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 fourth of the premiums earned by the property and casualty division. Over the last two years the division has experienced a decline in premiums due to strengthening of the U.S. Dollar, especially against the Japanese Yen. Japan is a key market for the company. Trefis expects that AIG will continue to expand its presence in the Asia-Pacific region, increasing premiums from about $8.5 billion in 2014 to around $12 billion by the end of the Trefis forecast period. However, owing to an intense competition from the company faces from other insurers AIG could fail to capture additional share in this fast-growing market. This would also impact P&C investment assets only reaching which we currently forecast to grow beyond $183 billion by the end of our forecast period. There is about 5% downside to the Trefis price estimate for AIG's stock if premiums from Asia grow to only about $9.5 billion and corresponding growth in P&C invested assets is slowed to $150 billion through the Trefis forecast period.
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 has seen growth in premium volumes across different markets over the last couple of years. However, losses on the investment side have been a major challenge for insurers. Emerging markets 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.
Recovery in life and health insurance market
Employment level in the economy has a major impact on the life and health insurance business. Over the last year, the U.S. economy has consistently added jobs. Unemployment rate has come down to 5.5% and this has reflected well in AIG's life and retirement business. Going forward, we expect the growth momentum in the life and health insurance market to continue as the economic growth creates more jobs.
Investment Income To Improve
The last couple of years have resulted in subdued returns on investments, which are a crucial income source for insurance companies. Insurance companies typically depend on investment income to pay off their liabilities (insurance benefits, claims and dividends). Lower investment incomes have also pressured operating margins. Going forward, as macroeconomic parameters improve the Federal Reserve is likely to start raising interest rates, which had been maintained near zero level to stimulate economic recovery, and this should lead to better returns on invested assets for the insurance company.
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