American International Group Inc Valuation – March 2019 #AIG

Company Profile (excerpt from Reuters): American International Group, Inc. (AIG), incorporated on June 9, 1967, is a global insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products and other financial services to commercial and individual customers. Its segments include Commercial Insurance, Consumer Insurance, Other Operations and Legacy Portfolio. The Company’s offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. Its Core businesses include Commercial Insurance and Consumer Insurance, as well as Other Operations. Commercial Insurance includes two modules: Liability and Financial Lines and Property and Special Risks. Consumer Insurance consists of four modules: Individual Retirement, Group Retirement, Life Insurance and Personal Insurance. It also reviews and assesses its core business through the locations of its insurance operations across three geographic modules: the United States, Europe and Japan.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG – March 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $37,361,814,481 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -110.67% Fail
5. Moderate PEmg Ratio PEmg < 20 21,490.00 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.67 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.00
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $0.03
MG Value based on 0% Growth $0.02
Market Implied Growth Rate 10740.75%
Current Price $42.98
% of Intrinsic Value N/A

American International Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $4.17 in 2015 to an estimated $0 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10740.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into American International Group Inc revealed the company was trading below its Graham Number of $75.74. The company pays a dividend of $1.28 per share, for a yield of 3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21490, which was above the industry average of 26.11.

American International Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $75.74
PEmg 21,490.00
PB Ratio 0.67
Dividend Yield 2.98%
TTM Dividend $1.28
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $34,540,000,000
Total Assets $491,984,000,000
Intangible Assets $4,082,000,000
Total Liabilities $434,675,000,000
Shares Outstanding (Diluted Average) 890,110,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.92
Dec2018 -$0.01
Dec2017 -$6.54
Dec2016 -$0.78
Dec2015 $1.65
Dec2014 $5.20
Dec2013 $6.13
Dec2012 $2.04
Dec2011 $11.01
Dec2010 $11.60
Dec2009 -$90.48
Dec2008 -$756.85
Dec2007 $47.80
Dec2006 $107.20
Dec2005 $79.80
Dec2004 $73.80
Dec2003 $70.60
Dec2002 $43.40
Dec2001 $30.80
Dec2000 $46.60
Dec1999 $46.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.00
Dec2018 -$1.34
Dec2017 -$0.96
Dec2016 $2.17
Dec2015 $4.17
Dec2014 $6.02
Dec2013 $0.30
Dec2012 -$56.58
Dec2011 -$109.06
Dec2010 -$158.11
Dec2009 -$202.81
Dec2008 -$202.54
Dec2007 $75.03
Dec2006 $84.08
Dec2005 $68.24
Dec2004 $59.32
Dec2003 $50.60

Recommended Reading:

Other ModernGraham posts about the company

American International Group Inc – June 2018 $AIG
American International Group Inc Valuation – March 2017 $AIG
Best Stocks Below Their Graham Number – January 2017
21 Best Undervalued Stocks of the Week – 8/27/16
Best Stocks Below Their Graham Number – August 2016

Other ModernGraham posts about related companies

Chubb Ltd Valuation – March 2019 #CB
Loews Corporation Valuation – March 2019 #L
Anthem Inc Valuation – February 2019 $ANTM
Arthur J Gallagher & Co Valuation – February 2019 $AJG
Brighthouse Financial Inc Valuation – February 2019 $BHF
Allstate Corp Valuation – February 2019 $ALL
Hartford Financial Services Group Inc Valuation – February 2019 $HIG
Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc – June 2018 $AIG

Company Profile (excerpt from Reuters): American International Group, Inc. (AIG), incorporated on June 9, 1967, is a global insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products and other financial services to commercial and individual customers. Its segments include Commercial Insurance, Consumer Insurance, Other Operations and Legacy Portfolio. The Company’s offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. Its Core businesses include Commercial Insurance and Consumer Insurance, as well as Other Operations. Commercial Insurance includes two modules: Liability and Financial Lines and Property and Special Risks. Consumer Insurance consists of four modules: Individual Retirement, Group Retirement, Life Insurance and Personal Insurance. It also reviews and assesses its core business through the locations of its insurance operations across three geographic modules: the United States, Europe and Japan.

AIG Chart

AIG data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG – June 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

 

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $49,480,309,041 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -96.07% Fail
5. Moderate PEmg Ratio PEmg < 20 254.40 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.80 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.22
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $3.14
MG Value based on 0% Growth $1.84
Market Implied Growth Rate 122.95%
Current Price $55.12
% of Intrinsic Value N/A

American International Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $6.02 in 2014 to an estimated $0.22 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 122.95% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into American International Group Inc revealed the company was trading below its Graham Number of $87.09. The company pays a dividend of $1.28 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 254.4, which was above the industry average of 30.02.

American International Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $87.09
PEmg 254.40
PB Ratio 0.80
Dividend Yield 2.32%
TTM Dividend $1.28
Number of Consecutive Years of Dividend Growth 5

Useful Links:

 

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $33,619,000,000
Total Assets $499,143,000,000
Intangible Assets $0
Total Liabilities $435,786,000,000
Shares Outstanding (Diluted Average) 925,267,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2017 -$6.54
Dec2016 -$0.78
Dec2015 $1.65
Dec2014 $5.20
Dec2013 $6.13
Dec2012 $2.04
Dec2011 $11.01
Dec2010 $11.60
Dec2009 -$90.48
Dec2008 -$756.85
Dec2007 $47.80
Dec2006 $107.20
Dec2005 $79.80
Dec2004 $73.80
Dec2003 $70.60
Dec2002 $43.40
Dec2001 $30.80
Dec2000 $46.60
Dec1999 $46.80
Dec1998 $38.40

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.22
Dec2017 -$0.96
Dec2016 $2.17
Dec2015 $4.17
Dec2014 $6.02
Dec2013 $0.30
Dec2012 -$56.58
Dec2011 -$109.06
Dec2010 -$158.11
Dec2009 -$202.81
Dec2008 -$202.54
Dec2007 $75.03
Dec2006 $84.08
Dec2005 $68.24
Dec2004 $59.32
Dec2003 $50.60
Dec2002 $40.80

Recommended Reading:

Other ModernGraham posts about the company

American International Group Inc Valuation – March 2017 $AIG
Best Stocks Below Their Graham Number – January 2017
21 Best Undervalued Stocks of the Week – 8/27/16
Best Stocks Below Their Graham Number – August 2016
American International Group Inc Valuation – August 2016 $AIG

Other ModernGraham posts about related companies

Chubb Ltd Valuation – June 2018 $CB
Loews Corp Valuation – May 2018 $L
Anthem Inc Valuation – May 2018 $ANTM
Berkshire Hathaway Inc Valuation – May 2018 $BRK-B
Arthur J Gallagher & Co Valuation – April 2018 $AJG
Allstate Corp Valuation – April 2018 $ALL
Hartford Financial Services Group Inc Valuation – April 2018 $HIG
Unum Group Valuation – April 2018 $UNM
Brighthouse Financial Inc Valuation – Initial Coverage $BHF
XL Group Ltd Valuation – April 2018 $XL

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc Valuation – March 2017 $AIG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American International Group Inc (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. is a global insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products and other financial services to commercial and individual customers. Its segments include Commercial Insurance, Consumer Insurance, Other Operations and Legacy Portfolio. The Commercial Insurance segment is a provider of insurance products and services for commercial customers. It includes property casualty networks. The Consumer Insurance segment is a franchise that brings together a portfolio of retirement, life insurance and personal insurance products offered through multiple distribution networks. The Other Operations segment consists of businesses and items not attributed to its Commercial and Consumer modules or its Legacy Portfolio. The Legacy Portfolio segment includes Legacy Property and Casualty Run-Off Insurance Lines, as well as Legacy Life Insurance Run-Off Lines and Legacy Investments.

AIG Chart

AIG data by YCharts

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG – March 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $61,967,130,248 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -100.59% Fail
5. Moderate PEmg Ratio PEmg < 20 24.28 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.59
MG Growth Estimate 15.00%
MG Value $99.74
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $37.56
MG Value based on 0% Growth $22.02
Market Implied Growth Rate 7.89%
Current Price $62.91
% of Intrinsic Value 63.07%

American International Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.3 in 2013 to an estimated $2.59 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.89% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into American International Group Inc revealed the company was trading below its Graham Number of $84.09. The company pays a dividend of $1.28 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 24.28, which was above the industry average of 18.78.

American International Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $84.09
PEmg 24.28
PB Ratio 0.90
Dividend Yield 2.03%
TTM Dividend $1.28
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Long-Term Debt & Capital Lease Obligation $30,912,000,000
Total Assets $498,264,000,000
Intangible Assets $0
Total Liabilities $421,964,000,000
Shares Outstanding (Diluted Average) 1,091,085,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.10
Dec2016 -$0.78
Dec2015 $1.65
Dec2014 $5.20
Dec2013 $6.13
Dec2012 $2.04
Dec2011 $11.01
Dec2010 $11.60
Dec2009 -$90.48
Dec2008 -$756.85
Dec2007 $47.80
Dec2006 $107.20
Dec2005 $79.80
Dec2004 $73.80
Dec2003 $70.60
Dec2002 $43.40
Dec2001 $30.80
Dec2000 $46.60
Dec1999 $46.80
Dec1998 $38.40
Dec1997 $32.00

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.59
Dec2016 $2.17
Dec2015 $4.17
Dec2014 $6.02
Dec2013 $0.30
Dec2012 -$56.58
Dec2011 -$109.06
Dec2010 -$158.11
Dec2009 -$202.81
Dec2008 -$202.54
Dec2007 $75.03
Dec2006 $84.08
Dec2005 $68.24
Dec2004 $59.32
Dec2003 $50.60
Dec2002 $40.80
Dec2001 $39.31

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – July 2016
5 Companies for Enterprising Investors Near 52 Week Lows – June 2016
Stocks Trading Below Their Graham Number – June 2016
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – March 2016

Other ModernGraham posts about related companies

Torchmark Corporation Valuation – March 2017 $TMK
Humana Inc Valuation – Initial Coverage $HUM
Chubb Ltd Valuation – March 2017 $CB
Stewart Information Services Corp Valuation – Initial Coverage $STC
Loews Corporation – February 2017 $L
Kemper Corp Valuation – Initial Coverage $KMPR
CNO Financial Group Inc Valuation – January 2017 $CNO
Anthem Inc Valuation – January 2017 $ANTM
American Financial Group Inc Valuation – January 2017 $AFG
Selective Insurance Group Valuation – Initial Coverage $SIGI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc Valuation – August 2016 $AIG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – August 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American International Group Inc (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is an insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in over 100 countries and jurisdictions. The Company operates through two segments: Commercial Insurance and Consumer Insurance, as well as a Corporate and Other category. Commercial Insurance has three operating segments: Property Casualty, Mortgage Guaranty and Institutional Markets. Commercial Insurance segment is a provider of insurance products and services for commercial and institutional customers. Consumer Insurance also has three operating segments: Retirement, Life and Personal Insurance. Consumer Insurance is a franchise that offers a portfolio of retirement, life insurance and property casualty products through multiple distribution networks. Corporate and Other includes the Company, as well as certain legacy assets and run-off insurance businesses.

AIG Chart

AIG data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG – August 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $62,816,099,240 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -101.31% Fail
5. Moderate PEmg Ratio PEmg < 20 16.16 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.75 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AIG value chart August 2016

EPSmg $3.64
MG Growth Estimate 15.00%
MG Value $140.01
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $52.73
MG Value based on 0% Growth $30.91
Market Implied Growth Rate 3.83%
Current Price $58.78
% of Intrinsic Value 41.98%

American International Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-56.58 in 2012 to an estimated $3.64 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.83% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into American International Group Inc revealed the company was trading below its Graham Number of $82.15. The company pays a dividend of $1.2 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 16.16, which was below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

American International Group Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

AIG charts August 2016

Graham Number $82.15
PEmg 16.16
PB Ratio 0.75
Dividend Yield 2.04%
TTM Dividend $1.20
Number of Consecutive Years of Dividend Growth 4

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Current Portion of Long-Term Debt $0
Total Assets $510,349,000,000
Intangible Assets $0
Total Liabilities $420,403,000,000
Shares Outstanding (Diluted Average) 1,140,046,000

Earnings Per Share History

Next Fiscal Year Estimate $3.61
Dec2015 $1.65
Dec2014 $5.20
Dec2013 $6.13
Dec2012 $2.04
Dec2011 $11.01
Dec2010 $11.60
Dec2009 -$90.48
Dec2008 -$756.85
Dec2007 $47.80
Dec2006 $107.20
Dec2005 $79.80
Dec2004 $73.80
Dec2003 $70.60
Dec2002 $43.40
Dec2001 $30.80
Dec2000 $46.60
Dec1999 $46.80
Dec1998 $38.40
Dec1997 $32.00
Dec1996 $29.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.64
Dec2015 $4.17
Dec2014 $6.02
Dec2013 $0.30
Dec2012 -$56.58
Dec2011 -$109.06
Dec2010 -$158.11
Dec2009 -$202.81
Dec2008 -$202.54
Dec2007 $75.03
Dec2006 $84.08
Dec2005 $68.24
Dec2004 $59.32
Dec2003 $50.60
Dec2002 $40.80
Dec2001 $39.31
Dec2000 $41.90

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – July 2016
5 Companies for Enterprising Investors Near 52 Week Lows – June 2016
Stocks Trading Below Their Graham Number – June 2016
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – March 2016

Other ModernGraham posts about related companies

Humana Inc Valuation – August 2016 $HUM
Chubb Limited Valuation – August 2016 $CB
Torchmark Corporation Valuation – August 2016 $TMK
Anthem Inc Valuation – August 2016 $ANTM
American Financial Group Inc Valuation – August 2016 $AFG
AFLAC Inc Valuation – August 2016 $AFL
Hartford Financial Services Group Inc Valuation – August 2016 $HIG
MetLife Inc Valuation – August 2016 $MET
Genworth Financial Inc Valuation – August 2016 $GNW
Aetna Inc Valuation – July 2016 $AET

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc Stock Valuation – February 2016 $AIG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American International Group Inc (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is an insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services. Its various offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. The Company’s AIG Global Benefits Network provides administrative and marketing services to insurance companies offering benefit solutions to multinational employers. AIG Global Benefits Network can develop global benefit plan solutions for multinational clients by tapping the coverage options offered by carriers throughout the network. AIG operates through two segments: Commercial Insurance and Consumer Insurance. Commercial Insurance is a provider of insurance products and services for commercial and institutional customers.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $67,534,221,034 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -102.53% Fail
5. Moderate PEmg Ratio PEmg < 20 10.58 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.67 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AIG value chart February 2016

EPSmg $4.92
MG Growth Estimate 15.00%
MG Value $189.37
Opinion Undervalued
MG Grade B-
MG Value based on 3% Growth $71.32
MG Value based on 0% Growth $41.81
Market Implied Growth Rate 1.04%
Current Price $52.04
% of Intrinsic Value 27.48%

American International Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-109.06 in 2011 to an estimated $4.92 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.04% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

American International Group Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

AIG charts February 2016

Graham Number $83.47
PEmg 10.58
PB Ratio 0.67
Dividend Yield 1.26%
Number of Consecutive Years of Dividend Growth 3

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep2015
Long-Term Debt $30,719,000,000
Total Assets $501,985,000,000
Intangible Assets $0
Total Liabilities $402,986,000,000
Shares Outstanding (Diluted Average) 1,279,073,000

Earnings Per Share History

Next Fiscal Year Estimate $3.90
Dec2014 $5.20
Dec2013 $6.13
Dec2012 $2.04
Dec2011 $11.01
Dec2010 $11.60
Dec2009 -$90.48
Dec2008 -$756.85
Dec2007 $47.80
Dec2006 $107.20
Dec2005 $79.80
Dec2004 $73.80
Dec2003 $70.60
Dec2002 $43.40
Dec2001 $30.80
Dec2000 $46.60
Dec1999 $46.80
Dec1998 $38.40
Dec1997 $32.00
Dec1996 $29.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.92
Dec2014 $6.02
Dec2013 $0.30
Dec2012 -$56.58
Dec2011 -$109.06
Dec2010 -$158.11
Dec2009 -$202.81
Dec2008 -$202.54
Dec2007 $75.03
Dec2006 $84.08
Dec2005 $68.24
Dec2004 $59.32
Dec2003 $50.60
Dec2002 $40.80
Dec2001 $39.31
Dec2000 $41.90
Dec1999 $36.13

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks For Value Investors This Week – 11/14/15
American International Group Inc. Valuation – November 2015 Update $AIG
10 Most Undervalued Companies for the Enterprising Investor – October 2015
The Best Companies of the Insurance Industry – October 2015
10 Most Undervalued Companies for the Enterprising Investor – August 2015

Other ModernGraham posts about related companies

Chubb Ltd Stock Valuation – February 2016 $CB
Prudential Financial Inc Valuation – February 2016 $PRU
Anthem Inc Valuation – February 2016 $ANTM
Aflac Inc Valuation – February 2016 $AFL
MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON
Progressive Corp Valuation – November 2015 Update $PGR

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc. Valuation – November 2015 Update $AIG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how American International Group Inc. (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is an insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services. Its various offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. The Company’s AIG Global Benefits Network provides administrative and marketing services to insurance companies offering benefit solutions to multinational employers. AIG Global Benefits Network can develop global benefit plan solutions for multinational clients by tapping the coverage options offered by carriers throughout the network. AIG operates through two segments: Commercial Insurance and Consumer Insurance. Commercial Insurance is a provider of insurance products and services for commercial and institutional customers.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIG – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $76,383,202,285 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -102.54% Fail
5. Moderate PEmg Ratio PEmg < 20 12.39 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.79 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AIG value Chart November 2015

EPSmg $4.93
MG Growth Estimate 15.00%
MG Value $189.88
Opinion Undervalued
MG Value based on 3% Growth $71.51
MG Value based on 0% Growth $41.92
Market Implied Growth Rate 1.95%
Current Price $61.11
% of Intrinsic Value 32.18%

American International Group Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the inconsistent dividend record.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $109.06 in 2011 to an estimated gain of $4.93 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.95% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on American International Group Inc. (AIG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AIG Charts November 2015

Graham Number $83.90
PEmg 12.39
PB Ratio 0.79
Dividend Yield 1.07%
Number of Consecutive Years of Dividend Growth 3

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $30,719,000,000
Total Assets $501,985,000,000
Intangible Assets $0
Total Liabilities $402,986,000,000
Shares Outstanding (Diluted Average) 1,279,073,000

Earnings Per Share History

Next Fiscal Year Estimate $3.94
Dec14 $5.20
Dec13 $6.13
Dec12 $2.04
Dec11 $11.01
Dec10 $11.60
Dec09 -$90.48
Dec08 -$756.85
Dec07 $47.80
Dec06 $107.20
Dec05 $79.80
Dec04 $73.80
Dec03 $70.60
Dec02 $43.40
Dec01 $30.80
Dec00 $46.60
Dec99 $46.80
Dec98 $38.40
Dec97 $32.00
Dec96 $29.16
Dec95 $25.13

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.93
Dec14 $6.02
Dec13 $0.30
Dec12 -$56.58
Dec11 -$109.06
Dec10 -$158.11
Dec09 -$202.81
Dec08 -$202.54
Dec07 $75.03
Dec06 $84.08
Dec05 $68.24
Dec04 $59.32
Dec03 $50.60
Dec02 $40.80
Dec01 $39.31
Dec00 $41.90
Dec99 $37.80

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Enterprising Investor – October 2015
The Best Companies of the Insurance Industry – October 2015
10 Most Undervalued Companies for the Enterprising Investor – August 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
American International Group Inc. Analysis – August 2015 Update $AIG

Other ModernGraham posts about related companies

Cincinnati Financial Corp Valuation – November 2015 Update $CINF
American Financial Group Inc. Valuation – November 2015 Update $AFG
Loews Corporation Valuation – November 2015 Update $L
Allstate Corporation Valuation – October 2015 Update $ALL
Humana Inc. Valuation – October 2015 Update $HUM
Torchmark Corporation Valuation – October 2015 Update $TMK
MetLife Inc. Valuation – October 2015 Update $MET
Aetna Inc. Valuation – October 2015 Update $AET
Cigna Corporation Analysis – October 2015 Update $CI
The Best Companies of the Insurance Industry – October 2015

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

American International Group Inc. Analysis – August 2015 Update $AIG

220px-AIG_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how American International Group Inc. (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is an insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services. Its various offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. The Company’s AIG Global Benefits Network provides administrative and marketing services to insurance companies offering benefit solutions to multinational employers. AIG Global Benefits Network can develop global benefit plan solutions for multinational clients by tapping the coverage options offered by carriers throughout the network. AIG operates through two segments: Commercial Insurance and Consumer Insurance. Commercial Insurance is a provider of insurance products and services for commercial and institutional customers.

Defensive Investor – must pass all 6 of the following tests: Score = 3/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $63.39
MG Value $206.31
MG Opinion Undervalued
Value Based on 3% Growth $77.70
Value Based on 0% Growth $45.55
Market Implied Growth Rate 1.66%
PEmg 11.83
PB Ratio 0.83

Balance Sheet – June 2015

Total Debt $30,360,000,000
Total Assets $509,987,000,000
Intangible Assets $0
Total Liabilities $405,729,000,000
Outstanding Shares 1,365,400,000

Earnings Per Share

2015 (estimate) $5.22
2014 $5.20
2013 $6.13
2012 $2.04
2011 $11.01
2010 $11.60
2009 -$90.48
2008 -$756.85
2007 $47.80
2006 $107.20
2005 $79.80

Earnings Per Share – ModernGraham 

2015 (estimate) $5.36
2014 $6.02
2013 $0.30
2012 -$56.58
2011 -$109.06
2010 -$158.11

Dividend History

Conclusion

American International Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the insufficient earnings growth or stability over the last ten years, and the inconsistent dividend record, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.

As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $109.06 in 2011 to an estimated gain of $5.36 for 2015.  This level of demonstrated growth is greater than the market’s implied estimate of 1.66% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on American International Group Inc. (AIG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any of the companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

American International Group Inc. Quarterly Valuation – May 2015 $AIG

220px-AIG_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how American International Group (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is an insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services. It offers products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. It earns revenues primarily from insurance premiums, policy fees from universal life insurance and investment products, and income from investments. AIG companies serve commercial, institutional and individual customers through worldwide property-casualty networks of any insurer. In addition, AIG companies are providers of life insurance and retirement services in the United States. Its segments include AIG Property Casualty and AIG Life and Retirement.

FITB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 3/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $59.67
MG Value $197.84
MG Opinion Undervalued
Value Based on 3% Growth $74.51
Value Based on 0% Growth $43.68
Market Implied Growth Rate 1.56%
PEmg 11.61
PB Ratio 0.77

Balance Sheet – March 2015

Total Debt $31,999,000,000
Total Assets $520,701,000,000
Intangible Assets $0
Total Liabilities $412,722,000,000
Outstanding Shares 1,386,300,000

Earnings Per Share

2015 (estimate) $4.56
2014 $5.20
2013 $6.13
2012 $2.04
2011 $11.01
2010 $11.60
2009 -$90.48
2008 -$756.85
2007 $47.80
2006 $107.20
2005 $79.80

Earnings Per Share – ModernGraham 

2015 (estimate) $5.14
2014 $6.02
2013 $0.30
2012 -$56.58
2011 -$109.06
2010 -$158.11

Dividend History

Conclusion

American International Group Inc. qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the inconsistent dividend history, as well as the lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $109.06 in 2011 to an estimated gain of $5.14 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.56% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on American International Group Inc. (AIG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in American International Group Inc. (AIG) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

American International Group Inc. Quarterly Valuation – January 2015 $AIG

220px-AIG_logo.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how American International Group Inc. (AIG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): American International Group, Inc. (AIG) is a global insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 130 countries. It diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. It earns revenues primarily from insurance premiums, policy fees from universal life insurance and investment products, and income from investments. In May 2014, the Company completed the sale of 100% interest in International Lease Finance Corporation (ILFC) to AerCap Holdings N.V.

Defensive Investor – must pass all 6 of the following tests: Score = 3/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $51.51
MG Value $222.81
MG Opinion Undervalued
Value Based on 3% Growth $83.92
Value Based on 0% Growth $49.19
Market Implied Growth Rate 0.20%
PEmg 8.90
PB Ratio 0.68

Balance Sheet – September 2014

Total Debt $36,223,000,000
Total Assets $527,190,000,000
Intangible Assets $0
Total Liabilities $418,609,000,000
Outstanding Shares 1,442,100,000

Earnings Per Share

2014 (estimate) $4.51
2013 $6.13
2012 $2.04
2011 $11.01
2010 $11.60
2009 -$90.48
2008 -$756.85
2007 $47.80
2006 $107.20
2005 $79.80
2004 $73.80

Earnings Per Share – ModernGraham 

2014 (estimate) $5.79
2013 $0.30
2012 -$56.58
2011 -$109.06
2010 -$158.11
2009 -$202.81

Dividend History

Conclusion:

American International Group qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years and the inconsistent dividends, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from a loss of $158.11 in 2010 to an estimated gain of $5.79 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.2% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out previous ModernGraham valuations of American International Group Inc. (AIG) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on American International Group Inc. (AIG)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in American International Group Inc. (AIG) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

ModernGraham Valuation: American International Group (AIG)

moneyCompany Profile (obtained from Google Finance): American International Group, Inc. (AIG) is a global insurance company. The Company provides a range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 130 countries. It diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. It earns revenues primarily from insurance premiums, policy fees from universal life insurance and investment products, and income from investments. Its segments include AIG Property Casualty and AIG Life and Retirement. During the year ended December 31, 2012, the Chartis segment was renamed AIG Property Casualty and the SunAmerica segment was renamed AIG Life and Retirement.

Defensive and Enterprising Investor Tests (What is the significance of these tests, and what is PEmg ratio?):

Defensive Investor – must pass all 6 of the following tests: Score = 2/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

  1. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary (Explanation of the ModernGraham Valuation Model)

Key Data:

MG Value $38.14
MG Opinion Overvalued
Value Based on 3% Growth $14.36
Value Based on 0% Growth $8.42
Market Implied Growth Rate 21.45%
PEmg 51.40
PB Ratio 0.76

Balance Sheet – 9/30/2013 

Total Debt $42,231,000,000
Total Assets $540,744,000,000
Intangible Assets $0
Total Liabilities $441,951,000,000
Outstanding Shares 1,472,340,000

Earnings Per Share

2013 (estimate) $5.62
2012 $4.44
2011 $8.60
2010 $14.75
2009 -$86.30
2008 -$753.90
2007 $47.80
2006 $107.00
2005 $79.80
2004 $75.00
2003 $70.60

Earnings Per Share – ModernGraham 

2013 (estimate) $0.99
2012 -$55.04
2011 -$107.79
2010 -$155.37
2009 -$200.66
2008 -$201.51

Conclusion:

American International Group is a company that is coming out of a very dark point in its history.  At this point in the turnaround, the company has yet to satisfy Defensive Investors or Enterprising Investors.  Defensive Investors look at a ten year history and require positive earnings and dividend payments throughout that period, but since American International Group had such large losses at the heart of the financial crisis, the Defensive Investor is not yet comfortable with the company.  Enterprising Investors look at only a five year history, so they are much closer to accepting the company as a potential investment, but the loss in 2009 still eliminates the company from contention for this investor type.  Therefore, Intelligent Investors seeking to follow Benjamin Graham’s value investing methods may wish to seek other opportunities by reviewing ModernGraham’s list of Defensive and Enterprising Companies.  From a valuation standpoint, the company has seen some growth, but the market is currently implying a growth rate above what has been seen historically.  As a result, the company appears to be overvalued at this time.

What do you think?  Do you agree that American International Group is overvalued?  What would be your assessment?  Is the company not suitable for Defensive Investors or Enterprising Investors?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in American International Group (AIG) at the time of publication and had no intention of changing that position within the next 72 hours.

Photo Credit:  Andrew Magill

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