American International Group Inc.

AIG generated $3,314 million in operating cash flow in FY2025 with zero required industrial capital expenditures, resulting in free cash flow of $3,314 million. Cash conversion is underpinned by positive underwriting cash flows and recurring investment yields. Financing cash outflows of $6,543 million in FY2025 reflected aggressive share repurchases of $5,836 million and common dividends of $976 million, drawing on non-recurring separation proceeds. On an ongoing basis, free cash flow conversion of approximately 100% of net income ($3,096 million in FY2025) provides dependable funding for shareholder returns.^4,6,7

Capital allocation centers on capital return via share repurchases and regular dividends, supported by strong liquidity and balance sheet capacity. In FY2025, total capital returns reached $6,812 million ($5,836 million in share repurchases and $976 million in dividends), funded partly by subsidiary separation proceeds alongside $3,314 million of . As divestiture cash normalizes, annual buybacks will pace within recurring organic capacity after servicing debt obligations on $9,127 million of total debt and cash reserves of $1,345 million.

Following extensive restructuring and de-risking, AIG operating income rebounded to $3,879 million in FY2025 on $26,775 million of revenue, generating a 14.49% operating margin. Net income reached $3,096 million. As expense discipline drives the expense ratio below 30% by full-year FY2027 and high investment yields continue compounding, return on capital is positioned to trend upward.

In FY2025, ROIC of 6.71% approached the moderate cost of equity of 7.55% and WACC of 6.99%, closing the historical economic return deficit.

In the bull phase of the commercial property and casualty cycle, compounded rate hardening exceeds loss cost trends, catastrophic risk premiums expand, and elevated benchmark bond yields bolster net investment income across fixed-income investment portfolios. Discipline in commercial lines risk selection expands underwriting profitability, generating substantial free cash flow that funds aggressive capital return programs.

The bear phase of the commercial P&C cycle is characterized by softening premium rates across competitive commercial and specialty accounts, escalating social inflation from litigation funding and nuclear verdicts, catastrophe loss volatility, and compressed reinvestment yields. In this environment, undisciplined carriers experience severe underwriting losses and reserve deficits, forcing capital preservation and curtailing equity buybacks.

Manage exposure by monitoring quarterly catastrophe loss seasonality, reinsurance renewal treaties, and casualty loss reserve development in regulatory filings. Limit maximum portfolio weighting to 6% and enforce stop-loss discipline if social inflation impairs casualty underwriting performance across successive reporting periods.