What To Expect From American International Group Stock?

+21.21%
Upside
57.29
Market
69.44
Trefis
AIG: American International Group logo
AIG
American International Group

American International Group’s stock (NYSE: AIG) has lost 9% YTD, while the S&P500 is down 18% over the same period. Further, its current price of $51 per share is trading 26% below its fair value of $69 – Trefis’ estimate for American International Group’s valuation

The company posted mixed results in the first quarter of 2022, with earnings beating the consensus but revenues missing the mark. The total revenues increased 9% y-o-y to $15.8 billion driven by a 9% rise in premiums and a 36% jump in the total net-realized-gains. The net-earned- premiums mainly benefited from a 7% growth in the general insurance unit, followed by a 40% increase in the life & retirement segment. On the flip side, the positive impact of growth in the above units was partially offset by an 11% drop in the net investment income, primarily because of lower returns on available-for-sale fixed maturity securities due to the higher interest rates. Overall, the adjusted net income rose by 10% y-o-y to $4.25 billion. It was partly because of the revenue growth and partly due to lower expenses as a % of revenues. We expect the same trend to continue in Q2. Notably, the consensus estimates for Q2 revenues and earnings are $11.39 billion and $1.20 respectively.

The insurance giant posted total revenues of $52.1 billion in 2021 – up 19% y-o-y. It was driven by a significant jump in net realized gains from -$2.2 billion to $2.2 billion, followed by a 7% increase in the net investment income and a 10% growth in the premiums. Moving forward, we forecast the American International Group revenues to remain around $50.9 billion in FY2022. Additionally, AIG’s adjusted net income margin is likely to decrease from 18% to around 9%, leading to an adjusted net income of $4.6 billion. This coupled with an annual EPS of $5.60 and a P/E multiple of just above 12x will lead to the valuation of $69.

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 Returns Jul 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 AIG Return 1% -9% -21%
 S&P 500 Return 3% -18% 74%
 Trefis Multi-Strategy Portfolio 6% -18% 221%

[1] Month-to-date and year-to-date as of 7/11/2022
[2] Cumulative total returns since the end of 2016

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