ITEM 7 |Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary 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.
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INDEX TO ITEM 7
Page
Executive Summary 37
Overview 37
Critical Accounting Estimates 38
Consolidated Results of Operations 43
Business Segment Operations 44
General Insurance 44
Other Operations 49
Use of Non-GAAP Measures 49
Investments 54
Overview 54
Investment Highlights in 2025 54
Investment Strategies 54
Credit Ratings 59
Insurance Reserves 60
Loss Reserves 60
Liquidity and Capital Resources 63
Overview 63
Liquidity and Capital Resources Highlights 64
Analysis of Sources and Uses of Cash 64
Liquidity and Capital Resources of AIG Parent and Subsidiaries 65
Credit Facilities 66
Contractual Obligations 66
Off-Balance Sheet Arrangements and Commercial Commitments 66
Financial Strength Ratings 68
Credit Ratings 68
Regulation and Supervision 69
Dividends 69
Repurchases of AIG Common Stock 69
Enterprise Risk Management 69
Credit Risk 70
Market Risk 70
Liquidity Risk 72
Operational Risk 72
Technology Risk 72
Business and Strategic Risk 73
Insurance Risk 73
Glossary 76
Acronyms 78
Throughout 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.
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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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ITEM 7 | Critical Accounting Estimates
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.
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 Reserves
In 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 Reserves
Estimation 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 Process
The 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 Estimates
Actuarial and Other Methods for Our Lines of Business
Our 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
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ITEM 7 | Critical Accounting Estimates
Line of Business or Category Key Assumptions
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:
(in millions)
Loss cost trends: Loss development factors:
U.S. Excess Casualty: U.S. Excess Casualty:
U.S. Excess Casualty:
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 ASSETS
In 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.
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ITEM 7 | Critical Accounting Estimates
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.
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.
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ITEM 7 | Consolidated Results of Operations
Consolidated Results of Operations
The 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
Revenues:
Net investment income:
Net investment income - Fortitude Re funds withheld assets 149 144 180 3 (20)
Net realized losses:
Net realized losses on Fortitude Re funds withheld assets (70) (39) (71) (79) 45
Benefits, losses and expenses:
Amortization of deferred policy acquisition costs 3,371 3,425 3,771 (2) (9)
(Gain) loss on extinguishment of debt (5) 14 (37) NM NM
Net (gain) loss on divestitures and other (81) (616) 29 87 NM
Income tax expense (benefit):
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
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ITEM 7 | Consolidated Results of Operations
NET INCOME (LOSS) ATTRIBUTABLE TO AIG COMMON SHAREHOLDERS
Years 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 Operations
We 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 Insurance
Our General Insurance business (General Insurance) consists of our three segments and the Net investment income related to our insurance operations.
GENERAL INSURANCE
Years Ended December 31, Change
Underwriting results:
Net premiums written, on constant dollar basis (1) (10)
(Increase) decrease in unearned premiums 3 (445) (1,628) NM 73
Acquisition expenses:
Amortization of deferred policy acquisition costs 3,357 3,413 3,623 (2) (6)
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ITEM 7 | Business Segment Operations | General Insurance
Years Ended December 31, Change
Catastrophe losses and reinstatement premiums (3.9) (5.0) (4.3) 1.1 (0.7)
(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:
Flooding, rainstorms and other $ — $ 10 $ 17 $ 27
Reinstatement premiums 5 (1) 1 5
Flooding, rainstorms and other $ 2 $ 98 $ — $ 100
Earthquakes — 7 — 7
Reinstatement premiums 12 (2) — 10
Flooding, rainstorms and other $ 10 $ 72 $ 20 $ 102
Reinstatement premiums 31 (1) 1 31
(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.
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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
Underwriting results:
Net premiums written, on constant dollar basis 4 (26)
Acquisition expenses:
Amortization of deferred policy acquisition costs 862 824 1,371 5 (40)
Catastrophe losses and reinstatement premiums (5.6) (9.7) (5.9) 4.1 (3.8)
(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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ITEM 7 | Business Segment Operations | General Insurance
INTERNATIONAL 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
Underwriting results:
Net premiums written, on constant dollar basis 3 3
Acquisition expenses:
Amortization of deferred policy acquisition costs 1,088 1,018 943 7 8
Catastrophe losses and reinstatement premiums (2.2) (2.9) (3.9) 0.7 1.0
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.
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ITEM 7 | Business Segment Operations | General Insurance
GLOBAL 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
Underwriting results:
Net premiums written, on constant dollar basis (13) 2
(Increase) decrease in unearned premiums 219 54 (225) 306 NM
Acquisition expenses:
Underwriting income (loss) $ 70 $ 142 $ (8) (51) % NM %
Catastrophe losses and reinstatement premiums (3.9) (2.0) (2.6) (1.9) 0.6
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 (3.4points) 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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ITEM 7 | Business Segment Operations | Other Operations
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
Years Ended December 31, Change
Benefits, losses and expenses:
Corporate and other general operating expenses 360 623 698 (42) (11)
Amortization of intangible assets 18 18 27 — (33)
Consolidation and eliminations — (1) (17) NM 94
*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
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ITEM 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,
Preferred equity — — 485
Less: AIG's ownership interest in Corebridge 1,512 3,810 6,738
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,
Less: Average AIG's ownership interest in Corebridge 3,207 6,770 7,376
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:
Dividends on preferred stock and preferred stock redemption premiums — 22 29
(Income) loss from discontinued operations — 3,626 (1,137)
Non-operating litigation reserves and settlements (9) (2) — (7) — — — — 1 — — 1
Non-operating pension expenses 15 3 — 12 — — — — 71 15 — 56
Weighted average diluted shares outstanding 570.3 657.3 725.2
(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):
Consolidation and Eliminations — — 1 — — — — — — — 13 —
Other income (expense) - net (6) — (5) — (31) — 18 — (49) — 39 —
(Gain) loss on extinguishment of debt — — — (5) — — — 14 — — — (37)
Net loss (gain) on divestitures and other — (55) — (26) — (522) — (94) — 18 — 11
Non-operating litigation reserves and settlements — 4 — (13) — — — — — — — 1
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
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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ITEM 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
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.
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ITEM 7 | Investments
Asset-Liability Management
The 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:
Bonds 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
Mortgage-backed, asset-backed and collateralized:
Total mortgage-backed, asset-backed and collateralized 21,208 17,663
*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:
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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:
Euro-Zone countries:
Remainder of Europe:
Investments in Municipal Bonds
At 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:
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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
Financial institutions:
Securities firms and other finance companies 856 669
*At December 31, 2025 and 2024, approximately 88 percent and 88 percent, respectively, of these investments were rated investment grade.
Commercial Mortgage Loans
At 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:
Numberof Loans Class Percentof Total
(dollars in millions) Apartments Offices Retail Industrial Hotel Others Total
State:
State:
*Does not reflect allowance for credit losses.
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ITEM 7 | Investments
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):
Change in allowance for credit losses on loans (10) 11 1 (23) — (23) (28) 3 (25)
Sales of alternative investments 3 — 3 (16) — (16) 29 — 29
*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.
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ITEM 7 | Investments
CREDIT RATINGS
Moody’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 Ratings
With 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
Rating:
Other fixed maturity securities
Mortgage-backed, asset-backed and collateralized
Non-rated — — — — — —
Total
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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):
General Insurance:
North America Commercial:
International Commercial:
Global Personal:
(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,
General Insurance:
North America Commercial:
U.S. Workers' Compensation $ (172) $ (261) $ (190)
U.S. Other Casualty (8) (25) (134)
U.S. Financial Lines (65) (43) 37
U.S. Property and Special Risks (124) 8 (7)
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
Total International Commercial $ (76) $ (99) $ 148
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ITEM 7 | Insurance Reserves
Years Ended December 31,
Global 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 – 2024
In 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.
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ITEM 7 | Insurance Reserves
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.
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 Agreements
NICO
In 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.
Gross Covered Losses
Deferred Gain Development
Pre-tax deferred gain before discount and amortization 3,008 2,906 2,617
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.
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ITEM 7 | Insurance Reserves
The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:
Years Ended December 31,
Balance at beginning of year, net of discount $ 284 $ 149 $ 205
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 billionof 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.
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ITEM 7 | Liquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES HIGHLIGHTS
Sources
Liquidity to AIG Parent from Subsidiaries
During 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 AIG
In 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.
Uses
General Borrowings
During 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.
Dividends
We 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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