Shares of American International Group Inc (AIG) have taken a hit in recent days, primarily due to the impact of Hurricane Helene on the insurance industry. Adding to the pressure on AIG is the prevailing ‘soft’ pricing power in the large employer insurance market, a trend that has caught the attention of analysts like Michael Zaremski from BMO Capital Markets. Zaremski, recognizing this trend, downgraded AIG’s rating from Outperform to Market Perform, simultaneously reducing the price target from $90 to $84.
The crux of Zaremski’s analysis lies in the observation that many large employers anticipate minimal acceleration in their property and casualty insurance costs over the next six months. This soft market outlook, according to Zaremski, will likely lead to a decline in AIG’s 2025 and 2026 earnings per share (EPS) estimates. He attributes this anticipated drop to the combination of higher underlying loss ratios in North America and International Commercial markets.
This soft pricing environment presents a significant challenge for insurers, especially those with substantial exposure in the large employer market. AIG, with a 2025 premium mix of approximately 72% commercial lines, a large portion of which is attributed to large-account clients, will feel the brunt of this trend.
As of Tuesday, AIG’s stock had dipped by 0.12% to $77.72. This downward trend reflects the market’s response to the concerns raised by Zaremski and the broader uncertainty surrounding the insurance industry’s performance in the face of Hurricane Helene’s impact and the ongoing soft pricing environment.