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Stock Strategist

AIG Has Ample Room to Improve

We think it should trade closer to book value than its current deep discount.


The years since the financial crisis have shown that American International Group (AIG) would have destroyed substantial value even if it had never written a single credit default swap, had noncore businesses it needed to shed, or had material issues in its core operations that it needed to address.

We believe underwriting discipline is the key stewardship factor in the insurance industry, and precrisis management's focus on growth is the root cause of AIG's poor historical performance. The shift to focus on risk-adjusted returns and operational efficiency set a course in the opposite direction. We think the strong underwriting background of current CEO Brian Duperreault positions him to make progress on the one big issue AIG still needs to resolve. We don't see any structural issues with AIG's business, and we think the franchise can earn adequate returns under capable management. The process will take time, but Duperreault promised to return AIG to underwriting profitability in 2019 and is on track to achieve this goal.

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

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