Goldman Sachs’ Top Fund Manager Stock Picks: 25 Best Overweight Stocks

9. American International Group, Inc. (NYSE:AIG)

Number of Hedge Fund Investors In Q2 2024: 61

Mutual Fund Overweight Percentage: 0.13%

American International Group, Inc. (NYSE:AIG) is one of the most well known insurance companies in America. It is a diversified business, with a presence in other countries such as Singapore. In fact, as of H1 2024, $6.6 billion of American International Group, Inc. (NYSE:AIG)’s $13.3 billion, or 49.6%, in revenue came from its international business. The firm focuses primarily on property and casualty insurance, which could create a dynamic environment for it in the future. This is because of global warming led climate catastrophes, which have increased the risks that insurers have to incur. However, American International Group, Inc. (NYSE:AIG)’s size, as evidenced by its $168 billion in assets could enable it to operate in areas that other insurance companies exit from by charging higher premiums. As property insurers come off the back of premium increases, American International Group, Inc. (NYSE:AIG)’s hypothesis is also dependent on the firm’s cost cutting initiatives through which it aims to reduce expenses by 13%. Costs are key to the firm’s narrative, as evidenced by a 12% share price drop in early August after Q2 EPS of $1.16 missed analyst estimates of $1.30.

During the Q2 2024 earnings call, American International Group, Inc. (NYSE:AIG)’s management shared how it is working on reducing its costs:

“As part of positioning AIG for the future, over the past several years, we’ve been on a journey to simplify AIG. We’re weaving the company together to operate seamlessly as one cohesive organization across underwriting, claims and all of our functional areas with the skills and capabilities to compete in the future. As a company, we’ve completed multiple transformation programs. These efforts, including AIG 200 have resulted in a reduction of our expense base of approximately $1.5 billion since 2018, while investing for the future. For example, over the last two years, we’ve invested approximately $300 million in data, digital workflow, AI and talent to accelerate our progress. If you look over the past five years, it include technology, end-to-end process workflow and foundational data investments that were part of AIG 200, our investment has been over $1 billion.

Also at the beginning of 2024, we formally launched AIG Next to further accelerate the realization of additional operational efficiencies. As part of the AIG Next program, we’re redefining our existing retained parent costs to reflect only expenses related to being a global regulated public company such as costs related to corporate governance, enterprise risk management and audit. Our objective is to decrease retained parent cost to $325 million to $350 million, or 1% to 1.5% of net premiums earned going forward. Expenses not defined as parent company costs will be fully embedded within the General Insurance results or they’ll be redundant. All of the factors being equal, we would expect our full year 2025 calendar year combined ratio to be the same or lower than the full year 2023 metric on a comparable basis as a result of the actions were taken as part of AIG Next.”