Goldman Sachs lowers AIG stock price target to $85 on business mix shift

Goldman Sachs lowered its price target for American International Group (AIG) to $85.00 while maintaining a Neutral rating, primarily due to pressures on underlying loss ratios in its commercial segments and a broader de-rating of insurance carriers. This adjustment comes despite AIG surpassing Q2 2025 earnings expectations, with operational challenges partially offset by stronger, sustainable net investment income growth. The mixed analyst sentiment is further evidenced by other firms like Jefferies and CFRA also reducing their AIG targets, even as the company maintains strong fundamentals.

Analysis

Despite American International Group (AIG) surpassing second-quarter 2025 earnings and revenue expectations, multiple analyst firms, including Goldman Sachs, Jefferies, and CFRA, have lowered their price targets, signaling underlying operational concerns. Goldman Sachs reduced its target to $85.00, citing pressures on the core insurance business, specifically forecasting a ~60 basis point weakening in the 2025-2027 Commercial and International Commercial underlying loss ratios. This deterioration is attributed to factors like mix shift and a notably weak international rate environment, which fell to -3% in Q2 from +2% in Q1. These underwriting challenges are currently being offset by stronger-than-expected net investment income, which Goldman Sachs views as sustainable due to meaningful growth in casualty premiums. The company's fundamentals remain solid, with a 33.2% gross profit margin, a 13-year history of consistent dividend payments, and an attractive P/E ratio of 14.6x. However, the consensus of downward price target revisions reflects a broader de-rating of insurance carriers and a focus on the declining quality of underwriting results, creating a mixed outlook where strong investment income and valuation metrics are pitted against deteriorating core business performance.

Key Decisions for Investors

• Given the divergence between AIG's headline earnings beat and weakening underlying underwriting metrics, investors should closely monitor future reports for any stabilization or improvement in the General Insurance loss ratios and international rate environment.
• The stock presents a classic value proposition with a P/E of 14.6x and a projected 11% total return, but this must be weighed against the clear operational headwinds and cautious sentiment reflected in multiple analyst downgrades.
• Consider that the stock's current support relies heavily on strong net investment income; any negative shift in invested asset growth or returns could expose the shares to significant downside risk from the underperforming core insurance operations.
• While Jefferies and CFRA maintain 'Buy' ratings, the reduction of their price targets in line with Goldman's 'Neutral' stance suggests that upside potential may be limited until the company demonstrates a reversal of the negative trends in its commercial underwriting segments.