Now Is A Great Time To Buy AIG

Summary

1. AIG has done well to recover from the financial crisis and has the potential to offer improved ROE.
2. Increase in dividend pay-out and share repurchase plan can amplify future shareholder returns.
3. Focus on property & casualty and life insurance business would hold the key to success.

Although American International Group (NYSE:AIG) grew steadily during the first half of 2015, it witnessed an 11% drop over the last 1.5 months. As a result, AIG now trades at a valuation closer to that of other large European insurers such as Axa (OTCQX:AXAHY), Allianz SE (OTCQX:AZSEY) and Zurich Insurance Group (OTCPK:ZFSVF). AIG's trailing P/E is 11.4 compared to 10.4 of AXAHY, 10.6 of ZFSVF, and 9.6 of Allianz. Looking one year down the line, AIG's forward P/E of 10.5 is close to the estimated figures of 10.3 of AZSEY, 9.5 of AXAHY and 9.1 of ZFSVF. The rapid decline in the stock price of AIG can be blamed more on the global equity sell-off led by the Chinese stock market crash and less on AIG's fundamental business processes. However, in terms of book value AIG remains attractive compared to its bigger counterparts. Value investors would find it interesting to take note of AIG's P/BV ratio of 0.7 that is less than half of 1.3 of ZFSVF and relatively low compared to 1.1 of AZSEY and 0.8 of AXAHY... READ MORE