American International Group’s Stock Is Trading Below Its Intrinsic Value

+24.02%
Upside
72.84
Market
90.34
Trefis
AIG: American International logo
AIG
American International

American International Group’s stock (NYSE: AIG) has lost 15% YTD, while the S&P500 is up 8% over the same period. Further, at its current price of $54 per share, it is trading 20% below its fair value of $67 – Trefis’ estimate for American International Group’s valuation

The company outperformed the consensus estimates in the first quarter of 2023, despite a 26% y-o-y drop in the total revenues to $10.98 billion. It was mainly due to a change in net realized gains from $3.6 billion to -$1.9 billion, offsetting the 19% increase in premiums and a 9% rise in net investment income (NII). The premiums figure mainly benefited from growth in North America group insurance, followed by a jump in the institutional insurance sub-segment of the life & retirement unit. Further, the net investment income grew due to a higher rate environment and higher available-for-sale fixed maturity sales. On the cost front, the total expense figure increased 22% y-o-y, primarily due to higher policyholder benefits and losses. Overall, the adjusted net income decreased from $4.2 billion to $23 million.

The top line grew 8% y-o-y to $56.4 billion in FY2022. It was mainly due to a change in total net realized gains from $2.15 billion to $8.99 billion, partially offset by a 19% y-o-y drop in NII. On the expense front, total benefits, losses & expenses as a % of revenues decreased from 76.7% to 74.7% over the same period. It led to a 9% improvement in adjusted net income to $10.25 billion.

Relevant Articles
  1. American International Group Stock Is Up 9% YTD, What’s Next?
  2. Up 14% In The Last Twelve Months, What To Expect From American International Group Stock In Q4?
  3. Up 9% In The Last One Month, Where Is American International Group Stock Headed?
  4. American International Group Stock Is Undervalued
  5. American International Group Stock To Post Mixed Results In Q4
  6. Forecast Of The Day: AIG’s International Net Premiums Earned

Moving forward, we estimate the American International Group revenues to remain around $50.81 billion in FY2023. Additionally, AIG’s adjusted net income margin is likely to decrease from 18% to around 12%, leading to an adjusted net income of $6.1 billion. This coupled with an annual EPS of $8.28 and a P/E multiple of just above 8x will lead to a valuation of $67.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns May 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AIG Return 1% -15% -18%
 S&P 500 Return -1% 8% 85%
 Trefis Multi-Strategy Portfolio 0% 8% 240%

[1] Month-to-date and year-to-date as of 5/8/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market Beating Portfolios
See all Trefis Price Estimates