Andrew Bary

A potential combination of insurers Chubb and American International Group is an intriguing possibility that could benefit investors and allow a member of the Greenberg family to once again head AIG.

Whether a deal happens is speculative at this point, but Wall Street appears to like the idea. Both stocks have rallied since Wednesday, when Insurance Insider US, an industry publication, wrote that the larger Chubb had made an "informal takeover approach" to AIG.

AIG stock is up over 10% since the report, closing Friday at $84.90. 1.5% higher in the session. Chubb has gained 4% to $308.47 since Wednesday, including a gain of 1.1% Friday.

Chubb put out a statement saying that it "emphatically denies that any offer was made." AIG said it "is not for sale."

Investors appear to favor the idea of a combination because it likely would lead to the elimination of overlapping costs at the two property and casualty companies. It would also give the well-regarded Evan Greenberg, Chubb's CEO, another major property and casualty insurance platform.

Evan Greenberg, 70, is the son of insurance legend Maurice "Hank" Greenberg, now 100, who built AIG into the P&C insurance industry's dominant company. He retired in 2005, while AIG was laid low during the 2008-2009 financial crisis due to losses in financial derivatives. It was bailed out by the federal government and is down from a reverse split-adjusted high of about $1,200 in 2007.

The elder Greenberg left the company amid board concerns over several regulatory inquiries into AIG at the time, according to coverage in the Wall Street Journal.

Chubb has about $56 billion of annual premium revenues, more than double that of AIG. Its market capitalization is $121 billion, compared with $45 billion for AIG.

It also has a higher valuation than AIG, which has executed a successful turnaround program in recent years under CEO Peter Zaffino, 58. The valuation gap likely would make a purchase of AIG accretive to Chubb's earnings and book value. It would boost Chubb's earnings per share and book value, resulting in a lower price/book ratio.

Chubb, best known for its high-end Masterpiece homeowners insurance franchise, is valued at 1.7 times third-quarter book value and 13 times projected 2025 earnings. AIG trades for about 1.1 times book value. If it bought AIG, Chubb would also get AIG's $89 billion investment portfolio to add to its own holdings of $166 billion.

"Insurance M&A is likely to pick up as top-line growth softens," says CFRA analyst Cathy Seifert. After several years of strong gains across many types of P&C insurance, pricing has been weakening in many business lines, including property coverage.

The potential for deals also benefits from what Seifert calls a more relaxed regulatory environment in Washington under President Donald Trump, though she also noted that administration policies can be unpredictable.

Seifert has Buy ratings on both stocks.

"An AIG/Chubb combination would likely involve material expense synergies due to several duplicative functions," wrote BofA Securities analyst Joshua Shanker in a note Thursday.

One negative, he added, is that there could be revenue shortfalls at the combined company if customers seek to diversify away from a single large carrier. There could also be antitrust issues. Shanker wrote that given Chubb's higher price/book ratio, a deal for AIG "might arguably make more sense than buybacks" of Chubb's own stock.

Chubb is a global leader in the P&C industry with some of the best underwriting margins and the second-highest market value among U.S. companies. Only the auto-insurance specialist Progressive is worth more. It is widely considered one of the industry's best-managed companies. One of its biggest fans is Warren Buffett, whose Berkshire Hathaway holds an 8% stake in Chubb.

AIG's results, meanwhile, have improved markedly under Zaffino's leadership. AIG had underwriting losses from 2008 to 2018 but has been profitable on an underwriting basis since 2021, including about $2 billion of underwriting profits in both 2023 and 2024.

Insurers earn money both from underwriting and investing the premiums they receive.

The company pays a 2% dividend yield and has been an aggressive buyer of its stock, repurchasing about 17% of the shares outstanding over the past 5 quarters.

When Barron's wrote favorably on Chubb in 2023, we stated that "Evan Greenberg is temperamentally similar to his intimidating father," who then was 97 and still coming to work every day as chairman and CEO of Starr, a private insurer and investment firm that once was affiliated with AIG. "I'm as active, healthy, engaged, and energetic as I have ever been," Evan Greenberg said. "I have absolutely no plans to retire.

Neither Chubb nor AIG "seems to have an obvious path in terms of succession," Shanker wrote Thursday. A Chubb/AIG deal could give Chubb a potential successor to Greenberg in Zaffino.

Buying AIG could be a coup for Evan Greenberg, giving him control of the company founded more than a century ago by Cornelius Vander Starr and built by his father into an insurance and financial powerhouse.

Given its size advantage, Chubb probably can buy AIG if it wants, though if deal talks did develop, it is possible that AIG could look to a white knight in Berkshire Hathaway.

Buffett likely has followed AIG for decades. Buying it would enable Berkshire to expand its already sizable P&C operations, led by auto insurer Geico and reinsurer Gen Re. Berkshire has the most insurance capital of any P&C insurer in the world and a balance sheet with over $300 billion of cash and equivalents.

Other companies might be interested as well. With AIG's turnaround complete, the revived company could become a takeover target in a still fragmented P&C industry.

Write to Andrew Bary at andrew.bary@barrons.com

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December 13, 2025 02:00 ET (07:00 GMT)

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