Why AIG Discounted Its Valuations in 2017



Lower valuations

Wall Street analysts have given a one-year price target of $70.00 on American International Group (AIG), which reflects an ~14.1% increase from the current price. American International Group has a one-year forward price-to-earnings ratio of ~12.0x, and its peers’ average one-year forward price-to-earnings ratio stood at ~13.0x.

Other insurance companies (IYF) have the following one-year forward price-to-earnings ratios:

  • Chubb Ltd. (CB): ~14.2x
  • Allstate (ALL): ~14.2x
  • MetLife (MET): ~10.6x

In 2Q17, AIG witnessed an increase of 33% in its Consumer Insurance division’s pretax operating income on a YoY basis. The company’s valuations could increase, as the company’s management expects to deploy capital in order to generate organic and inorganic profitable growth.

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AIG’s management is focusing on improving the bottom-line numbers for its Commercial business. The company has a positive outlook on its Personal Insurance business in terms of future growth. Strong performance in the equity markets has benefited the Group Retirement and Individual Businesses in 2Q17.

Price-to-sales ratios

American International Group’s (AIG) price-to-sales ratio on a trailing-12-month (or TTM) basis stood at ~1.1x. The price-to-sales ratios of its peers on a TTM basis are as follows:


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