Skip to Content
Stock Strategist

Better Stewardship Creates Opportunity for AIG

The market’s view of the insurer’s turnaround efforts is too skeptical.

Mentioned: , , ,

 American International Group’s (AIG) problems during the financial crisis primarily related to its financial products division, and all of the issues that led to its blowup have been reduced to a point of immateriality, in our view. But the years since have shown that AIG would have destroyed substantial shareholder value even if it had never written a single credit default swap, that noncore businesses needed to be shed, and that the operational issues in the core operations need to be remedied.

Insurers have two potential sources of income: investment income and underwriting profits. Combined, these two streams determine the return on equity a company generates. The relative level of investment income for insurers depends on hard-to-predict capital market movements and is largely out of the company’s control; higher investment returns typically reflect higher risk taking as opposed to investing acumen, in our view. We do not believe any insurance company has a sustainable competitive advantage when it comes to investing float. (Warren Buffett and Berkshire Hathaway (BRK.B) would be the one exception to this rule.) As a result, we focus exclusively on underwriting profitability to distinguish quality companies in the sector.

Brett Horn does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.