BRK.B vs. AIG: Which Global Insurance Giant Can Offer Better Returns?

Globe and Mail

14-05-2025

Better pricing, climate change, which exposes insurers to catastrophe losses, and accelerated digitalization are likely to have an impact on the insurance industry. Though the Fed has held the borrowing rate between 4.25% and 4.5% since December, a July or September cut is now more likely, per media reports. Yet Berkshire Hathaway Inc. (
BRK.B
) and American International Group, Inc. AIG — two insurance behemoths — are expected to stay strong.
Pricing plays an important part in their profitability. Per a recent analysis by MarketScout's Market Barometer, the commercial insurance sector saw a composite rate increase of 3%. Per the report, the personal lines composite rate increased 4.9% in the first quarter of 2025, up from 4% in the fourth quarter of 2024.
Given the increased adoption of technology, merger and acquisition (M&A) activity is projected to witness momentum in 2025, driven by a higher number of technology-driven deals, per a report by Willis Towers Watson's Quarterly Deal Performance Monitor.
Yet, as an investment option, which stock, BRK.B or AIG, is more attractive for long-term insurance-focused investors? Let's closely look at the fundamentals of these stocks.
Factors to Consider for BRK.B
Berkshire Hathaway is a diversified conglomerate with over 90 subsidiaries spanning a wide range of industries, including insurance and consumer products, which helps mitigate concentration risk.
Among its various operations, insurance is the most significant, contributing roughly one-fourth of the company's total revenues. This segment is well-positioned for sustained growth, driven by increased market exposure, disciplined underwriting and favorable pricing trends.
The continued expansion of its insurance business boosts float, enhances earnings, maximizes return on equity, and provides the financial flexibility for strategic acquisitions.
With substantial cash reserves, Berkshire Hathaway regularly acquires companies or increases its holdings in firms with consistent earnings and strong returns on equity. While large-scale acquisitions create new business opportunities, smaller bolt-on deals strengthen existing operations and improve profitability.
Warren Buffett has consistently targeted undervalued assets with strong growth potential. His investments in companies like Coca-Cola, American Express, Apple, Bank of America, Chevron, and Occidental Petroleum reflect Berkshire's disciplined and strategic investment approach.
Net margin, measuring a company's profitability, expanded 190 basis points in a year.
It has strengthened its balance sheet with more than $100 billion in cash reserves, low debt, and a high credit rating.
Berkshire's return on equity of 7.2% lags the industry average of 8% but this company has improved the same over time. BRK.B shares have gained 13% year to date. .
Factors to Consider for AIG
American International Group, better known as AIG, is a leading global insurance organization, providing a wide range of property casualty insurance, life insurance, retirement solutions, and other financial services to customers in more than 80 countries and jurisdictions.
The company has been focusing on implementing stricter underwriting discipline, divesting non-core businesses, reducing debt, launching strategic transformation initiatives and modernizing operations and technology infrastructure, as well as investing heavily in data and digital strategies. These have led AIG to generate $2 billion annually in underwriting profit, on average, over the past three years.
AIG is also benefiting from reinvesting assets at higher yields, including increasing asset allocation to private credit at attractive spreads.
The company stated that the deconsolidation of Corebridge accelerated the AIG Next initiative, resulting in $450 million in exit run-rate savings for 2024. The company also expects to lower its expense ratio to between 1% and 1.5% of net premiums earned by the end of 2025. Net margin is yet to recover. Net margin was -7% in the first quarter of 2025 versus 24% in the first quarter of 2024.
A solid capital deployment strategy supports growth and helps return wealth to shareholders. Last month, its board increased the share repurchase authorization to $7.5 billion and approved a 12.5% increase in quarterly dividend. Its return on equity of 7.1% lags the industry average. AIG has gained 14.9% year to date.
Estimates for BRK.B and AIG
The Zacks Consensus Estimate for BRK.B's 2025 revenues implies a year-over-year increase of 1% while that for EPS implies a year-over-year decrease of 6.9%. EPS estimates have moved 1.7% north over the past 30 days.
The Zacks Consensus Estimate for AIG's 2025 revenues implies a year-over-year decrease of 16.3% while that for EPS implies a year-over-year increase of 26.1%. EPS estimates have moved 1.3% north over the past 30 days.
Are BRK.B and AIG Shares Expensive?
Berkshire is trading at a price-to-book multiple of 1.68, above its median of 1.39 over the last five years. AIG's price-to-book multiple sits at 1.6, above its median of 0.89 over the last five years.
Conclusion
Holding shares of Berkshire Hathaway adds dynamism to shareholders' portfolios. It gives the feel of investing in mutual funds while rewarding investors with higher returns. Above all, the company has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills. However, it remains to be seen how the behemoth fares when Greg Abel succeeds Warren Buffett as CEO of Berkshire, effective Jan. 1, 2026. Buffett will, however, remain the company's executive chairman.
Meanwhile, strategic business de-risking, acquisitions, cost-control efforts, investment in digitalization and accelerated capital deployment drive AIG. Though AIG Next initiative is designed to save costs, the net margin is still in the red. However, it has a solid capital deployment strategy that enhances shareholders' value.
On the basis of return on equity, which reflects a company's efficiency in generating profit from shareholders' equity as well as gives a clear picture of the company's financial health, BRK.B scores higher than AIG.
Though Berkshire Hathaway and AIG carry a Zacks Rank #3 (Hold) each, BRK.B has an edge over AIG.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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