiums earned 8,580 8,145 7,964 5 2
Losses and loss adjustment expenses incurred 4,781 4,463 4,641 7 (4)Acquisition expenses:Amortization of deferred policy acquisition costs 1,088 1,018 943 7 8
Other acquisition expenses 364 342 350 6 (2)
Total acquisition expenses 1,452 1,360 1,293 7 5
General operating expenses 1,229 1,095 1,028 12 7
Underwriting income $ 1,118 $ 1,227 $ 1,002 (9) % 22 %
Loss ratio 55.7 54.8 58.3 0.9 (3.5)
Acquisition ratio 16.9 16.7 16.2 0.2 0.5
General operating expense ratio 14.3 13.4 12.9 0.9 0.5
Expense ratio 31.2 30.1 29.1 1.1 1.0
Combined ratio 86.9 84.9 87.4 2.0 (2.5)Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (2.2) (2.9) (3.9) 0.7 1.0
Prior year development, net of reinsurance and prior year premiums 0.9 1.0 (1.8) (0.1) 2.8
Accident year loss ratio, as adjusted 54.4 52.9 52.6 1.5 0.3
Accident year combined ratio, as adjusted 85.6 83.0 81.7 2.6 1.3
Premiums Years Ended December 31, 2025 and 2024 Comparison
Net premiums written, excluding the favorable impact of foreign exchange ($38 million), increased by $261 million, or 3 percent, primarily from Property, Global Specialty and Casualty driven by strength of renewal retentions and new business growth, partially offset by lower production in Financial Lines. The increase in Net premiums earned is primarily driven by the same factors.
Underwriting Results Years Ended December 31, 2025 and 2024 Comparison
International Commercial produced underwriting income of $1.1 billion from a combined ratio of 86.9, which was 2.0 points higher. This was driven by a higher loss ratio (0.9 points) from:
• higher accident year loss ratio, as adjusted (1.5 points) due to changes in business mix; and
• lower net favorable prior year reserve development (0.1 points), with favorable development driven by Property and Specialty.
This was partially offset by lower catastrophe losses (0.7 points).
The expense ratio increased by 1.1 points, from a mix-driven increase in the acquisition ratio (0.2 points) and an increase in the general operating expense ratio (0.9 points).
The accident year loss ratio, as adjusted, and general operating expense ratio were both impacted by higher reapportionment of corporate expenses from lean parent implementation.
For additional information on prior year development, see Insurance Reserves.
AIG | 2025 Form 10-K
47TABLE OF CONTENTS
ITEM 7 | Business Segment Operations | General InsuranceGLOBAL PERSONAL
The Global Personal segment consists primarily of Global Accident & Health and Personal Lines insurance businesses in the United States, Japan, the United Kingdom, EMEA region, Asia Pacific, Latin America and Caribbean, and China. Global Accident & Health products include group personal accident and business travel products for employees, associations and other organizations, and voluntary and sponsor-paid personal accident and supplemental health products for individuals. Personal Lines products include personal auto and homeowners in selected markets, comprehensive extended warranty, device protection insurance, home warranty and related services, and insurance for high net-worth individuals offered through Private Client Select (PCS) in the U.S. that covers auto, homeowners, umbrella, yacht, fine art and collections.Years Ended December 31, Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023Underwriting results:Net premiums written $ 6,253 $ 7,086 $ 7,119 (12) % — %
Net premiums written, on constant dollar basis
(13) 2
(Increase) decrease in unearned premiums 219 54 (225) 306 NM
Net premiums earned 6,472 7,140 6,894 (9) 4
Losses and loss adjustment expenses incurred 3,721 3,862 3,811 (4) 1Acquisition expenses:Amortization of deferred policy acquisition costs 1,407 1,571 1,309 (10) 20
Other acquisition expenses 358 573 698 (38) (18)
Total acquisition expenses 1,765 2,144 2,007 (18) 7
General operating expenses 916 992 1,084 (8) (8)
Underwriting income (loss) $ 70 $ 142 $ (8) (51) % NM %
Loss ratio 57.5 54.1 55.3 3.4 (1.2)
Acquisition ratio 27.3 30.0 29.1 (2.7) 0.9
General operating expense ratio 14.2 13.9 15.7 0.3 (1.8)
Expense ratio 41.5 43.9 44.8 (2.4) (0.9)
Combined ratio 99.0 98.0 100.1 1.0 (2.1)Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:Catastrophe losses and reinstatement premiums (3.9) (2.0) (2.6) (1.9) 0.6
Prior year development, net of reinsurance and prior year premiums 0.6 1.6 1.8 (1.0) (0.2)
Accident year loss ratio, as adjusted 54.2 53.7 54.5 0.5 (0.8)
Accident year combined ratio, as adjusted 95.7 97.6 99.3 (1.9) (1.7)
Premiums Years Ended December 31, 2025 and 2024 Comparison
Net premiums written, excluding the favorable impact of foreign exchange ($65 million) decreased by $898 million, or 13 percent, primarily due to the sale of AIG’s global individual personal travel insurance and assistance business in December 2024 ($718 million), U.S. high net worth due to changes in reinsurance structure and lower production in Warranty, partially offset by growth in Personal Property and Personal Auto. The increase in Net premiums earned is primarily driven by the same factors.
Underwriting Results Years Ended December 31, 2025 and 2024 Comparison
Global Personal produced underwriting income of $70 million from a combined ratio of 99.0, which was 1.0 points higher. This was driven by a higher loss ratio (3.4 points) from:
• higher catastrophe losses (1.9 points);
• lower net favorable prior year reserve development (1.0 points), with favorable development driven by U.S. high net worth; and
• higher accident year loss ratio, as adjusted (0.5 points) due primarily to the sale of AIG’s global individual personal travel insurance and assistance business (1.7 points) partially offset by favorable changes in business mix.
The expense ratio improved by 2.4 points, reflecting a lower acquisition ratio (2.7 points) primarily driven by changes in business mix and improved commission terms, partially offset by an increase in the general operating expense ratio (0.3 points).
The accident year loss ratio, as adjusted, and general operating expense ratio were both impacted by higher reapportionment of corporate expenses from lean parent implementation.
For additional information on prior year development, see Insurance Reserves.
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AIG | 2025 Form 10-KTABLE OF CONTENTSITEM 7 | Business Segment Operations | Other OperationsOther Operations
Other Operations predominantly consists of Net Investment Income from our AIG Parent liquidity portfolio, Corebridge dividend income, corporate General operating expenses, and Interest expense.OTHER OPERATIONSYears Ended December 31, Change(in millions) 2025 2024 2023 2025 vs 2024 2024 vs 2023
Net investment income and other $ 349 $ 434 $ 190 (20) % 128 %Benefits, losses and expenses:Corporate and other general operating expenses 360 623 698 (42) (11)
Amortization of intangible assets 18 18 27 — (33)
Interest expense 392 445 498 (12) (11)
Total benefits, losses and expenses 770 1,086 1,223 (29) (11)
Adjusted pre-tax loss before consolidation and eliminations (421) (652) (1,033) 35 37
Consolidation and eliminations — (1) (17) NM 94
Adjusted pre-tax loss* $ (421) $ (653) $ (1,050) 36 % 38 %* In the fourth quarter of 2024, AIG realigned and began excluding the net results of run-off businesses previously reported in Other Operations from Adjusted pre-tax income. Historical results have been recast to reflect these changes.ADJUSTED PRE-TAX LOSS BEFORE CONSOLIDATION AND ELIMINATIONS
Years Ended December 31, 2025 and 2024 Comparison
Adjusted pre-tax loss before consolidation and eliminations decreased $231 million primarily due to the following:
• lower net investment income and other of $85 million due to lower dividend income from Corebridge of $72 million and lower interest on AIG Parent portfolio as a result of lower yields;
• lower corporate and other general operating expenses of $263 million primarily driven by reapportionment of corporate expenses from lean parent implementation to the business; and
• lower interest expense of $53 million primarily driven by interest savings from $2.4 billion debt repurchases, through cash tender offers, debt redemption and maturities in 2025 and 2024 partially offset by new debt issuance of $1.25 billion in 2025 and ¥100 billion debt, equivalent to approximately $660 million in 2024.
Use of Non-GAAP Measures
Throughout this MD&A, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.
We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our segments. We believe they also allow for more meaningful comparisons with our insurance competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis in the Consolidated Results of Operations section of this MD&A.
Book value per share, excluding investments related cumulative unrealized gains and losses recorded in Accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG
AIG | 2025 Form 10-K
49TABLE OF CONTENTSITEM 7 | Use of Non-GAAP Measures
common shareholders’ equity, excluding Investments AOCI (AIG adjusted common shareholders' equity) by total common shares outstanding.
Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs), corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.
The following table presents reconciliations of Book value per share to Adjusted book value per share and Core operating book value per share, which are non-GAAP measures .
December 31,
(in millions, except per share data)
2025 2024 2023
Total AIG shareholders' equity
$ 41,139 $ 42,521 $ 45,351
Preferred equity
— — 485
Total AIG common shareholders' equity
41,139 42,521 44,866
Less: Investments related AOCI
(1,376) (2,872) (10,994)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets
(523) (667) (1,791)
Subtotal: Investments AOCI (853) (2,205) (9,203)
AIG adjusted common shareholders' equity $ 41,992 $ 44,726 $ 54,069
Total AIG common shareholders' equity
$ 41,139 $ 42,521 $ 44,866
Less: AIG's ownership interest in Corebridge 1,512 3,810 6,738
Less: Investments related AOCI - AIG
(1,376) (2,872) (3,084)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets - AIG
(523) (667) (573)
Subtotal: Investments AOCI - AIG (853) (2,205) (2,511)
Less: Deferred tax assets 3,278 3,489 4,313
AIG core operating shareholders' equity $ 37,202 $ 37,427 $ 36,326
Total common shares outstanding 538.2 606.1 688.8
Book value per share $ 76.44 $ 70.16 $ 65.14
Adjusted book value per share 78.02 73.79 78.50
Core operating book value per share 69.12 61.75 52.74
Return on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates the fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.
Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to NOLs, CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. We believe this metric provides investors with greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.
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ITEM 7 | Use of Non-GAAP Measures
The following table presents reconciliations of Return on equity to Adjusted return on equity and Core operating return on equity, which are non-GAAP measures.
Years Ended December 31,
(dollars in millions)
2025 2024 2023
Actual or annualized net income (loss) attributable to AIG common shareholders
$ 3,096 $ (1,426) $ 3,614
Actual or annualized adjusted after-tax income attributable to AIG common shareholders
$ 4,044 $ 3,254 $ 3,205
Average AIG common shareholders' equity
$ 41,535 $ 44,051 $ 41,930
Less: Average investments AOCI (1,418) (5,132) (14,836)
Average AIG adjusted common shareholders' equity $ 42,953 $ 49,183 $ 56,766
Average AIG common shareholders' equity
$ 41,535 $ 44,051 $ 41,930
Less: Average AIG's ownership interest in Corebridge 3,207 6,770 7,376
Less: Average Investments AOCI - AIG (1,418) (2,351) (3,254)
Less: Average deferred tax assets 3,264 3,998 4,322
Average AIG core operating shareholders' equity $ 36,482 $ 35,634 $ 33,486
Return on equity 7.5 % (3.2) % 8.6 %
Adjusted return on equity 9.4 6.6 5.6
Core operating return on equity 11.1 9.1 9.6
Adjusted pre-tax income (APTI) is derived by excluding the items set forth below from income from continuing operations before income tax:
• changes in the fair values of equity securities, AIG's investment in Corebridge and gain/loss on sale of shares;
• net investment income on Fortitude Re funds withheld assets;
• net realized gains and losses on Fortitude Re funds withheld assets;
• loss (gain) on extinguishment of debt;
• all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication. Earned income on such economic hedges is reclassified from net realized gains and losses to specific APTI line items based on the economic risk being hedged (e.g. net investment income);
• income or loss from discontinued operations;
• net loss reserve discount benefit (charge);
• net results of businesses in run-off;
• non-operating pension expenses;
• net gain or loss on divestitures and other;
• non-operating litigation reserves and settlements;
• restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;
• the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain;
• integration and transaction costs associated with acquiring or divesting businesses;
• losses from the impairment of goodwill;
• non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles; and
• income from elimination of the international reporting lag.
Adjusted after-tax income attributable to AIG common shareholders is derived by excluding the tax effected APTI adjustments described above, dividends on preferred stock and preferred stock redemption premiums, noncontrolling interest on net realized gains (losses), other non-operating expenses and the following tax items from net income attributable to AIG:
• deferred income tax valuation allowance releases and charges;
• changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and
• net tax charge related to the enactment of the Tax Cuts and Jobs Act.
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ITEM 7 | Use of Non-GAAP Measures
The following table presents a reconciliation of pre-tax income (loss)/net income (loss) attributable to AIG to adjusted pre-tax income (loss)/adjusted after-tax income (loss) attributable to AIG:
Years Ended December 31, 2025 2024 2023
(in millions, except per common share data) Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax Pre-tax Total Tax (Benefit) Charge Non- controlling Interests (a)
After Tax
Pre-tax income/net income (loss), including noncontrolling interests $ 3,879 $ 782 $ — $ 3,097 $ 3,870 $ 1,170 $ — $ (926) $ 2,867 $ 126 $ — $ 3,878
Noncontrolling interests (a)
(1) (1) (478) (478) (235) (235)
Pre-tax income/net income (loss) attributable to AIG - including discontinued operations $ 3,879 $ 782 $ (1) $ 3,096 $ 3,870 $ 1,170 $ (478) $ (1,404) $ 2,867 $ 126 $ (235) $ 3,643
Dividends on preferred stock and preferred stock redemption premiums — 22 29
Net income (loss) attributable to AIG common shareholders $ 3,096 $ (1,426) $ 3,614
Changes in uncertain tax positions and other tax adjustments
(35) — 35 (239) — 239 176 — (176)
Deferred income tax valuation allowance releases (b)
305 — (305) 30 — (30) 365 — (365)
Changes in the fair values of equity securities, AIG's investment in Corebridge and gain/loss on sale of shares (255) (54) — (201) (586) (123) — (463) (53) (11) — (42)
(Gain) loss on extinguishment of debt and preferred stock redemption premiums (5) (1) — (4) 14 3 — 26 (37) (8) — (29)
Net investment income on Fortitude Re funds withheld assets (149) (31) — (118) (144) (30) — (114) (180) (38) — (142)
Net realized losses on Fortitude Re funds withheld assets 70 15 — 55 39 8 — 31 71 15 — 56
Net realized losses on Fortitude Re funds withheld embedded derivative 166 34 — 132 75 16 — 59 273 57 — 216
Net realized losses (c)
973 145 — 828 428 95 — 333 743 128 — 615
(Income) loss from discontinued operations — 3,626 (1,137)
Net gain on divestitures and other (81) (17) — (64) (616) (128) — (488) 29 149 — (120)
Non-operating litigation reserves and settlements (9) (2) — (7) — — — — 1 — — 1
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements 105 22 — 83 105 22 — 83 (62) (13) — (49)
Net loss reserve discount charge 48 10 — 38 226 47 — 179 195 41 — 154
Net results of businesses in run-off (d)
(4) (1) — (3) 111 24 — 87 31 7 — 24
Non-operating pension expenses 15 3 — 12 — — — — 71 15 — 56
Integration and transaction costs associated with acquiring or divesting businesses 136 29 — 107 39 8 — 31 6 1 — 5
Restructuring and other costs (e)
439 92 — 347 745 156 — 589 356 75 — 281
Non-recurring costs related to regulatory or accounting changes 16 3 — 13 18 4 — 14 22 5 — 17
Net impact from elimination of international reporting lag
— — — — — — — — (12) (3) — (9)
Noncontrolling interests (a)
— — 478 478 235 235
Adjusted pre-tax income/Adjusted after-tax income attributable to AIG common shareholders $ 5,344 $ 1,299 $ (1) $ 4,044 $ 4,324 $ 1,063 $ — $ 3,254 $ 4,321 $ 1,087 $ — $ 3,205
Weighted average diluted shares outstanding
570.3 657.3 725.2
Income (loss) per common share attributable to AIG common shareholders (diluted)
$ 5.43 $ (2.17) $ 4.98
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)
$ 7.09 $ 4.95 $ 4.42
(a) Noncontrolling interest primarily relates to Corebridge and is the portion of Corebridge earnings that AIG did not own. Corebridge was consolidated until June 9, 2024. The historical results of Corebridge owned by AIG are reflected in Income (loss) from discontinued operations, net of income taxes.
(b) The years ended December 31, 2025 and 2023 include a valuation allowance release related to our U.S. federal consolidated tax attribute carryforwards, as well as valuation allowance changes in certain foreign jurisdictions.
(c) Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.
(d) In the fourth quarter of 2024, AIG realigned and began excluding the net results of run-off businesses previously reported in Other Operations from Adjusted pre-tax income. Historical results have been recast to reflect these changes. In the third quarter of 2025, AIG began excluding the net results of run-off businesses previously reported in General Insurance from Adjusted pre-tax income.
(e) In the years ended December 31, 2025 and 2024, Restructuring and other costs was primarily related to employee-related costs, including severance, and, in the year ended December 31, 2024, real estate impairment charges.
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ITEM 7 | Use of Non-GAAP Measures
The following table presents a reconciliation of General Insurance and Other Operations Net investment income and other/pre-tax income (loss) to Net investment income and other, APTI basis/adjusted pre-tax income (loss):
Years Ended December 31, 2025 2024 2023
General Insurance Other Operations General Insurance Other Operations General Insurance Other Operations
(in millions)
Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss) Net Investment Income and Other Pre-tax Income (Loss)
Net investment income and other/Pre-tax income (loss) $ 3,511 $ 4,031 $ 712 $ (152) $ 3,215 $ 4,474 $ 1,047 $ (604) $ 3,150 $ 4,308 $ 302 $ (1,441)
Consolidation and Eliminations — — 1 — — — — — — — 13 —
Other income (expense) - net (6) — (5) — (31) — 18 — (49) — 39 —
Changes in the fair values of equity securities, AIG's investment in Corebridge and gain/loss on sale of shares
(74) (74) (181) (181) (73) (73) (513) (513) (84) (84) 31 31
(Gain) loss on extinguishment of debt — — — (5) — — — 14 — — — (37)
Net investment income on Fortitude Re funds withheld assets 1 1 (150) (150) (44) (44) (100) (100) (4) (4) (176) (176)
Net realized losses on Fortitude Re funds withheld assets — 6 — 64 — 8 — 31 — 1 — 70
Net realized gains on Fortitude Re funds withheld embedded derivative — — — 166 — — — 75 — (18) — 291
Net realized (gains) losses 1 1,358 3 (385) (7) 330 (1) 98 10 731 2 12
Net loss (gain) on divestitures and other — (55) — (26) — (522) — (94) — 18 — 11
Non-operating litigation reserves and settlements
— 4 — (13) — — — — — — — 1
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements — 69 — 36 — 101 — 4 — (42) — (20)
Net loss reserve discount charge — 48 — — — 226 — — — 195 — —
Net results of businesses in run-off — — (31) (4) — — (17) 111 — — (21) 31
Non-operating pension expenses — 16 — (1) — — — — — 60 — 11
Integration and transaction costs associated with acquiring or divesting businesses — 19 — 117 — — — 39 — 1 — 5
Restructuring and other costs — 326 — 113 — 459 — 286 — 195 — 161
Non-recurring costs related to regulatory or accounting changes — 16 — — — 18 — — — 22 — —
Net impact from elimination of international reporting lag — — — — — — — — (1) (12) — —
Net investment income and other, APTI basis/Adjusted pre-tax income (loss) $ 3,433 $ 5,765 $ 349 $ (421) $ 3,060 $ 4,977 $ 434 $ (653) $ 3,022 $ 5,371 $ 190 $ (1,050)
Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. Our ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.
Accident year loss and accident year combined ratios, as adjusted (Accident year loss ratio, ex-CAT and Accident year combined ratio, ex-CAT): both the accident year loss and accident year combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. We believe that as adjusted ratios are meaningful measures of our underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. We also exclude prior year development to provide transparency related to current accident year results.
Results from discontinued operations are excluded from all of these measures.
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TABLE OF CONTENTSITEM 7 | Investments
Investments
OVERVIEW
Our investment strategies are tailored to the specific business needs of each segment by targeting an asset allocation mix that supports estimated cash flow needs of our outstanding liabilities and provides diversification from an asset class, sector, issuer, and geographic perspective. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus. The majority of assets backing our insurance liabilities consist of fixed maturity securities.INVESTMENT HIGHLIGHTS IN 2025
• Blended investment yields on new investments were higher than blended rates on investments that were sold, matured or called during this period. We continued to make investments in structured securities and other fixed maturity securities with attractive risk-adjusted return characteristics to improve yields and increase net investment income.
• Total Net investment income decreased for the year ended December 31, 2025 compared to the prior year, primarily due to lower gains on the changes in the fair value, lower gains on sale of shares, and lower dividends from AIG's investment in Corebridge, and lower income from mortgage loans, partially offset by higher income on available for sale fixed maturity securities and Alternatives investments.INVESTMENT STRATEGIES
Investment strategies are assessed at the segment level and involve considerations that include local and general market and economic conditions, duration and cash flow management, risk appetite and volatility constraints, rating agency and regulatory capital considerations, tax, regulatory and legal investment limitations, and, as applicable, environmental, social and governance considerations.
Some of our key investment strategies are as follows:
• Our fundamental strategy across the portfolios is to seek investments with similar duration and cash flow characteristics to the associated insurance liabilities to the extent practicable.• We seek to purchase investments like Private Assets that offer enhanced yield through illiquidity premiums and other portfolio diversification benefits. These assets typically provide credit protections through covenants and offset custom structures that meet the insurance company needs.• Given our global presence, we seek investments that provide diversification from investments available in local markets. To the extent we purchase these investments, we generally hedge any currency risk using derivatives, which could provide opportunities to earn higher risk adjusted returns compared to investments in the functional currency.
• AIG Parent, included in Other Operations, actively manages its assets and liabilities, counterparties and duration. AIG Parent’s liquidity sources are held primarily in the form of cash and short-term investments. This strategy allows us to both diversify our sources of liquidity and reduce the cost of maintaining sufficient liquidity.
• Within the U.S., General Insurance investments are generally split between reserve backing and surplus portfolios.
– Insurance reserves are backed mainly by investment grade fixed maturity securities that meet our duration, risk-return, capital, tax, liquidity, credit quality and diversification objectives. We assess asset classes based on their fundamental underlying risk factors, including credit (public and private), commercial real estate and residential real estate, regardless of whether such investments are bonds, loans, or structured products.– Surplus investments seek to enhance portfolio returns and are generally comprised of a mix of fixed maturity investment grade and below investment grade securities and various alternative asset classes, including private equity and private credit.• Outside of the U.S., fixed maturity securities held by our insurance companies consist primarily of investment-grade securities generally denominated in the currencies of the countries in which we operate.
• We also utilize derivatives to manage our asset and liability duration as well as currency exposures.54
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TABLE OF CONTENTS
ITEM 7 | InvestmentsAsset-Liability ManagementThe investment strategy within the General Insurance companies focuses on growth of surplus, maintenance of sufficient liquidity for unanticipated insurance claims, and preservation of capital. General Insurance invests primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans. Fixed maturity securities of the General Insurance companies have an average duration of 3.8 years.
While assets backing reserves of the General Insurance companies are primarily invested in conventional liquid fixed maturity securities, we have also continued to allocate a portion of our portfolio to asset classes that offer higher yields through structural and illiquidity premiums, particularly in our North America operations. In addition, we continue to invest in both fixed rate and floating rate asset-backed investments to manage our exposure to potential changes in interest rates and inflation. We seek to diversify the portfolio across asset classes, sectors and issuers to mitigate idiosyncratic portfolio risks.In addition, a portion of the surplus of General Insurance companies is invested in a diversified portfolio of alternative investments that seek to balance liquidity, volatility and growth of surplus. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields and have provided added diversification to the broader portfolio.
Available-for-Sale Investments
The following table presents the fair value of our available-for-sale securities:(in millions) December 31, 2025 December 31, 2024Bonds available for sale:U.S. government and government sponsored entities $ 3,298 $ 3,267
Obligations of states, municipalities and political subdivisions 2,775 3,143
Non-U.S. governments 6,516 8,107
Corporate debt 37,235 31,826Mortgage-backed, asset-backed and collateralized:RMBS - agency 5,988 4,978
RMBS - non-agency
4,180 3,626
CMBS 4,616 3,926
CLO/ABS 6,424 5,133
Total mortgage-backed, asset-backed and collateralized 21,208 17,663
Total bonds available for sale* $ 71,032 $ 64,006
* At December 31, 2025 and 2024, the fair value of bonds available for sale we held that were below investment grade or not rated totaled $5.9 billion and $3.6 billion, respectively.The following table presents the fair value of our aggregate credit exposures to non-U.S. governments for our fixed maturity securities:(in millions) December 31, 2025 December 31, 2024
Canada $ 1,207 $ 1,384
Japan 489 555
Germany 444 834
United Kingdom 344 416
Israel 322 312
Australia 284 335
Denmark 241 205
Malaysia 216 220
Korea, Republic of 214 268
Singapore 206 204
Other 2,572 3,398
Total $ 6,539 $ 8,131
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55TABLE OF CONTENTS
ITEM 7 | Investments
The following table presents the fair value of our aggregate European credit exposures by major sector for our fixed maturity securities:December 31, 2025 December 31, 2024 Total(in millions) Sovereign Financial Institution Non-Financial Corporates Structured Products Total
Euro-Zone countries:France $ 134 $ 1,599 $ 481 $ 44 $ 2,258 $ 1,989
Germany 444 264 895 57 1,660 1,863
Netherlands 86 600 324 51 1,061 935
Ireland 5 106 110 512 733 584
Spain 7 335 90 62 494 321
Italy 13 103 331 33 480 369
Denmark 241 74 22 — 337 257
Belgium 10 132 59 15 216 242
Luxembourg 14 78 95 18 205 157
Finland 8 81 3 1 93 79
Other Euro-Zone 214 34 33 29 310 299
Total Euro-Zone $ 1,176 $ 3,406 $ 2,443 $ 822 $ 7,847 $ 7,095Remainder of Europe:United Kingdom $ 344 $ 1,561 $ 1,682 $ 430 $ 4,017 $ 3,262
Switzerland 19 252 263 — 534 484
Sweden 121 222 29 — 372 291
Norway 59 70 7 — 136 110
Jersey (Channel Islands) 3 3 7 45 58 94
Other - Remainder of Europe 41 14 4 — 59 50
Total - Remainder of Europe $ 587 $ 2,122 $ 1,992 $ 475 $ 5,176 $ 4,291
Total $ 1,763 $ 5,528 $ 4,435 $ 1,297 $ 13,023 $ 11,386Investments in Municipal BondsAt December 31, 2025, the U.S. municipal bond portfolio was composed primarily of essential service revenue bonds and high-quality tax-exempt bonds with 98 percent of the portfolio rated A or higher.The following table presents the fair values of our available for sale U.S. municipal bond portfolio by state and municipal bond type:December 31, 2025
(in millions) State General Obligation Local General Obligation Revenue Total Fair Value December 31, 2024 Total Fair Value
California $ 212 $ 143 $ 335 $ 690 $ 716
New York 28 89 284 401 422
Massachusetts 40 11 116 167 199
Texas 11 32 101 144 265
Florida 1 — 126 127 143
Pennsylvania 34 — 84 118 133
Connecticut 26 2 83 111 125
Illinois 4 26 54 84 110
Georgia 48 — 25 73 79
Oregon 7 46 14 67 71
Hawaii 65 — 1 66 74
Virginia 8 3 49 60 57
Alabama — — 57 57 57All other states37 33 540 610 692Total$ 521 $ 385 $ 1,869 $ 2,775 $ 3,143
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ITEM 7 | Investments
Investments in Corporate Debt Securities
The following table presents the fair value of our available for sale corporate debt securities by industry categories:
Industry Category(in millions) December 31, 2025 December 31, 2024Financial institutions:Banks $ 8,086 $ 7,085
Insurance 1,378 1,222
Securities firms and other finance companies 856 669
Other financial institutions 5,733 4,116
Utilities 3,231 2,659
Communications 2,188 1,844
Consumer noncyclical 2,706 2,715
Capital goods 1,805 1,715
Energy 2,010 1,702
Consumer cyclical 3,649 3,284
Basic materials 2,093 1,838
Other 3,500 2,977
Total* $ 37,235 $ 31,826
* At December 31, 2025 and 2024, approximately 88 percent and 88 percent, respectively, of these investments were rated investment grade.Commercial Mortgage LoansAt December 31, 2025, we had direct commercial mortgage loan exposure of $2.5 billion.The following table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost:
Number of Loans Class Percent of Total
(dollars in millions) Apartments Offices Retail Industrial Hotel Others TotalDecember 31, 2025
State:
California 17 $ 89 $ 190 $ 27 $ 18 $ 31 $ — $ 355 14 %
New York 17 48 188 44 19 33 — 332 13
Texas 19 72 135 1 30 10 — 248 10
Massachusetts 7 — 175 48 7 — — 230 9
Florida 11 68 — 60 8 37 — 173 7
Pennsylvania 9 28 57 15 18 — — 118 5
Illinois 5 88 13 — — — — 101 4
New Jersey 8 55 — — 3 — 10 68 3
Washington 3 49 — — — — — 49 2
Colorado 3 7 20 16 — — — 43 2
Other states 23 109 12 68 28 — — 217 9
Foreign 23 180 196 78 27 80 — 561 22
Total* 145 $ 793 $ 986 $ 357 $ 158 $ 191 $ 10 $ 2,495 100 %December 31, 2024
State:
California 21 $ 97 $ 247 $ 30 $ 56 $ 32 $ — $ 462 14 %
New York 19 43 217 70 20 32 — 382 12
Texas 19 78 201 2 31 22 — 334 10
Massachusetts 9 94 156 49 7 — — 306 9
Florida 11 68 — 62 8 38 — 176 5New Jersey 18 78 — — 43 — 10 131 4
Pennsylvania 10 18 52 29 18 — — 117 4Illinois 6 88 20 — — — — 108 3
Ohio 5 62 — 29 — — — 91 3
Washington 5 49 — — — 11 — 60 2
Other states 31 134 33 63 49 6 — 285 8
Foreign 36 278 182 98 69 117 109 853 26
Total* 190 $ 1,087 $ 1,108 $ 432 $ 301 $ 258 $ 119 $ 3,305 100 %* Does not reflect allowance for credit losses.AIG | 2025 Form 10-K
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ITEM 7 | InvestmentsFor additional information on commercial mortgage loans, see Note 7 to the Consolidated Financial Statements.
Net Realized Gains and Losses
The following table presents the components of Net realized gains (losses):Years Ended December 31, 2025 2024 2023
(in millions)
Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total Excluding Fortitude Re Funds Withheld Assets Fortitude Re Funds Withheld Assets Total
Sales of fixed maturity securities $ (523) $ (70) $ (593) $ (583) $ (36) $ (619) $ (668) $ (67) $ (735)
Change in allowance for credit losses on fixed maturity securities 1 — 1 (25) — (25) (44) — (44)
Change in allowance for credit losses on loans (10) 11 1 (23) — (23) (28) 3 (25)
Foreign exchange transactions 146 17 163 256 (9) 247 124 5 129
All other derivatives and hedge accounting (180) (20) (200) (62) 7 (55) (165) (8) (173)
Sales of alternative investments 3 — 3 (16) — (16) 29 — 29
Other* (403) (8) (411) 19 (1) 18 18 (4) 14
Net realized losses – excluding Fortitude Re funds withheld embedded derivative (966) (70) (1,036) (434) (39) (473) (734) (71) (805)
Net realized losses on Fortitude Re funds withheld embedded derivative — (166) (166) — (75) (75) — (273) (273)
Net realized losses $ (966) $ (236) $ (1,202) $ (434) $ (114) $ (548) $ (734) $ (344) $ (1,078)
* In the year ended December 31, 2025, Other increased primarily as a result of impairments on investments in real estate funds, which were sold on December 23, 2025.
Higher Net realized losses excluding Fortitude Re funds withheld assets in the year ended December 31, 2025 compared to 2024 were primarily due to impairments on investments in real estate funds, higher losses on derivative and hedge activity, lower gains on foreign exchange, partially offset by lower losses on fixed income securities compared to the prior year period.Net realized gains (losses) on Fortitude Re funds withheld assets primarily reflect changes in the valuation of the modified coinsurance and funds withheld assets. Increases in the valuation of these assets result in losses to AIG as the appreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. Decreases in valuation of the assets result in gains to AIG as the depreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. For additional information on the impact of the funds withheld arrangements with Fortitude Re, see Note 8 to the Consolidated Financial Statements.For additional information on our investment portfolio, see Note 6 to the Consolidated Financial Statements. For information regarding AIG's net realized gains and losses for the year ended December 31, 2024 compared with the year ended December 31, 2023, see Part II, Item 7. MD&A – Investments – Investment Strategies – Net Realized Gains and Losses in the 2024 Annual Report.
Unrealized Gains and Losses on Investments
Net unrealized investment losses included in shareholders’ equity were $1.4 billion at December 31, 2025 compared with $2.9 billion at December 31, 2024. The change in net unrealized gains and losses on investments in the year ended December 31, 2025 was primarily attributable to a change in the fair value of fixed maturity securities mainly due to lower interest rates and narrowing of credit spreads. The change in net unrealized gains and losses on investments in the year ended December 31, 2024 was primarily attributable to a change in the fair value of fixed maturity securities mainly due to lower interest rates and narrowing of credit spreads.
At December 31, 2025, the Company had $1.4 billion fixed maturity investments reported at fair value for which fair value was less than 80 percent of amortized cost. At December 31, 2024, the Company had $2.4 billion fixed maturity investments reported at fair value for which fair value was less than 80 percent of amortized cost.
At December 31, 2025 and 2024, below investment grade securities comprised 8 percent and 6 percent, respectively, of the fair value of our fixed maturity investment portfolio. Included in below investment grade securities at December 31, 2025 were securities in an unrealized loss position that, in the aggregate, had an amortized cost of $1.9 billion and a fair value of $1.8 billion, resulting in a net pre-tax unrealized investment loss of $86 million.For additional information on our investment portfolio, see Note 6 to the Consolidated Financial Statements.58
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ITEM 7 | InvestmentsCREDIT RATINGSMoody’s Investors Service, Inc. (Moody’s), Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc. (S&P), Fitch Ratings Inc. (Fitch), or similar foreign rating services rate a significant portion of our foreign entities’ fixed maturity securities portfolio. Rating services are not available for some foreign-issued securities. We closely monitor the credit quality of the foreign portfolio’s non-rated fixed maturity securities.
At December 31, 2025, approximately 62 percent of our fixed maturity securities were held by our U.S. entities. Approximately 91 percent of these securities were rated investment grade by one or more of the major rating agencies.
At December 31, 2025, approximately 93 percent of our fixed maturity securities held by our foreign entities were either rated investment grade or, on the basis of analysis of our investment managers, were equivalent from a credit standpoint to securities rated investment grade. Approximately 17 percent of the foreign entities’ fixed maturity securities portfolio is comprised of sovereign fixed maturity securities supporting policy liabilities in the country of issuance.Composite AIG Credit RatingsWith respect to our fixed maturity securities, the credit ratings in the table below reflect: (i) a composite of the ratings of the three major rating agencies, or when agency ratings are not available, the National Association of Insurance Commissioners (NAIC) Designation assigned by the NAIC Securities Valuation Office (SVO) (96 percent of total fixed maturity securities), or (ii) our internal ratings when these investments have not been rated by any of the major rating agencies or the NAIC. The “Non-rated” category consists of fixed maturity securities that have not been rated by any of the major rating agencies, the NAIC or us.
For information regarding credit risks associated with Investments, see Enterprise Risk Management – Credit Risk.The following table presents the composite AIG credit ratings of our fixed maturity securities calculated on the basis of their fair value:Available for Sale Other Bond Securities Total
(in millions) December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024Rating:
Other fixed maturity securitiesAAA $ 4,063 $ 5,254 $ 14 $ 13 $ 4,077 $ 5,267
AA 8,693 9,599 50 80 8,743 9,679
A 17,679 14,420 173 114 17,852 14,534
BBB 14,565 12,839 100 145 14,665 12,984
Below investment grade 4,730 4,171 11 4 4,741 4,175
Non-rated 94 60 — — 94 60
Total $ 49,824 $ 46,343 $ 348 $ 356 $ 50,172 $ 46,699Mortgage-backed, asset-backed and collateralizedAAA $ 11,198 $ 8,757 $ 102 $ 134 $ 11,300 $ 8,891
AA 7,468 6,765 49 89 7,517 6,854
A 1,030 482 135 49 1,165 531
BBB 411 470 77 88 488 558
Below investment grade 1,101 1,189 30 29 1,131 1,218
Non-rated — — — — — —
Total $ 21,208 $ 17,663 $ 393 $ 389 $ 21,601 $ 18,052TotalAAA $ 15,261 $ 14,011 $ 116 $ 147 $ 15,377 $ 14,158
AA 16,161 16,364 99 169 16,260 16,533
A 18,709 14,902 308 163 19,017 15,065
BBB 14,976 13,309 177 233 15,153 13,542
Below investment grade 5,831 5,360 41 33 5,872 5,393
Non-rated 94 60 — — 94 60
Total $ 71,032 $ 64,006 $ 741 $ 745 $ 71,773 $ 64,751
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ITEM 7 | Insurance Reserves
Insurance Reserves
LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)
The following table presents the components of our gross and net loss reserves by segment and major lines of business (a) :December 31, 2025 December 31, 2024(in millions) Net Loss Reserves Reinsurance Recoverable Gross Loss Reserves Net Loss Reserves Reinsurance Recoverable Gross Loss Reserves
General Insurance:
North America Commercial:U.S. Workers' Compensation (net of discount) $ 2,273 $ 3,742 $ 6,015 $ 2,293 $ 3,916 $ 6,209
U.S. Excess Casualty 3,153 2,961 6,114 3,208 3,139 6,347
U.S. Other Casualty 4,651 3,170 7,821 4,387 3,416 7,803
U.S. Financial Lines 5,270 1,516 6,786 5,422 1,614 7,036
U.S. Property and Special Risks 4,142 990 5,132 4,297 1,233 5,530Other product lines (b)4,356 2,947 7,303 3,747 2,947 6,694
Total North America Commercial 23,845 15,326 39,171 23,354 16,265 39,619International Commercial:UK/Europe Casualty and Financial Lines 8,288 2,376 10,664 7,280 1,952 9,232
UK/Europe Property and Special Risks 2,176 2,214 4,390 2,355 1,761 4,116Other product lines (b)1,882 1,272 3,154 1,630 1,230 2,860
Total International Commercial 12,346 5,862 18,208 11,265 4,943 16,208Global Personal:U.S. Personal Insurance 705 1,986 2,691 836 2,048 2,884
UK/Europe and Japan Personal Insurance 1,240 733 1,973 1,269 670 1,939Other product lines (b)1,109 750 1,859 983 776 1,759
Total Global Personal 3,054 3,469 6,523 3,088 3,494 6,582Unallocated loss adjustment expenses (b)1,965 629 2,594 1,804 744 2,548
Total General Insurance 41,210 25,286 66,496 39,511 25,446 64,957
Other Operations 585 3,585 4,170 631 3,580 4,211
Total $ 41,795 $ 28,871 $ 70,666 $ 40,142 $ 29,026 $ 69,168
(a) Includes net loss reserve discount of $1.2 billion and $1.2 billion at December 31, 2025 and 2024, respectively. For information regarding loss reserve discount, see Note 13 to the Consolidated Financial Statements.
(b) Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $2.3 billion and $2.7 billion at December 31, 2025 and 2024, respectively.Prior Year Development
The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment and major lines of business:
Years Ended December 31,(in millions) 2025 2024 2023General Insurance:
North America Commercial:U.S. Workers' Compensation $ (172) $ (261) $ (190)
U.S. Excess Casualty 85 228 (48)
U.S. Other Casualty (8) (25) (134)
U.S. Financial Lines (65) (43) 37
U.S. Property and Special Risks (124) 8 (7)
Other Product Lines (148) (63) (65)
Total North America Commercial $ (432) $ (156) $ (407)International Commercial:UK/Europe Casualty and Financial Lines $ 216 $ 170 $ 165
UK/Europe Property and Special Risks (19) (35) 81
Other Product Lines (273) (234) (98)
Total International Commercial $ (76) $ (99) $ 148
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ITEM 7 | Insurance Reserves
Years Ended December 31,(in millions) 2025 2024 2023Global Personal:U.S. Personal Insurance $ (10) $ (27) $ (66)
UK/Europe and Japan Personal Insurance 37 (47) (57)
Other Product Lines (67) (39) (9)
Total Global Personal $ (40) $ (113) $ (132)
Total Prior Year (Favorable) Unfavorable Development* $ (548) $ (368) $ (391)
* Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $124 million, $136 million and $164 million for the years ended December 31, 2025, 2024 and 2023, respectively. Consistent with our definition of APTI, the amount excludes the portion of (favorable)/unfavorable prior year reserve development for which we have ceded the risk under the NICO reinsurance agreements of $102 million, $289 million and $(158) million for the years ended December 31, 2025, 2024 and 2023, respectively. Also excludes the related changes in amortization of the deferred gain, which were $106 million, $268 million and $(83) million over those same periods.
Net Loss Development – 2025
In the year ended December 31, 2025, we recognized favorable prior year loss reserve development of $548 million, primarily driven by:
North America Commercial
• Favorable development in U.S. Workers’ Compensation primarily driven by favorable experience within Excess of Loss Sensitive offset by adverse development within Primary Guaranteed Cost and Defense Base Act business.
• Favorable development in Other Product Lines, reflecting favorable experience in several lines, most notably short-tail Property.
• Favorable development in U.S. Property and Special Risks primarily driven by U.S. Property and Programs.
• Adverse development in U.S. Excess Casualty primarily driven by unfavorable development in Mass Tort.
• Benefit from the amortization of the deferred gain on the adverse development cover.
International Commercial
• Favorable development in Other Product Lines, primarily due to development in Global Specialty, notably within Energy and Trade Credit, as well as development in short-tail Property.
• Adverse development in UK/Europe Casualty and Financial Lines driven by UK Financial Lines, and EMEA Casualty, particularly within Auto and General Liability lines, partially offset by favorable development in EMEA Financial Lines.
For additional information on prior year development by line of business, see Note 13 to the Consolidated Financial Statements. For information regarding actuarial methods employed for major classes of business, see Critical Accounting Estimates.Net Loss Development – 2024In the year ended December 31, 2024, we recognized favorable prior year loss reserve development of $367 million, primarily driven by:North America Commercial
• Favorable development on our U.S. Workers' Compensation reflecting continued favorable loss experience.
• Adverse development on U.S. Excess Casualty driven by a large settlement of a legacy mass tort claim with the gross loss in accident years covered under the Adverse Development Cover and increased reserves related to claims emergence.
• Adverse development on U.S. Property and Special Risks reflecting development on prior year catastrophes offset by favorable loss experience in Retail and Wholesale Property.
• Favorable development on U.S. Financial Lines, reflecting favorable experience across most reserving classes, offset by unfavorable development in M&A and High Excess classes.
• Favorable development on U.S. Other Casualty, reflecting favorability across numerous Casualty reserving classes, partially offset by unfavorable development on Commercial Auto and Wholesale Primary General Liability.
• Amortization benefit related to the deferred gain on the adverse development cover.AIG | 2025 Form 10-K
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ITEM 7 | Insurance ReservesInternational Commercial
• Favorable development on Other Product Lines, primarily driven by Global Specialty which saw favorable development across multiple lines.
• Adverse development on UK/Europe Casualty and Financial Lines driven by unfavorable development in UK Financial Lines partially offset by favorable development in EMEA Financial Lines, and unfavorable development in European Excess Casualty driven by claim-specific emergence on accident year 2016.
• Favorable development on UK/Europe Property and Special Risks reflecting favorable development across most segments and geographies.
Global Personal
• Favorable development on UK/Europe and Japan Personal Insurance primarily driven by Japan A&H and Auto, partially offset by unfavorable development in Personal Auto in EMEA.
• Favorable development in U.S. Personal Insurance and Other Product Lines due to favorable development on prior year catastrophes across several events, primarily in the 2019-2023 accident years.For certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us.
For information regarding the 2023 net loss development, see Part II, Item 7. MD&A – Insurance Reserves – Loss Reserves in the 2024 Annual Report.Significant Reinsurance AgreementsNICOIn the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.For a description of AIG’s catastrophe reinsurance protection for 2026, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risk – Natural Catastrophe Risk.The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement, the effect of discounting of loss reserves and amortization of the deferred gain.(in millions) December 31, 2025 December 31, 2024 December 31, 2023Gross Covered LossesCovered reserves before discount $ 8,907 $ 9,823 $ 10,849
Inception to date losses paid 32,588 31,545 30,157Attachment point (25,000) (25,000) (25,000)Covered losses above attachment point $ 16,495 $ 16,368 $ 16,006Deferred Gain DevelopmentCovered losses above attachment ceded to NICO (80%) $ 13,196 $ 13,094 $ 12,805Consideration paid including interest (10,188) (10,188) (10,188)Pre-tax deferred gain before discount and amortization 3,008 2,906 2,617Discount on ceded losses (a)(891) (936) (1,104)
Pre-tax deferred gain before amortization 2,117 1,970 1,513
Inception to date amortization of deferred gain at inception (1,688) (1,564) (1,428)Inception to date amortization attributed to changes in deferred gain (b)(156) (122) 64
Deferred gain liability reflected in AIG's balance sheet $ 273 $ 284 $ 149(a) The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries.
(b) Excluded from APTI.62
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ITEM 7 | Insurance ReservesThe following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:
Years Ended December 31,(in millions) 2025 2024 2023
Balance at beginning of year, net of discount $ 284 $ 149 $ 205(Favorable) unfavorable prior year reserve development ceded to NICO (a)102 289 (158)Amortization attributed to deferred gain at inception (b)(124) (136) (164)Amortization attributed to changes in deferred gain (c)(34) (186) 116
Changes in discount on ceded loss reserves 45 168 150
Balance at end of year, net of discount $ 273 $ 284 $ 149(a) Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP.
(b) Represents amortization of the deferred gain recognized in APTI.
(c) Excluded from APTI.
The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of both favorable and unfavorable prior year development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time.Fortitude Re
Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our insurance run-off lines into a single legal entity. As of December 31, 2025, $3.2 billion of reserves related to business written by multiple wholly-owned AIG subsidiaries had been ceded to Fortitude Re under these reinsurance transactions.Liquidity and Capital Resources
OVERVIEW
Liquidity refers to the ability to generate sufficient cash resources to meet the cash requirements of our business operations and payment obligations.
Capital refers to the long-term financial resources available to support the operation of our businesses, fund business growth and cover financial and operational needs that arise from adverse circumstances. Our primary source of ongoing capital generation is derived from the profitability of our insurance subsidiaries. We must comply with numerous constraints on our capital positions. These constraints drive the requirements for capital adequacy at AIG and the individual businesses and are based on internally defined risk tolerances, regulatory requirements, rating agency and creditor expectations and business needs.For information regarding our liquidity risk framework, see Enterprise Risk Management – Liquidity Risk.We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to policyholders, customers, creditors and debt-holders, including those arising from reasonably foreseeable contingencies or events. Nevertheless, some circumstances may cause our cash or capital needs to exceed projected liquidity or readily deployable capital resources.For information regarding risks associated with our liquidity and capital resources, see Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit.Depending on market conditions, regulatory and rating agency considerations and other factors, we may take various liability and capital management actions. Liability management actions may include, but are not limited to, repurchasing or redeeming outstanding debt, issuing new debt or engaging in debt exchange offers. Capital management actions may include, but are not limited to, issuing preferred stock, paying dividends to our shareholders on AIG Common Stock, par value $2.50 per share (AIG Common Stock) and repurchases of AIG Common Stock.AIG | 2025 Form 10-K
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ITEM 7 | Liquidity and Capital ResourcesLIQUIDITY AND CAPITAL RESOURCES HIGHLIGHTSSourcesLiquidity to AIG Parent from SubsidiariesDuring the year ended December 31, 2025, our General Insurance companies distributed dividends of $3.0 billion to AIG Parent or applicable intermediate holding companies.Sales of Corebridge Shares by AIGIn May 2025, we sold approximately 13 million shares of Corebridge common stock at a per share purchase price of $32.15. The aggregate proceeds to AIG Parent were approximately $430 million.
In August and September 2025, we sold an aggregate of approximately 31.2 million shares of Corebridge common stock at a public offering price of $33.65 per share, which included 30 million shares initially offered and the partial exercise by the underwriters of their option to purchase additional shares. The aggregate proceeds to AIG Parent were approximately $1.0 billion.
In November 2025, we sold 32.6 million shares of Corebridge common stock at a public offering price of $31.10 per share. The aggregate proceeds to AIG Parent were approximately $1.0 billion. Corebridge purchased approximately $500 million of common stock from the underwriter at the same per share price paid by the underwriter to us, net of underwriting discounts and commissions.
Debt Issuance
In May 2025, AIG issued $625 million aggregate principal amount of 4.850% Notes Due 2030 and $625 million aggregate principal amount of 5.450% Notes Due 2035.
UsesGeneral BorrowingsDuring the year ended December 31, 2025, $1.1 billion of debt categorized as general borrowings matured, was repaid and/or redeemed, including:
• Repayment of ¥37.7 billion aggregate principal amount of AIG Japan Holdings Kabushiki Kaisha's borrowings, equivalent to approximately $250 million at the time of repayment.
• Repurchase, through cash tender offers, of approximately $457 million aggregate principal amount of certain notes and debentures issued by AIG for an aggregate purchase price of approximately $448 million.
• Redemption of approximately $236 million aggregate principal amount of our 3.900% Notes Due 2026 for a redemption price of 100 percent of the principal amount, plus accrued and unpaid interest.
• Repayment of $146 million aggregate principal amount of our 2.500% Notes Due June 30, 2025.
We made interest payments on our general borrowings totaling $382 million during the year ended December 31, 2025.DividendsWe made cash dividend payments in the amount of $0.45 per share on AIG Common Stock for each of the three month periods ended December 31, 2025, September 30, 2025 and June 30, 2025 (an increase of 12.5 percent from prior dividend payments), and $0.40 per share for the three month period ended March 31, 2025, totaling $976 million in the aggregate.
Repurchases of Common Stock
During the year ended December 31, 2025, AIG Parent repurchased approximately 73 million shares of AIG Common Stock, for an aggregate purchase price of approximately $5.8 billion. Pursuant to a Securities Exchange Act of 1934 (the Exchange Act) Rule 10b5-1 repurchase plan, from January 1, 2026 to February 6, 2026, AIG Parent repurchased approximately 2 million shares of AIG Common Stock for an aggregate purchase price of approximately $125 million.ANALYSIS OF SOURCES AND USES OF CASH
Operating Cash Flow Activities
Insurance companies generally receive most premiums in advance of the payment of claims or policy benefits. The ability of insurance companies to generate positive cash flow is affected by the frequency and severity of losses under their insurance policies, policy retention rates, effective management of their investment portfolio and operating expense discipline.Interest payments totaled $389 million and $858 million in the years ended December 31, 2025 and 2024, respectively. Excluding interest payments, AIG had operating cash inflows of $3.7 billion and $4.1 billion in the years ended December 31, 2025 and 2024, respectively, including outflows of $104 million from discontinued operations in 2024.
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ITEM 7 | Liquidity and Capital ResourcesInvesting Cash Flow ActivitiesNet cash provided by investing activities in the year ended December 31, 2025 was $3.2 billion compared to net cash provided by investing activities of $1.7 billion, including $4.2 billion used in discontinued operations, in 2024.Financing Cash Flow ActivitiesNet cash used in financing activities in the year ended December 31, 2025 totaled $6.5 billion, reflecting:
• $976 million to pay dividends of $0.45 per share in each of the three month periods ended December 31, 2025, September 30, 2025 and June 30, 2025, and $0.40 per share for the three month period ended March 31, 2025 on AIG Common Stock;
• $5.8 billion to repurchase approximately 73 million shares of AIG Common Stock; and
• $142 million in net inflows from the issuance and repayment of long-term debt.
Net cash used in financing activities in the year ended December 31, 2024 totaled $5.1 billion reflecting:
• $1.0 billion to pay dividends of $0.40 per share in each of the three month periods ended December 31, 2024, September 30, 2024 and June 30, 2024, and $0.36 per share for the three month period ended March 31, 2024 on AIG Common Stock;
• $22 million to pay a first quarter dividend of $365.625 per share on AIG’s Series A 5.85% Non-Cumulative Perpetual Preferred Stock and redemption premiums;• $6.7 billion to repurchase approximately 90 million shares of AIG Common Stock;
• $1.4 billion in net outflows from the issuance and repayment of long-term debt; and• $3.9 billion in net inflows from discontinued operations.For information regarding cash flow activities for the year ended December 31, 2023, see Part II, Item 7. MD&A – Liquidity and Capital Resources – Analysis of Sources and Uses of Cash of our 2024 Annual Report.LIQUIDITY AND CAPITAL RESOURCES OF AIG PARENT AND SUBSIDIARIES
AIG ParentAs of December 31, 2025 and 2024, respectively, AIG Parent had approximately $9.3 billion and $10.7 billion in liquidity sources held in the form of cash, short-term investments and AIG Parent's committed, revolving syndicated credit facility of $3.0 billion. AIG Parent’s primary sources of liquidity are dividends, distributions, loans and other payments from subsidiaries and credit facilities. AIG Parent’s primary uses of liquidity are for debt service, capital and liability management, operating expenses and dividends on AIG Common Stock.We expect to access the debt and preferred equity markets from time to time to meet funding requirements as needed.
We utilize our capital resources to support our businesses, with the majority of capital allocated to our insurance operations. Should we have or generate more capital than is needed to support our business strategies (including organic or inorganic growth opportunities) or mitigate risks inherent to our business, we may develop plans to distribute such capital to shareholders via dividends or AIG Common Stock repurchase authorizations or deploy such capital towards liability management.
Insurance Companies
We expect that our insurance companies will be able to continue to satisfy reasonably foreseeable future liquidity requirements and meet their obligations, including those arising from reasonably foreseeable contingencies or events, through cash from operations and, to the extent necessary, monetization of invested assets.Our insurance companies’ liquidity resources are primarily held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities. Each of our material insurance companies’ liquidity is monitored through various internal liquidity risk measures. The primary sources of liquidity are premiums, fees, reinsurance recoverables and investment income and maturities. Certain of our insurance companies have access to Federal Home Loan Bank (FHLB) borrowings as an additional source of funding.
The primary uses of liquidity are paid losses, reinsurance payments, interest payments, dividends, expenses, investment purchases and collateral requirements. Payments of dividends to AIG Parent or intermediate holding companies by insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities. For information regarding restrictions on payments of dividends by our subsidiaries, see Note 18 to the Consolidated Financial Statements.Our insurance companies may require additional funding to meet capital or liquidity needs under certain circumstances. For example, large catastrophes may require us to provide additional support to the affected operations of our insurance companies.AIG | 2025 Form 10-K
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ITEM 7 | Liquidity and Capital ResourcesWe are party to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time in support of our insurance companies. These letters of credit are subject to reimbursement by us in the event of a drawdown. Letters of credit issued in support of our insurance companies totaled approximately $2.3 billion at December 31, 2025.CREDIT FACILITIESWe maintain a syndicated, multicurrency revolving credit facility (the Facility) as a potential source of liquidity for general corporate purposes with aggregate commitments by the bank syndicate to provide AIG Parent with unsecured revolving loans and/or standby letters of credit of up to $3.0 billion. The Facility is scheduled to expire in September 2029.Our ability to utilize the Facility is conditioned on the satisfaction of certain legal, operating, administrative and financial covenants and other requirements contained in the Facility. These include covenants relating to our maintenance of a specified total consolidated net worth and total consolidated debt to total consolidated capitalization. Failure to satisfy these and other requirements contained in the Facility would restrict our access to the Facility and could have a material adverse effect on our financial condition, results of operations and liquidity.As of December 31, 2025, a total of $3.0 billion remained available under the Facility.CONTRACTUAL OBLIGATIONS
The following table summarizes material contractual obligations in total, and by remaining maturity:December 31, 2025 Payments due by Period
(in millions) Total Payments 2026 2027 - 2028 ThereafterLoss reserves (a)$ 72,729 $ 20,067 $ 20,721 $ 31,941Long-term debt (b)9,035 36 1,655 7,344
Interest payments on long-term debt 4,863 396 704 3,763
Total $ 86,627 $ 20,499 $ 23,080 $ 43,048(a) Represents loss reserves, undiscounted and gross of reinsurance.(b) Does not reflect $156 million of debt of consolidated investment entities, for which recourse is limited to the assets of the respective investment entities and for which there is no recourse to the general credit of AIG.Loss ReservesLoss reserves represent our General Insurance companies' estimates of future loss and loss adjustment expense payments based on historical loss development payment patterns. The amounts presented in the above table are undiscounted and therefore exceed the liability for unpaid losses and loss adjustment expenses, including allowance for credit losses, as presented on the Consolidated Balance Sheets. Due to the significance of the assumptions used, the payments by period presented above could be materially different from actual required payments. We believe that our General Insurance companies maintain adequate financial resources to meet the actual required payments under these obligations.For additional information on loss reserves, see Critical Accounting Estimates – Loss Reserves and Note 13 to the Consolidated Financial Statements.
Long-Term Debt and Interest Payments on Long-Term Debt
The amounts presented in the above table represent AIG's total long-term debt outstanding and associated future interest payments due on such debt.
For additional information on outstanding debt, see – Debt.OFF-BALANCE SHEET ARRANGEMENTS AND COMMERCIAL COMMITMENTS
In the normal course of business, AIG and our subsidiaries enter into commitments under which we may be required to make payments in the future on a contingent basis.66
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ITEM 7 | Liquidity and Capital ResourcesThe following table summarizes Off-Balance Sheet Arrangements and Commercial Commitments in total, and by remaining maturity:December 31, 2025 Total AmountsCommitted(in millions) 2026 2027 - 2028 ThereafterCommitments:Investment commitments $ 1,466 $ 992 $ 350 $ 124
Commitments to extend credit 120 75 22 23
Letters of credit 231 130 100 1Total (a)(b)$ 1,817 $ 1,197 $ 472 $ 148
(a) Excludes guarantees and other support arrangements between AIG consolidated entities.
(b) Excludes commitments with respect to pension plans. The annual pension contribution for 2026 is expected to be approximately $54 million.Investment commitmentsWe enter into investment commitments in the normal course of business that are aligned with and support our investment strategies. These represent commitments to investment in private equity funds. The commitments to invest are called at the discretion of each fund, as needed for funding new investments or expenses of the fund, the timing of which is estimated based on the expected life cycle of the related funds, consistent with past trends of requirements for funding. These commitments are primarily made by insurance subsidiaries of the Company.We also enter into arrangements with variable interest entities (VIEs) and consolidate a VIE when we are the primary beneficiary of the entity.
For additional information on investment commitments and VIEs, see Note 10 to the Consolidated Financial Statements.
Commitments to extend credit
As part of our normal course of business lending operations, we enter into commitments to fund mortgage loans at certain interest rates and various other terms, within a stated period of time. Such commitments are legally binding and generally made by insurance subsidiaries of the Company.
Letters of credit
AIG is party to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time for the benefit of third parties in support of our businesses. These letters of credit are subject to reimbursement by AIG in the event of a drawdown.
Indemnification agreements
For information regarding our indemnification agreements, see Note 15 to the Consolidated Financial Statements.DEBT
We expect to service and repay general borrowings through maturing investments and dispositions of invested assets, future cash flows from operations, cash flows generated from invested assets, future debt or preferred stock issuances and other financing arrangements.
The following table provides the rollforward of our total debt outstanding:Year Ended December 31, 2025 Balance, Beginning of Year Issuances Maturities and Repayments Effect of Foreign Exchange Other Changes Balance, End of Year(in millions)
General borrowings:Notes and bonds payable $ 7,885 $ 1,241 $ (718) $ 116 $ 5 $ 8,529
Junior subordinated debt 602 — (122) — 1 481
AIG Japan Holdings Kabushiki Kaisha 239 — (247) 8 — —
Total general borrowings 8,726 1,241 (1,087) 124 6 9,010
Borrowings supported by assets 37 — (12) — — 25
Other subsidiaries' notes, bonds, loans and mortgages payable - not guaranteed by AIG 1 — — — (1) —
Total long-term debt $ 8,764 $ 1,241 $ (1,099) $ 124 $ 5 $ 9,035Debt of consolidated investment entities - not guaranteed by AIG (a)$ 158 $ — $ (2) $ — $ — $ 156
(a) Includes debt of consolidated investment entities related to real estate investments of $156 million at December 31, 2025 and $158 million at December 31, 2024.
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ITEM 7 | Liquidity and Capital ResourcesDebt MaturitiesThe following table summarizes maturing long-term debt at December 31, 2025 of AIG for the next four quarters:First Quarter Second Quarter Third Quarter Fourth Quarter(in millions) 2026 2026 2026 2026 Total
General borrowings $ — $ — $ — $ 29 $ 29
Borrowings supported by assets 7 — — — 7
Total $ 7 $ — $ — $ 29 $ 36
FINANCIAL STRENGTH RATINGS
Financial Strength ratings estimate an insurance company’s ability to pay its obligations under an insurance policy. The following table presents the ratings of our significant insurance subsidiaries as of the date of this filing.
A.M. Best S&P Fitch Moody’s
National Union Fire Insurance Company of Pittsburgh, Pa. A AA- AA- A1
Lexington Insurance Company A AA- AA- A1
American Home Assurance Company A AA- AA- A1
AIG Europe S.A. NR AA- NR A1
American International Group UK Limited A AA- NR A1
AIG General Insurance Company, Ltd. NR AA- NR NR
In May 2025, S&P upgraded the financial strength ratings of AIG’s significant insurance subsidiaries to AA- from A+.
In June 2025, Moody’s upgraded the financial strength ratings of AIG’s insurance subsidiaries to A1 from A2.
In November 2025, Fitch upgraded the financial strength ratings of AIG’s insurance subsidiaries to AA- from A+.
In November 2025, A.M. Best affirmed the financial strength ratings of AIG’s insurance subsidiaries at A and revised the outlook to positive from stable.
These financial strength ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances.CREDIT RATINGS
Credit ratings estimate a company’s ability to meet its obligations and may directly affect the cost and availability of financing to that company. The following table presents the credit ratings of AIG Parent as of the date of this filing. Figures in parentheses indicate the relative ranking of the ratings within the agency’s rating categories; that ranking refers only to the major rating category and not to the modifiers assigned by the rating agencies.Short-Term Debt Senior Debt RatingMoody's S&P Moody's (a)
S&P (b)
Fitch (c)
American International Group, Inc.P-2 (2nd of 4) A-2 (2nd of 5) Baa 1 (4th of 9) / Stable
A- (3rd of 9) /StableA- (3rd of 9) /
Stable(a) Moody’s appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within the rating categories.
(b) S&P ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.(c) Fitch ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
In May 2025, S&P upgraded the Senior Debt Rating of AIG Parent to A- from BBB+ and revised the outlook to stable from positive.
In June 2025, Moody’s upgraded the Senior Debt Rating of AIG Parent to Baa1 from Baa2 and revised the outlook to stable from positive.
In November 2025, Fitch upgraded the Senior Debt Rating of AIG Parent to A- from BBB+, and maintained the outlook as stable.These credit ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at our request.68
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ITEM 7 | Liquidity and Capital ResourcesWe are party to some agreements that contain “ratings triggers.” Depending on the ratings maintained by one or more rating agencies, these triggers could result in (i) the termination or limitation of credit availability or a requirement for accelerated repayment, (ii) the termination of business contracts or (iii) a requirement to post collateral for the benefit of counterparties.In the event of a downgrade of our long-term senior debt ratings, certain AIG entities would be required to post additional collateral under some derivative and other transactions, or certain of the counterparties of such entities would be permitted to terminate such transactions early.
The actual amount of collateral that we would be required to post to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at the time of the downgrade.For information regarding the effects of downgrades in our credit ratings and financial strength ratings, see Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit – “A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity” and Note 11 to the Consolidated Financial Statements.REGULATION AND SUPERVISION
For a discussion of our regulation and supervision by different regulatory authorities in the United States and abroad, including with respect to our liquidity and capital resources, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation.
DIVIDENDSOn February 10, 2026, our Board of Directors (the Board) declared a cash dividend on AIG Common Stock of $0.45 per share, payable on March 30, 2026 to shareholders of record on March 16, 2026.The payment of any future dividends will be at the discretion of our Board of Directors and will depend on various factors. For further detail on our dividends, see Note 16 to the Consolidated Financial Statements.
REPURCHASES OF AIG COMMON STOCKThe Board has authorized the repurchase of shares of AIG Common Stock through a series of actions. Effective April 1, 2025, the Board authorized the repurchase of $7.5 billion of AIG Common Stock (inclusive of the approximately $3.4 billion remaining under the Board's prior share repurchase authorization). During the year ended December 31, 2025, AIG Parent repurchased approximately 73 million shares of AIG Common Stock for an aggregate purchase price of $5.8 billion. Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from January 1, 2026 to February 6, 2026, AIG Parent repurchased approximately 2 million shares of AIG Common Stock for an aggregate purchase price of approximately $125 million. As of February 6, 2026, $3.8 billion remained under the Board's authorization.The timing of any future share repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors, as discussed further in Note 16 to the Consolidated Financial Statements.Enterprise Risk ManagementRisk management is an integral part of our business strategy and a key element of our approach to corporate governance. We have an integrated process for managing risks throughout our organization in accordance with our firm-wide risk appetite. Our Board of Directors has oversight responsibility for the management of risk. Our ERM Department oversees and integrates the risk management functions in our business and embeds risk management in our day-to-day business processes, providing senior management with a consolidated view of AIG’s major risk positions. Nevertheless, our risk management efforts may not always be successful and material adverse effects on our business, results of operations, cash flows, liquidity or financial condition may occur. For further information regarding the risks associated with our business and operations, see Part I, Item 1A. Risk Factors.
AIG employs a Three Lines model. AIG’s business leaders assume full accountability for the risks and controls in their segments and functions, and ERM and other second line functions have review, challenge and oversight function. The third line consists of our Internal Audit Group that provides independent assurance to AIG’s Board of Directors.
Our Board of Directors oversees the management of risk through its Risk Committee and Audit Committee. Our Chief Risk Officer (CRO), a member of the Executive Leadership team, reports to both the Risk Committee and our Chairman and Chief Executive Officer.
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ITEM 7 | Enterprise Risk ManagementThe AIG CRO chairs the Group Risk Committee (GRC), the senior management group responsible for assessing all significant risks on a global basis. The GRC is supported by management committees and Legal Entity Risk Committees.
The ERM department strives to nurture a healthy risk culture and establish sound governance. Among other things, the ERM department is tasked with:
• AIG's Risk Appetite Framework and the establishment and maintenance of tolerances and limits on material risks to meet AIG's objectives.
• Risk identification and measurement through multiple processes at the business entity and corporate level focused on capturing our material risks.
AIG major risk categories include credit risk, market risk, liquidity risk, operational risk, technology risk, business and strategic risk, and insurance risk. Emerging risks are regularly monitored.
CREDIT RISKCredit risk is defined as the risk that our customers or counterparties are unable or unwilling to repay their contractual obligations when they become due. Credit risk may also result from a downgrade of a counterparty’s credit ratings or a widening of its credit spreads.
Direct and indirect credit exposures may arise from, but are not limited to, fixed income investments, equity securities, deposits, commercial paper investments, securities purchased under agreements to resell and repurchase agreements, corporate and consumer loans, leases, reinsurance and retrocessional insurance recoverables, counterparty risk arising from derivatives activities, collateral extended to counterparties, insurance risk cessions to third parties, financial guarantees, letters of credit, and certain General Insurance businesses. AIG's credit risk management framework defines credit risk processes to identify, evaluate, risk rate, measure, manage and govern credit risk across the enterprise and to ensure the consistency of those processes.
We monitor and control our company-wide credit risk concentrations and attempt to avoid unwanted or excessive risk accumulations, whether funded or unfunded. To minimize the level of credit risk in some circumstances, we may require mitigants, such as parental or third-party guarantees, simultaneous payment provisions or collateral, including commercial bank-issued letters of credit, funds withheld accounts and cash or securities held in trust collateral accounts.
For additional information on our credit concentrations and credit exposures, see Investments – Investment Strategies – Available-for-Sale Investments.
Derivative TransactionsWe utilize derivatives principally to enable us to hedge exposure associated with changes in levels of interest rates, currencies, credit, commodities, equity prices and other risks. Credit risk associated with derivative counterparties exists for a derivative contract when that contract has a positive fair value to us. All derivative transactions must be transacted within counterparty limits that have been approved by ERM. We evaluate counterparty credit quality via an internal analysis that is consistent with our organizational policies and, where necessary, we require credit enhancements for certain transactions and enter into offsetting and netting arrangements.For additional information related to derivative transactions, see Note 11 to the Consolidated Financial Statements.MARKET RISKMarket risk is defined as the risk of adverse impact due to systemic movements in one or more of the following market risk drivers: interest rates, credit spreads, foreign exchange, equity and commodity prices, residential and commercial real estate values, inflation, and their respective levels of uncertainty. It can also be brought on by political turmoil, natural disasters, and terrorist attacks. We are exposed to market risks primarily within our insurance and capital markets activities, on both the asset and the liability sides of our balance sheet through on- and off-balance sheet exposures.Market risk is overseen at the corporate level within ERM through the CRO. Market risk is managed by our finance, treasury and investment management corporate functions, collectively, and in partnership with ERM. The scope and magnitude of our market risk exposures are monitored through GAAP and statutory accounting frameworks as well as through economic analysis consistent with our risk appetite statement. This process aims to establish a comprehensive coverage of potential implications from adverse market risk developments. We use a number of approaches to measure market risk exposure including sensitivity analysis, scenario analysis and stress testing.
Impact of Changes in the Interest Rate Environment
Certain global benchmark interest rates continued to fluctuate in 2025 as markets reacted to change in inflation trends, geopolitical risk, trade and tariff uncertainties and the rate decisions of the global central banks. Our Net investment income is impacted by market interest rates as well as the deployment of asset allocation strategies to enhance yield and manage duration and interest rate risk.
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ITEM 7 | Enterprise Risk ManagementThe changes in interest rates and credit spreads impact our ability to reinvest future cash flows at rates equal or greater than the rates on sales and maturities. For additional information on our investment and asset-liability management strategies, see Investments.
Impact of Currency Volatility
As a global company, AIG conducts business in multiple currencies. In general, we aim to match liabilities with assets of the same currency. For regulated insurance subsidiaries, we also try to mitigate statutory surplus or capital injection risk and capital surplus volatility in accordance with the entity’s statutory accounting framework. This often requires us to allocate capital in the liability’s currency mix or the functional currency of the entity. Derivatives may also be used.
The value of the U.S. dollar compared to the Euro, British pound and the Japanese yen (the Major Currencies) impacts income for our businesses with substantial international operations. These currencies may continue to fluctuate, especially as a result of concerns regarding international trade, future economic growth and other macroeconomic factors, and such fluctuations will affect financial statement line item comparability.Market Risk SensitivitiesMost of our fixed income portfolio is reported as available-for-sale. Therefore, fair value changes have a direct impact on Accumulated other comprehensive income (loss) (AOCI), but do not impact our net investment income revenue unless the assets are sold. Our short-term and long-term debt is reported at amortized cost and thus changes in interest rates do not impact the debt values reported on our financial statements. Their fair value, however, is sensitive to interest rates.
The following table provides estimates of sensitivity to changes in yield curves, equity prices and foreign exchange (FX) rates on our financial instruments. We aim to manage interest rate exposure of the investment portfolio such that valuation changes from interest rates are partially offset by changes in the economic value of insurance reserves. These exposures are regularly reviewed as part of AIG’s governance structure and limits are set accordingly. The table excludes $2.9 billion of interest rate sensitive assets supporting the Fortitude Re funds withheld arrangements as the contractual returns related to the assets are transferred to Fortitude Re, as well as $3.0 billion of related funds withheld payables. This sensitivity table does not reflect potential management actions that could be taken to mitigate losses, and actual results could differ from those illustrated.Balance Sheet Exposure Economic Effect
(dollars in millions)December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024Sensitivity factor
100 bps parallel increase in all yield curves
Interest rate sensitive assets:
Fixed maturity securities$ 68,005 $ 61,408 $ (2,459) $ (2,248)Mortgage and other loans receivable (a)3,748 3,057 (45) (61)Total interest rate sensitive assets (b)$ 71,753 $ 64,465 $ (2,504) $ (2,309)Interest rate sensitive liabilities:
Long-term debt (a)(c)(9,035) (8,525) 634 628Total interest rate sensitive liabilities$ (9,035) $ (8,525) $ 634 $ 628Sensitivity factor
20% decline in equity prices and alternative investments
Equity and alternative investments:
Real estate investments$ 255 $ 259 $ (51) $ (52)Private equity3,026 3,586 (605) (717)Hedge funds175 187 (35) (37)
Common equity 502 704 (100) (141)Other investments3,240 5,796 (648) (1,159)Total equity and alternative investments$ 7,198 $ 10,532 $ (1,439) $ (2,106)Sensitivity factor
10% depreciation of all FX rates against the U.S. dollar
Foreign currency-denominated net asset position:British pound $ 1,105 $ 1,233 $ (110) $ (123)
Japan Yen 787 627 (79) (63)Euro1,174 1,165 (117) (116)All other foreign currencies2,605 2,941 (260) (294)Total foreign currency-denominated net asset position (d)$ 5,671 $ 5,966 $ (566) $ (596)
(a) The economic effect is the difference between the estimated fair value with and without a 100 bps parallel increase in all yield curves. The estimated fair values for Mortgage and other loans receivable and Long-term debt, excluding assets supporting Fortitude Re funds withheld assets, were $3.8 billion and $8.7 billion at December 31, 2025, respectively. The estimated fair values for Mortgage and other loans receivable and Long-term debt, excluding assets supporting Fortitude Re funds withheld assets, were $2.8 billion and $8.2 billion at December 31, 2024, respectively.
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ITEM 7 | Enterprise Risk Management(b) At December 31, 2025, $60 million of Fixed maturity securities and $54 million of Mortgage and other loans receivable were excluded due to modeling limitations. At December 31, 2024, this amount was $568 million for Fixed maturity securities and $492 million for Mortgage and other loans receivable.
(c) At December 31, 2024 the analysis excluded $239 million of AIG Japan Holdings Kabushiki Kaisha loans. The loans matured in 2025 and were not renewed.
(d) Most of the foreign currency exposure is reported on a one quarter lag. Foreign currency-denominated net asset position reflects our aggregated non-U.S. dollar assets less our aggregated non-U.S. dollar liabilities on a GAAP basis.
Interest rate sensitivity is defined as the change in value with respect to a 100 basis point parallel shift up in the interest rate environment, calculated as: scenario value minus base value, where base value is the value under the yield curves as of the period end and scenario value is the value reflecting a 100 basis point parallel increase in all yield curves. The hypothetical change is assumed to be instantaneous. This therefore also assumes that the interest rate risk profile of the company remains constant and doesn't reflect the impact of any potential portfolio duration repositioning while interest rates rise.
LIQUIDITY RISKLiquidity risk is defined as the risk that our financial condition will be adversely affected by the inability or perceived inability to meet our short-term cash, collateral or other financial obligations as they come due.AIG and its legal entities seek to maintain sufficient liquidity both in the normal course of business and under defined liquidity stress scenarios to ensure that sufficient cash will be available to meet the obligations as they come due.Liquidity risk drivers include market/monetization risk, cash flow mismatch risk, event funding risk, and financing risk.Liquidity risk is monitored through comprehensive cash flow projections over varying time horizons that incorporate all relevant liquidity sources and uses and include known and likely cash inflows and outflows. We use several approaches to measure liquidity risk exposure including coverage ratios, cash flow forecasts and stress testing.
OPERATIONAL RISK
Operational risk is defined as the risk of loss, or other adverse consequences, resulting from inadequate or failed internal processes, people, systems, or from external events. Operational risk includes legal, regulatory, compliance, third-party and business continuity risks, but excludes business and strategy risks.
Operational risk is inherent in our business entities and can have many impacts, including but not limited to, unexpected economic losses or gains, reputational harm, regulatory action from supervisory agencies and operational and business disruptions, and/or damage to customer relationships.
ERM, working together with other control and assurance functions and first line risk control owners through the risk and control framework, provides an independent view of operational risks for each of the business areas.
TECHNOLOGY RISK
Technology risk is defined as the risk that technology fails to perform as intended, resulting in missed enterprise objectives. It is associated with the ownership, involvement and adoption of Information Technology within an enterprise. It includes vulnerabilities associated with information technology, operational technology, and communications technology.
AIG strives to reduce the probability and impact of technology risks as much as reasonably practicable while maintaining the ability to conduct business.Cybersecurity Risk
AIG, like other global companies, continues to witness the increased sophistication and activities of unauthorized parties attempting cyber and other computer-related penetrations such as “denial of service” attacks, phishing, untargeted but sophisticated and automated attacks, and other disruptive software in an effort to compromise systems, networks and obtain sensitive information.ERM supports the risk management practices of Information Technology, the Information Security Office and the business units and functions that form the lines of defense against the cybersecurity risks that we face.
For additional information regarding the privacy data protection and cybersecurity regulations to which we are subject, see Part I, Item 1. Business – Regulation – Privacy, Data Protection, Cybersecurity and Artificial Intelligence Requirements. For additional discussion of cybersecurity risks, see Part I, Item 1A. Risk Factors – Business and Operations. For additional information regarding our cybersecurity risk management as well as strategy and governance, please see Part I, Item 1C. Cybersecurity.
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ITEM 7 | Enterprise Risk ManagementBUSINESS AND STRATEGIC RISK
Business and strategy risk encompasses those risks that stem from strategy risk, risk of legal and regulatory actions, risk of rating agency actions, and reputational risk. The major AIG strategy risks capture risk of losses due to the inability to implement appropriate business plans and strategies, make decisions, allocate resources or adapt to changes in the business environment. These risks include, but are not limited to pricing, distribution channels, acquisitions, and dispositions.
AIG monitors and reports on the above-mentioned risks through ongoing risk reporting to various committees, monitoring of capital positions, regular interaction with AIG businesses and functions, regulators, and rating agencies. On a regular basis, ERM performs Second Line Review and Challenge on many of these processes and approaches. The Internal Audit Group performs audits on key processes and provides continuous monitoring on remediation of audit findings. Processes and controls are designed to respond in an effective and consistent way.
INSURANCE RISK
Insurance risk is defined as the risk of actual claims experience and/or policyholder behavior being materially different than expected at the inception of an insurance contract or at the latest valuation. Uncertainties related to insurance risk can lead to deviations in magnitude and/or timing of prospective cash flows associated with our liabilities compared to expectations.
We manage our insurance business risk oversight activities through our insurance operations, which aims to achieve an acceptable risk-adjusted return on equity. We remain disciplined in risk selection, premium adequacy, and appropriate terms and conditions to cover the risk accepted.
We operate our insurance businesses on a global basis, and we are exposed to a wide variety of risks with different time horizons. We manage these risks throughout the organization through a number of processes and procedures, including but not limited to, pricing and risk selection models, pricing approval processes, pre-launch approval of product design, development, and distribution, underwriting approval processes and authorities, modeling and reporting of aggregations and limit concentrations at multiple levels, model risk management framework and validation processes, risk transfer tools, review and challenge of reserves, actuarial profitability and reserve reviews, management of the relationship between assets and liabilities, and experience monitoring and assumption updates.Risks primarily include loss reserves, underwriting, catastrophe exposure, single risk loss exposure, and reinsurance. The potential inadequacy of the liabilities we establish for unpaid losses and loss adjustment expenses is a key risk faced by the General Insurance companies, which we manage through internal controls and oversight of the loss reserve setting process, as well as reviews by external experts. For further information, see Critical Accounting Estimates – Loss Reserves.
The potential inadequacy of premiums charged for future risk periods on risks underwritten in our portfolios can impact the General Insurance companies’ ability to achieve an underwriting profit. We develop pricing based on our estimates of losses and expenses, but factors such as market pressures and the inherent uncertainty and complexity in estimating losses may result in premiums that are inadequate to generate underwriting profit.
Our business is exposed to various catastrophic events, including natural disasters, man-made catastrophes, or pandemic disease, in which multiple losses can occur and affect multiple lines of business in any calendar year, adversely affecting our business and operating results. Concentration of exposure in certain industries or geographies may cause us to suffer disproportionate losses.Our business is exposed to loss events, such as fires or earthquakes, that have the potential to generate losses from a single insured client. The net risk to us is managed to acceptable limits established by the Chief Underwriting Officer through a combination of internal underwriting standards and external reinsurance.Since we use reinsurance to limit our losses, we are exposed to risks associated with reinsurance including the recoverability of expected payments from reinsurers due to either an inability or unwillingness to pay, contracts that do not respond properly to the event or actual reinsurance coverage that is different than anticipated, which is monitored through our credit risk management framework.
We closely manage insurance risk by monitoring and controlling the nature and geographic location of the risks in each underwritten line of business, concentrations in industries, the terms and conditions of the underwriting and the premiums we charge for taking on the risk. We analyze concentrations of risks using various modeling techniques, including both probability distributions (stochastic) and/or single-point estimates (deterministic) approaches.AIG | 2025 Form 10-K
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ITEM 7 | Enterprise Risk Management
Risk Measurement, Monitoring and Limits
We use several approaches to measure our insurance risk exposure including sensitivity and scenario analyses, stochastic methods, and experience studies. Additionally, there are risk-specific assessment tools in place to appropriately manage the variety of insurance risks to which we are exposed.Natural Catastrophe Risk
We manage catastrophe exposure with multiple approaches such as setting risk limits based on aggregate Probable Maximum Loss (PML) modeling, monitoring overall exposures and risk accumulations, modifying our gross underwriting standards, and purchasing catastrophe reinsurance through both the traditional reinsurance and capital markets in addition to other reinsurance protections.
We use third-party catastrophe risk models and other tools to evaluate and simulate frequency and severity of catastrophic events and associated losses to our portfolios of exposures with adjustments applied to modeled losses to account for loss adjustment expenses, model biases, data quality and non-modeled risks.
We recognize that climate change has implications for insurance industry exposure to natural catastrophe risk. With multiple levels of risk management processes in place, we actively analyze the latest climate science and policies to anticipate potential changes to our risk profile, pricing models and strategic planning and will continue to adapt to and evolve with the developing risk exposures attributed to climate change. In addition, we provide insurance products and services to help our clients be proactive against the threat of climate change.The table below details our modeled estimates of PML, net of reinsurance, on an annual aggregate basis. The 1-in-100 and 1-in-250 PMLs are the annual aggregate probable maximum losses with probability of 1 percent and 0.4 percent in a year, respectively. Estimates as of December 31, 2025 reflect our in-force portfolio for exposures as of July 1, 2025, and all inuring reinsurance covers as of December 31, 2025, except for the catastrophe reinsurance programs, which are as of January 1, 2026 and reflected as of such date.The following table presents an overview of annual aggregate modeled losses for world-wide all perils and exposures arising from our largest primarily modeled perils:At December 31, 2025 Net of Reinsurance Net of Reinsurance,After Tax (f)
Percent of Total Shareholders' Equity Percent of Total Shareholders' Equity Excluding AOCI
(in millions)
Exposures:
World-wide all peril (1-in-250) (a)$ 2,500 $ 1,975 4.8 % 4.3 %U.S. Hurricane (1-in-100) (b)938 741 1.8 1.6U.S. Earthquake (1-in-250) (c)901 712 1.7 1.5Japanese Typhoon (1-in-100) (d)283 224 0.5 0.5Japanese Earthquake (1-in-250) (e)251 198 0.5 0.4(a) The world-wide all peril loss estimate includes wildfire exposure.
(b) The U.S. hurricane loss estimate includes losses to Commercial and Personal Property from hurricane hazards of wind and storm surge.
(c) The U.S. earthquake loss estimates represent exposure to Commercial and Personal Property, U.S. Workers’ Compensation and A&H lines of business.
(d) Japan Typhoon loss estimate represents exposure to Commercial and Personal Property.
(e) Japan Earthquake loss estimate represents exposure to Commercial and Personal Property and A&H lines of business.
(f) Taxed at the statutory tax rate of 21 percent for both the U.S. and Japanese modeled losses. The majority of Japan exposures are ceded to our U.S. Pool.
AIG, along with other property casualty insurance and reinsurance companies, uses industry-recognized catastrophe models and applies proprietary modeling processes and assumptions to arrive at loss estimates. The use of different methodologies and assumptions could materially change the projected losses, and our modeled losses may not be comparable to estimates made by other companies.
Also, the modeled results are based on the assumption that all reinsurers fulfill their obligations to us under the terms of the reinsurance arrangements. These estimates are inherently uncertain and may not accurately reflect our net exposure, inclusive of credit risk, to these events.Our 2026 property catastrophe reinsurance program is a worldwide program providing both aggregate and per occurrence protection, with differing per occurrence and aggregate retentions for North America, Japan, and rest of world. In 2026, for North America Commercial portfolio, we maintained the $500 million retention and increased the vertical limit purchased by $500 million. For the North America Personal Lines portfolio, it continues to be covered in the aggregate cover, and we maintained the $200 million retention. For the International portfolio, we maintained the $200 million retention for Japan and increased our retention to $150 million for rest of world.
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ITEM 7 | Enterprise Risk ManagementWe have also purchased property per risk covers that provide protection against large losses globally, which include those emanating from non-critical catastrophe events (all events except for named windstorm and earthquake) globally as well as critical catastrophe events (named windstorm and earthquake) outside North America.
Actual results in any period are likely to vary, perhaps materially, from the modeled scenarios. The occurrence of one or more severe events could have a material adverse effect on our financial condition, results of operations and liquidity. For additional information, see also Part 1, Item 1A. Risk Factors – Reserves and Exposures.
Terrorism Risk
We actively monitor terrorism risk and manage exposures to losses from terrorist attacks. Terrorism risks are modeled using a third-party vendor model for various terrorism attack modes and scenarios. Adjustments are made to account for vendor model gaps and the nature of the General Insurance companies’ exposures.
Our largest terrorism concentrations are in New York City, and estimated losses are largely driven by the Property and Workers’ Compensation lines of business. Our exposure to terrorism risk in the U.S. is mitigated by the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) in addition to limited private reinsurance protections. TRIPRA covers certified terrorist attacks within the U.S. or U.S. missions and against certain U.S. carriers or vessels and excludes certain lines of business as specified by applicable law.
We offer terrorism coverage in many other countries through various insurance products and participate in country terrorism pools when applicable. International terrorism exposure is estimated using scenario-based modeling and exposure concentration is monitored routinely. Targeted reinsurance purchases are made for some lines of business to cover potential losses due to terrorist attacks. We also rely on the government-sponsored and government-arranged terrorism reinsurance programs, including pools, in force in applicable non-U.S. jurisdictions.
Reinsurance Activities
We purchase reinsurance for our insurance and reinsurance operations. Reinsurance facilitates insurance risk management (retention, volatility, concentrations) and capital planning. We may purchase reinsurance on a pooled basis.
Reinsurance is used primarily to manage overall capital adequacy and mitigate the insurance loss exposure related to certain events, such as natural and man-made catastrophes, death events, or single policy level events. Our subsidiaries operate worldwide primarily by underwriting and accepting risks for their direct account on a gross basis and reinsuring a portion of the exposure on either an individual risk or an aggregate basis to the extent those risks exceed the desired retention level. In addition, as a condition of certain direct underwriting transactions, we may be required by clients, agents or regulation to cede all or a portion of risks to specified reinsurance entities, such as captives, other insurers, local reinsurers and compulsory pools.For additional information on reinsurance recoverable, see Critical Accounting Estimates – Reinsurance Assets.AIG | 2025 Form 10-K
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Glossary
Glossary
Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.
Accident year combined ratio, as adjusted (Accident year combined ratio, ex-CAT) The combined ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Accident year loss ratio, as adjusted (Accident year loss ratio, ex-CAT) The loss ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Acquisition ratio Acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to acquire new and renewal insurance contracts and also include the amortization of VOBA and DAC. Acquisition costs vary with sales and include, but are not limited to, commissions, premium taxes, direct marketing costs and certain costs of personnel engaged in sales support activities such as underwriting.
Attritional losses are losses recorded in the current accident year, which are not catastrophe losses.Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs), corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.Book value per share, excluding investments related cumulative unrealized gains and losses recorded in Accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjust for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI (AIG adjusted common shareholders' equity) by total common shares outstanding.
Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons, i.e., not the insured, and the legal liability imposed on the insured as a result.
Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios.
Credit Support Annex A legal document generally associated with an ISDA Master Agreement that provides for collateral postings which could vary depending on ratings and threshold levels.
DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful acquisition of new business or renewal of existing business.Deferred gain on retroactive reinsurance Retroactive reinsurance is a reinsurance contract in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events. If the amount of premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and amortized over the settlement period of the reserves. Any related development on the ceded loss reserves recoverable under the contract would increase the deferred gain if unfavorable, or decrease the deferred gain if favorable.
Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.
General operating expense ratio General operating expenses divided by net premiums earned. General operating expenses are those costs that are generally attributed to the support infrastructure of the organization and include but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude losses and loss adjustment expenses incurred, acquisition expenses, and investment expenses.
IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.76
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GlossaryISDA Master Agreement An agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, that generally provides for the net settlement of all or a specified group of these derivative transactions, as well as pledged collateral, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions.
Loan-to-value ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.
Loss Adjustment Expenses The expenses directly attributed to settling and paying claims of insureds and include, but are not limited to, legal fees, adjuster’s fees and the portion of general expenses allocated to claim settlement costs.
Loss ratio Losses and loss adjustment expenses incurred divided by net premiums earned.
Loss reserve development The increase or decrease in incurred losses and loss adjustment expenses related to prior years as a result of the re-estimation of loss reserves at successive valuation dates for a given group of claims.
Loss reserves Liability for unpaid losses and loss adjustment expenses. The estimated ultimate cost of settling claims relating to insured events that have occurred on or before the balance sheet date, whether or not reported to the insurer at that date.
Master netting agreement An agreement between two counterparties who have multiple derivative contracts with each other that provides for the net settlement of all contracts covered by such agreement, as well as pledged collateral, through a single payment, in a single currency, in the event of default on or upon termination of any one such contract.
Natural catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold.
Net premiums written represent the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during a given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net premiums written are a measure of performance for a sales period, while net premiums earned are a measure of performance for a coverage period.
Noncontrolling interests The portion of equity ownership in a consolidated subsidiary not attributable to the controlling parent company.
Pool A reinsurance arrangement whereby all of the underwriting results of the pool members are combined and then shared by each member in accordance with its pool participation percentage.
Prior year development See Loss reserve development .Reinstatement premiums Premiums on an insurance policy over and above the initial premium imposed at the beginning of the policy payable to reinsurers or receivable from insurers to restore coverage limits that have been reduced or exhausted as a result of reinsured losses under certain excess of loss reinsurance contracts.
Reinsurance The practice whereby one insurer, the reinsurer, in consideration of a premium paid to that insurer, agrees to indemnify another insurer, the ceding company, for part or all of the liability of the ceding company under one or more policies or contracts of insurance which it has issued.
Reinsurance recoverables are comprised of paid losses recoverable, ceded loss reserves, ceded reserves for unearned premiums.
Retroactive reinsurance See Deferred gain on retroactive reinsurance .Return on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates the fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude the portion of DTA representing U.S. tax attributes related to NOLs, CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the corresponding portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. We believe this metric provides investors with greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.Subrogation The amount of recovery for claims we have paid our policyholders, generally from a negligent third party or such party’s insurer.
Unearned premium reserve Liabilities established by insurers and reinsurers to reflect unearned premiums, which are usually refundable to policyholders if an insurance or reinsurance contract is canceled prior to expiration of the contract term.
VOBA Value of Business Acquired Present value of future pre-tax profits from in-force policies of acquired businesses discounted at yields applicable at the time of purchase. VOBA is reported in DAC in the Consolidated Balance Sheets.AIG | 2025 Form 10-K
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TABLE OF CONTENTSAcronymsAcronymsA&H Accident and Health Insurance ISDA International Swaps and Derivatives Association, Inc.ABS Asset-Backed Securities Moody's Moody's Investors Service, Inc.APTI Adjusted pre-tax income NAIC National Association of Insurance Commissioners
CDS Credit Default Swap NM Not Meaningful
CLO Collateralized Loan Obligations ORR Obligor Risk Ratings
CMBS Commercial Mortgage-Backed Securities RMBS Residential Mortgage-Backed Securities
ERM Enterprise Risk Management S&P Standard & Poor's Financial Services LLC
FASB Financial Accounting Standards Board SEC Securities and Exchange Commission
GAAP Accounting Principles Generally Accepted in the United States of America VIE Variable Interest Entity