Up 9% In The Last One Month, Where Is American International Group Stock Headed?

+20.29%
Upside
75.10
Market
90.34
Trefis
AIG: American International logo
AIG
American International

American International Group’s stock (NYSE: AIG) has gained around 2% YTD, while the S&P500 is up 19% over the same period. Further, at its current price of $65 per share, it is trading 4% below its fair value of $68 – Trefis’ estimate for American International Group’s valuation

Amid the current financial backdrop, AIG stock has seen extremely strong gains of 65% from levels of $40 in early January 2021 to around $65 now, vs. an increase of about 20% for the S&P 500 over this roughly 3-year period. AIG is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 50% in 2021, 11% in 2022, and 2% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 19% in 2023 (YTD) – indicating that AIG underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including V, JPM, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could AIG face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

AIG posted mixed results in the third quarter of 2023, with earnings beating the mark but revenues falling short. It reported total revenues of $12.78 billion – down 9% y-o-y, mainly driven by a 7% decrease in the premiums and a drop in total net realized gains from $2.6 billion to $1.1 billion. The premiums figure mainly suffered in the general insurance and the institutional markets segments. On the flip side, the net investment income witnessed a significant jump of 33% in the quarter. It was due to higher income from available sale fixed maturity securities and an improvement in the interest rate environment. Overall, the adjusted net income decreased by 26% y-o-y to $2 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. American International Group Stock Is Undervalued
  4. American International Group’s Stock Is Trading Below Its Intrinsic Value
  5. American International Group Stock To Post Mixed Results In Q4
  6. Forecast Of The Day: AIG’s International Net Premiums Earned

The top line declined 13% y-o-y to $36.98 billion in the first nine months of FY2023. It was primarily because of a change in total net realized gains from $8.78 billion to -$1.13 billion, partially offset by positive growth in total premiums and net investment income. In addition to the lower revenues, the expense figure increased 9% y-o-y. It led to a 63% drop in the adjusted net income to $3.5 billion.

Moving forward, we estimate the American International Group revenues to remain around $50.66 billion in FY2023. Additionally, AIG’s adjusted net income margin is likely to see some drop in the year, leading to an annual EPS of $6.59. This coupled with a P/E multiple of just above 10x will lead to a valuation of $68.

 Returns Nov 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 AIG Return 5% 2% -1%
 S&P 500 Return 9% 19% 103%
 Trefis Reinforced Value Portfolio 8% 27% 550%

[1] Month-to-date and year-to-date as of 11/29/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates