This is a company with a book value of at least $62 per share, trading at $48.28. Folks, companies that trade this cheaply are usually in extremely bad shape, or have terrible business models. That is simply not the case with AIG. Anyone see the quarter over quarter increase in the Life Insurance segment? Up 30%+!!!! Yes, as a company, overall revenues have decreased a bit, but there are numerous companies dealing with slight drops in revenue, to me it will be rectified as the global economy continues to heal and companies begin to make more capital expenditures for property, plant and equipment. Also, remember last year we took the Hurricane Sandy hit during this quarter, by the looks of things this year, there will be no major hurricane even to depress earnings for this quarter.
So why the huge selloff...well in my opinion it was hedge fund driven....As soon as the CEO said that AIG will stop providing updates on goals, the hedge crowd all decided to go out of the exits at the same time. I don't neccessarily think this is a bad thing. Basically, Mr. Bemosche is not going to make promises to satisfy the hunger of Wall Street piranhas at the expense of AIG employees, the US taxpayer, and long-term shareholders. Anyone can hit goals by liquidating assets at any price attainable, slashing headcount, etc, but that is not the goal of AIG here. Believe me, fellow longs, one day this company will trade at least as book value. And also believe, that as soon as interest rates start rising, the cash is going to start pouring through the doors as the bond portfolio starts benefitting. Just my two cents.
it was a poor quarter. If AIG wants to trade at book value it needs to show that it can get to 9-10% return on equity. If it can do so, then it will be a very good investment from here. In order to get there though, it needs to deliver gains on the underwriting side otherwise it will join a large number of other subpar insurance companies that trade below book value.