BRK.B vs. AIG: Which Global Insurance Giant Can Offer Better Returns?
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.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
American International Group, Inc. (AIG): Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
2 hours ago
- Globe and Mail
Is General Mills Stock Underperforming the Dow?
Minneapolis, Minnesota-based General Mills, Inc. (GIS) is a global manufacturer and marketer of branded consumer foods sold through retail stores. With a market cap of $30.2 billion, the company operates through North America Retail, International, Pet, and North America Foodservice segments. Companies worth $10 billion or more are typically referred to as "large-cap stocks." GIS fits right into that category, with its market cap exceeding this threshold, reflecting its substantial size and influence in the packaged foods industry. The company benefits from its vast offerings of ready-to-eat cereals, convenient meals, snacks, and more. The company touched its 52-week high of $75.90 on Sept. 10 last year and has fallen 28.2% from that peak. In the past three months, GIS stock has declined 16.5%, underperforming the Dow Jones Industrial Average's ($DOWI) 2.3% uptick during the same time frame. The stock's performance looks grim over the longer term as well. GIS stock has fallen 18.5% over the past 52 weeks and 14.5% on a YTD basis, underperforming Dow's 10.3% gains over the past year and a marginal rise in 2025. To confirm its recent downturn, GIS has been trading below its 200-day moving average since early November 2024 and below its 50-day moving average since early October 2024, with some fluctuations. On Mar. 19, GIS shares plunged 2.1% following the release of its mixed Q3 results. The company's net sales decreased 5% year-over-year to $4.8 billion, caused by higher-than-expected retailer inventory reductions and a slowdown in the snacking segment, and missed the Street's estimates. Its adjusted operating profit also declined 13% from the previous year's quarter to $801 million, caused by a 140 basis point drop in its adjusted operating margin to 16.5%. Moreover, GIS' adjusted EPS declined 15% year-over-year to $1.00 but successfully surpassed the consensus estimates by 5.3%. Its peer, The Kraft Heinz Company (KHC), has declined 13.4% in 2025 and 20.8% over the past year, lagging behind the stock. Among the 20 analysts covering the GIS stock, the consensus rating is a ' Hold.' Its mean price target of $60.95 suggests a robust 11.8% upside potential from current price levels.
Globe and Mail
2 hours ago
- Globe and Mail
Previewing Q2 Earnings Expectations
The expectation is for Q2 earnings to increase by +5.1% from the same period last year on +3.8% higher revenues. This will be a material deceleration from the +11.9% earnings growth in Q1 on +3.6% revenue growth. In the unlikely event that actual Q2 earnings growth for the S&P 500 index turns out to be +5.1%, as currently expected, this will be the lowest earnings growth pace for the index since the +4.3% growth rate in 2023 Q3. We have been regularly flagging in recent weeks that 2025 Q2 earnings estimates have been steadily decreasing, as shown in the chart below. The magnitude of cuts to 2025 Q2 estimates since the start of the period is larger and more widespread compared to what we have become accustomed to seeing in the post-COVID period. Since the start of April, Q2 estimates have declined for 14 of the 16 Zacks sectors (Aerospace and Utilities are the only sectors whose estimates have increased), with the largest cuts to Conglomerates, Autos, Transportation, Energy, Basic Materials, and Construction sectors. Estimates for the Tech and Finance sectors, the largest earnings contributors to the S&P 500 index, accounting for more than 50% of all index earnings, have also been cut since the quarter got underway. But as we have been pointing out in recent weeks, the revisions trend for the Tech sector has notably stabilized in recent weeks, which you can see in the chart below. We see this same trend at play in annual estimates as well. The chart below shows the Tech sector's evolving earnings expectations for full-year 2025 A likely explanation for this stabilization in the revisions trend is the easing of tariff uncertainty after the more punitive version of the tariff regime was delayed. Analysts started revising their estimates lower in the immediate aftermath of the early April tariff announcements, but appear to have since concluded that those punitive tariff levels are unlikely to get levied, helping stabilize the revisions trend. The chart below shows current Q2 earnings and revenue growth expectations in the context of the preceding four quarters and the coming three quarters. The chart below shows the overall earnings picture on a calendar-year basis. In terms of S&P 500 index 'EPS', these growth rates approximate to $254.04 for 2025 and $287 for 2026. The chart below shows how these calendar year 2025 earnings growth expectations have evolved since the start of Q2. As you can see below, estimates fell sharply at the beginning of the quarter, which coincided with the tariff announcements, but have notably stabilized over the last four to six weeks. Key Earnings Reports This week The Q2 earnings season will really get going when the big banks come out with their June-quarter results in about a month. But we will have officially counted almost two dozen quarterly reports from S&P 500 members by then. All of those reports will be from companies with fiscal quarters ending in May, which we and other research organizations count as part of the June-quarter tally. We have seen such fiscal May-quarter results from four S&P 500 members, including last Wednesday's strong release from Oracle ORCL. We have another six S&P 500 members scheduled to report results this week, including Accenture ACN, Lennar LEN, and others. Oracle shares were up significantly following the beat-and-raise quarterly release, which came after two consecutive quarterly reports that market participants had found disappointing. Oracle's cloud growth appears to have finally arrived, with fiscal 2026 cloud revenues expected to grow by +40%, up from the fiscal 2025 growth rate of +24% (Oracle's fiscal year ends in May). As noted earlier, the stock has spiked on the earnings release and is now up +29.3% this year, handily outperforming the S&P 500 index (up +2.1%) and the Zacks Tech sector (up +2.5%). Shares of IT consulting firm Accenture have been under pressure lately, reflecting a challenging operating environment for its end-markets. The stock is down -11.4% this year, which compares to a +2.1% gain for the S&P 500 index and a +2.5% gain for the Zacks Tech sector. The issues in the Accenture story, in a generalized qualitative sense, pertain to the negative effects on corporate IT budgets of the ongoing tariff uncertainty and the deflationary effects of AI-driven operating efficiencies. One could argue that Accenture's scale lends its results considerable stability, particularly in comparison to other peers like India-based Infosys, TCS, and Wipro. But these macro headwinds nevertheless limit the stock's near-term upside potential. The company is scheduled to report results on June 20 th, with estimates essentially unchanged over the last two months. Lennar, the homebuilder, is scheduled to report results after the market's close on Monday, June 16 th. The homebuilder is expected to bring in $1.97 per share in earnings on $8.24 billion in revenues, representing year-over-year changes of -41.7% and -5.97%, respectively. This is a challenging environment for Lennar and other homebuilders, with demand hindered by affordability concerns and elevated mortgage rates. The stock was down after each of the last five quarterly releases and has lost roughly a fifth of its value this year (down -20.3%), which compares to the Zacks Construction sector's -1.9% decline and the S&P 500 index's +2.2% gain. Q2 Earnings Season Scorecard As noted earlier, we have already seen fiscal May-quarter results from four S&P 500 members, which we include in our Q2 tally. Total earnings for these four index members that have reported results are up +4.7% from the same period last year on +8.6% revenue gains, with 75% of the companies beating EPS estimates and all beating revenue estimates. The comparison charts below put the Q2 earnings and revenue growth rates for these index members in a historical context. The comparison charts below put the Q2 EPS and revenue beats percentages in a historical context. We are not drawing any conclusions from these results, given the small sample size at this stage. But we nevertheless wanted to put these early results in a historical context. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Accenture PLC (ACN): Free Stock Analysis Report Oracle Corporation (ORCL): Free Stock Analysis Report Lennar Corporation (LEN): Free Stock Analysis Report This article originally published on Zacks Investment Research (
CTV News
2 hours ago
- CTV News
Trump clears path for Nippon Steel investment in US Steel, so long as it fits the government's terms
WASHINGTON — U.S. President Donald Trump on Friday signed an executive order paving the way for a Nippon Steel investment in U.S. Steel, so long as the Japanese company complies with a 'national security agreement' submitted by the federal government. Trump's order didn't detail the terms of the national security agreement. But U.S. Steel and Nippon Steel said in a joint statement that the agreement stipulates that approximately US$11 billion in new investments will be made by 2028 and includes giving the U.S. government a 'golden share' — essentially veto power to ensure the country's national security interests are protected. 'We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership,' the two companies said. 'This partnership will bring a massive investment that will support our communities and families for generations to come. We look forward to putting our commitments into action to make American steelmaking and manufacturing great again.' The companies have completed a U.S. Department of Justice review and received all necessary regulatory approvals, the statement said. 'The partnership is expected to be finalized promptly,' the statement said. The companies offered few details on how the golden share would work and what investments would be made. Trump said Thursday that he would as president have 'total control' of what U.S. Steel did as part of the investment. Trump said then that the deal would preserve '51 per cent ownership by Americans.' The Japan-based steelmaker had been offering nearly $15 billion to purchase the Pittsburgh-based U.S. Steel in a merger that had been delayed on national security concerns starting during Joe Biden's presidency. Trump opposed the purchase while campaigning for the White House, yet he expressed optimism in working out an arrangement once in office. 'We have a golden share, which I control,' said Trump, although it was unclear what he meant by suggesting that the federal government would determine what U.S. Steel does as a company. Trump added that he was 'a little concerned' about what presidents other than him would do with their golden share, 'but that gives you total control.' Still, Nippon Steel has never said it was backing off its bid to buy and control U.S. Steel as a wholly owned subsidiary. The proposed merger had been under review by the Committee on Foreign Investment in the United States, or CFIUS, during the Trump and Biden administrations. The order signed Friday by Trump said the CFIUS review provided 'credible evidence' that Nippon Steel 'might take action that threatens to impair the national security of the United States,' but such risks might be 'adequately mitigated' by approving the proposed national security agreement. The order doesn't detail the perceived national security risk and only provides a timeline for the national security agreement. The White House declined to provide details on the terms of the agreement. The order said the draft agreement was submitted to U.S. Steel and Nippon Steel on Friday. The two companies must successfully execute the agreement as decided by the Treasury Department and other federal agencies that are part CFIUS by the closing date of the transaction. Trump reserves the authority to issue further actions regarding the investment as part of the order he signed on Friday. Associated Press writer Marc Levy in Harrisburg, Pa., contributed to this report Josh Boak, The Associated Press
