AIG's second quarter of fiscal 2026 is the first clean snapshot of the company as a pure property and casualty insurer, because on May 7 it sold the last remaining stake in Corebridge, the life and retirement business it had been unwinding for four years, for roughly $710 million. The quarter tells a story of underwriting strength masking a headline earnings decline: adjusted after-tax income per diluted share rose 10% year over year to $2.00, even as GAAP net income per diluted share fell 10% to $1.78 because the removal of the Corebridge investment removed the fair-value swings that had flattered the prior-year comparison. The equity, at about $76.64 on August 14, trades at roughly 14 times trailing earnings and about 9 times forward earnings, which prices in continued execution on the 2025 Investor Day financial targets that management says remain on track.
The mechanism behind the quarter is straightforward to read. General Insurance net premiums written grew 9% to $7.5 billion on both a reported and constant dollar basis, with all three segments contributing, while the combined ratio improved 30 basis points to 89.0% and the accident year combined ratio improved the same amount to 88.1%. Underwriting income rose 10% to $686 million, and Core Operating ROE, which strips out the Corebridge stake, deferred tax assets and investment fair-value noise to isolate the insurance operations, printed 11.1% against a prior-year 11.7%. The spread between the 9.4% plain ROE and the 11.1% core operating ROE is the gap where investment fair-value and legacy noise sit, and it is the source of the adjusted per-share growth that drives the equity narrative. The market appears to be pricing this as a maturing, de-risked compounder that returns capital aggressively rather than the volatile conglomerate it used to be, and the buyback math supports that read, with 8 million shares repurchased in the quarter and a ledger that shows 524.7 million shares outstanding against 559.8 million a year earlier, a 6% year-over-year reduction that lifts every per-share metric.
The single load-bearing risk is that the pricing environment is cooling just as AIG has committed to a growth agenda built on acquired renewal rights and newly purchased minority stakes. The market has moved from broad positive rate increases into what management calls a more selective environment, and two of the three segments - International Commercial and the accident year book of North America Commercial - showed combined-ratio deterioration tied to rate pressure, while catastrophe losses, including $75 million tied to the Middle East conflict, remain an uncontrollable swing factor. The falsifiable clock is the third-quarter print, due in early November, which tests whether the selective-pricing discipline holds the accident year combined ratio near 88% and whether deflation in the share count continues to do as much heavy lifting as operating leverage.