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AIG: Worth More Than Its Share Price

Robert Honeywill profile picture
Robert Honeywill


  • American International Group has had a run up of late, but its share price remains well below its book value.
  • The company has flagged its intention to sell down some of its assets, presumably at book value, or above, and repurchase shares at current depressed prices.
  • On top of this, analysts' forward EPS estimates are well above recent years' historical levels, providing another avenue for upward pressure on share price in coming years.
  • Furthermore, a 2.6% dividend yield adds to the attractiveness of this stock.
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Fed Bails Out AIG With $85 Billion Emergency Loan
Photo by Spencer Platt/Getty Images News via Getty Images

Investment Thesis

Management have been pruning costs, and based on analysts' consensus EPS estimates, EPS growth for American International Group (NYSE:AIG) is likely to improve over the next three years compared to the last three years. Share price growth is

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This article was written by

Robert Honeywill profile picture
I am a retired accountant with a background in large mining projects, from feasibility to full-scale operation, large scale primary industry and food processing, commercialisation of university intellectual property, and consulting to small businesses, government departments and insolvency practitioners. I have gained a wealth of experience from having the extreme good fortune to work, in a cooperative environment, with so many people far more intelligent and smarter than me; from scientists and engineers with MBA qualifications, to University professors across a range of disciplines. Through the accident of mergers, acquisitions and dispositions, I held, at various times, financial controller positions within Utah International Inc, General Electric Inc, and BHP Billiton organizations. If I have a special skill, it is in methods of assessment of projects with long lives, where costs are front loaded and/or future revenues are subject to considerable degrees of uncertainty. In relation to stocks, I have a theory, using projections to calculate a present value per share is far less useful for a share buying decision, than using those same projections for calculating future value per share for determining potential exit value and rate of return.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment advisor and/or a tax advisor as to the suitability of such investments for their specific situation. Neither information nor any opinion expressed in this article constitutes a solicitation, an offer, or a recommendation to buy, sell, or dispose of any investment, or to provide any investment advice or service. An opinion in this article can change at any time without notice.

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Comments (28)

Great news post close today for AIG long term investors!
AIG is dead money. It has gone nowhere over the last years! No need to touch this deadly animal AIG! My 2 cents.
Too big to fail, government welfare queen with executives rewarded for failure. No thanks.
All insurance cos are crooked but AIG takes the crown. If there is something like a "legacy crook", AIG is it.
Abigsoxfan profile picture
Nobody knows what their book value is because nobody knows how under-valued their loss reserves are. Hence, valuing this company based on book value is a fruitless effort. And the market appears aware of this as it has valued the stock well under book for quite some time.
Equity Educator profile picture
@Abigsoxfan that’s the case for any and all insurance companies. So insurance companies are uninvestable? I think not! ACGL and CB, among others have been great performers over time. Your thesis of ten years ago is stale. AIG should be a 65 dollar stock even is reserves are 15% deficient
federmanevan profile picture
@Abigsoxfan it might be time to move on to a different company. The same thing is said on each alert on the company
Abigsoxfan profile picture
@Equity Educator Other insurance companies do not have AIG's record. Other insurance companies do not have a verifiable track record of under reserving losses by several billions of dollars. Other insurance companies did not rely on a $182 billion bail-out to still be here today. No, AIG stand far and above the mismanagement of themselves much more than any other insurance company.
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