Insurance company AIG watched its stock price climb approximately 5% during early Friday trading after executives announced the firm has reduced its private credit investments in response to current market uncertainties.
The decision comes as rising default rates have intensified investor scrutiny of major asset management companies and their liquidity positions, particularly as more clients seek to withdraw funds across the sector. Market participants have become increasingly concerned about the private credit industry’s explosive growth and limited transparency.
Multiple alternative asset management firms with significant exposure to these credit markets have experienced stock declines during the first months of 2026.
“We’ve slowed our deployment in this asset class, given market conditions,” stated CFO Keith Walsh during an analyst call following the company’s earnings report.
AIG reported a significant increase in quarterly adjusted earnings on Thursday, boosted by solid underwriting performance and a dramatic reduction in catastrophe losses compared to the previous year when the insurance industry faced substantial claims from the Los Angeles wildfire disasters.
Walsh explained that AIG maintains all its direct lending investments on its balance sheet through business development companies. These BDCs serve as publicly traded lenders to private businesses and represent a crucial component of the private credit marketplace, offering investors enhanced returns alongside increased credit and liquidity risks.
Market participants are questioning whether current reported net asset values accurately capture the stress affecting portions of the private credit sector. Unlike publicly traded securities, BDC portfolios receive valuations through fair-value assessments and internal modeling systems that may not quickly reflect changing credit environments, creating doubt about whether asset values truly represent underlying investment worth.
“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 explained.
The portfolio reassurance and deployment strategy helped boost the insurer’s struggling stock, which has dropped nearly 13% since the beginning of the year.
Regarding software sector exposure, Walsh noted during the call: “The software exposure is approximately $130 million, or just 16 basis points of the general insurance portfolio.”
Growing anxiety over software-sector investments and potential artificial intelligence disruption has led to increased examination of valuation methods, raising concerns that loans to small and medium-sized businesses could face pressure.
MetLife CEO Michel Khalaf told attendees at the Semafor World Economy Summit in Washington last month that while some weaknesses may exist in the private credit sector, these don’t indicate an impending bubble collapse.
