By Pritam Biswas
May 1 (Reuters) – AIG has pared back its private credit activity amid current market conditions, the insurer’s finance chief said on Friday, helping reassure investors and pushing its shares up about 5% in early trading.
Elevated default rates have put big asset managers under sharper scrutiny over their liquidity, as redemptions pick up across the industry. Investors have also grown wary of the private credit market’s rapid expansion and its lack of transparency.
Several alternative asset managers who have a strong footing in such credit markets have seen their shares take the hit in the early months of 2026.
“We’ve slowed our deployment in this asset class, given market conditions,” CFO Keith Walsh said on a post earnings call with analysts.
The insurer posted a sharp rise in quarterly adjusted profit on Thursday, driven by strong underwriting and a steep decline in catastrophe-related losses from a year earlier when the industry was hit by claims from the Los Angeles wildfires.
Walsh also added that AIG holds all direct lending on its balance sheet and through business development companies. BDCs are publicly traded lenders to private companies and a key part of the private credit market. They offer investors higher yields, but with greater credit and liquidity risk.
Investor concerns center on whether reported net asset values fully reflect strains in parts of the private credit market. Unlike publicly traded assets, BDC portfolios are valued using fair-value estimates and internal models that can lag shifts in credit conditions, fuelling scepticism that NAVs may overstate the true value of underlying holdings.
“Our direct lending exposure is about $1.2 billion, less than 1.5% of the general insurance investment portfolio. It is a diversified portfolio of middle market loans with an average loan size of about $6 million,” Walsh said.
The reassurance of the portfolio and (non)deployment decision helps the under-pressure stock of the insurer, which has seen a year-to-date decline of nearly 13%.
SOFTWARE HOLDINGS AT MINIMUM
“The software exposure is approximately $130 million, or just 16 basis points of the general insurance portfolio,” Walsh said on the call.
Worries have also mounted over exposure to software‑heavy sectors and the risk of disruption from artificial intelligence, leading to closer scrutiny of valuation practices.
That has raised the risk that loans to small- and mid-sized companies could come under pressure.
Insurer Metlife’s CEO Michel Khalaf told the Semafor World Economy Summit in Washington last month that there may be some cracks in the private credit sector but not a sign that it’s a bubble about to burst.
(Reporting by Pritam Biswas in Bengaluru; Editing by Shailesh Kuber)
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