AIG reports its 4Q12 earnings this week, and we already know it will reflect significant Superstorm Sandy losses -- an estimated $2 billion. It will be most interesting to observe how the company's property-casualty business performed excluding these claims, since almost all of its competitors reported much better than expected results in the comparable period. If AIG's general insurance performance does not mirror the improved results of other carriers, I believe this will be cause for considerable concern among investors. It will also be important to learn from management what level of commercial-lines rate increases were obtained in 4Q12 and what the trends in this important metric are so far in 2013. Finally, this segment of the company has had an operating expense problem for some time, and it will be important to observe what management is doing to lower the entity's expense ratio going forward.
I hope investors look beneath the headline numbers and dig into the details of AIG"S operating metrics to truly understand if management will achieve its ROE objectives. So far, the company isn't close to earning its cost-of-capital, which explains why its share are selling at such a steep discount to book value. Until this metric significantly improves, one shouldn't expect a material upward move in its share price.
If AIG crushed earnings why is it trading less now then it was before last earnings? Everyone keeps saying this stock is worth $65 but come on it won't even trade over $40 so someone must know something we don't.
AIG hasn't crushed earnings the past four quarters, especially with regard to its general insurance business. Moreover, it had better crush its 4Q12 EPS because that is what all its competitors did. We'll observe what it did shortly. Let's hope it didn't have to strengthen its p-c loss reserves once again.