This site requires a more recent version of Adobe Flash Player to function properly.
Go here to get Flash.
Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once
Flash is enabled:
Investment Overview for AIG (NYSE:AIG)
Below we look at the key drivers for AIG with potential upside or downside to the AIG's stock price.
- Property & Casualty Premiums In Asia Property & Casualty premiums in Asia account for a third of the premiums earned by the property and casualty division. Trefis expects that AIG will continue to expand its presence in the Asia-Pacific region, increasing premiums from under $11 billion in 2012 to over $20 billion by the end of the Trefis forecast period. However, if the company is unable to capture additional share as other insurers also focus in the fast-growing region, AIG's Asia P&C premiums may only reach about $17 billion. This would also likely result in P&C investment assets only reaching about $175 billion by the end of the Trefis forecast period, versus our current forecast of about $200 billion. This is because the company's invested assets are highly correlated to premium income, given that it invests its premiums. Should this occur there would be a downside of about 5% to the Trefis price estimate for AIG's stock.
American International Group, Inc. (AIG) is a leading provider of insurance and retirement solutions. The company serves individual and commercial customers primarily in the U.S., Canada, Europe and Asia. AIG's primary products include property and casualty (P&C) insurance, life insurance and retirement solutions.
Growth in global property & casualty market will present significant opportunity
The property and casualty insurance market was fairly resilient throughout the global economic downturn. Despite losses on the investment side, insurers had more than enough capacity to meed demand. While premium volumes declined in the U.S. and Europe, they rose in other regions. Growing economies such as India and China are expected to boost the property and casualty insurance market, which should provide healthy revenues for AIG with its global footprint.
Modest growth in life and health insurance market
Growth in the life and health insurance business continues to be impacted by the current higher levels of unemployment and it is possible that individuals may further reduce or eliminate coverages in response to financial pressures. Accordingly we expect only modest growth in the life and health insurance market in the near-term.
Investment losses should subside
The financial crisis of 2008-09 caused financial services firms to book heavy losses on their invested assets. Insurance companies typically depend on investment income to pay off their liabilities (insurance benefits, claims and dividends). Heavy investment losses during the financial crisis caused operating margins to drop significantly. While 2012 and 2011 was a soft year for investment returns relative to 2010, we do not expect the company to experience further losses on its investment portfolio.
Trefis Forecast Rationale for AIG's P&C Insurance Market Share in U.S.
This represents AIG's share of the global property and casualty (P&C) insurance market in terms of total premiums earned.
AIG's market share increased from 7.5% in 2009 to 8.1% in 2011.
Going forward, we expect modest improvement in AIG's market share as the company focuses more on its core business and leverages its strong market position in the U.S. We expect AIG's market share to eventually apporach 9% by the end of the Trefis forecast period.
Trefis considered the following factors in its analysis:
Back to Company Overview
- Global presence will help increase market share in emerging markets
- AIG has diversified operations around the world in regions such as North America, Asia Pacific, Europe, the Middle East and Latin America. While the U.S. and European markets have been relatively stagnant, there is growth in markets such as India and China. AIG's global presence and its recognized brand image will provide it an edge over some competitors in capturing that new business.
- Diversified product offering
- AIG writes all lines of commercial and general insurance including auto insurance and home insurance. AIG's insurance product offerings are much more extensive than many competitors. These include specialized forms of insurance such as such as aviation, directors and officers liability (D&O), kidnap-ransom, export credit and political risk coverages. This product offering should give AIG an advantage over competitors going forward.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on: DCF Methodology
View All Help Topics