Intrinsic Value American International Group, Inc. (0OAL.L)

• Previous Close: £74.65
• Intrinsic Value: £42.25
• Upside potential: -43%

Stock Valuation Context

Business Model And Market Position

American International Group, Inc. (AIG) is a global leader in diversified insurance, operating across commercial, institutional, and individual markets. The company’s General Insurance segment provides a broad portfolio of liability, property, and specialty insurance products, including cyber risk, marine, and political risk coverage. Its Life and Retirement segment offers annuities, life insurance, and retirement solutions, distributed through independent agents, financial advisors, and direct channels. AIG’s diversified revenue streams and global footprint position it as a resilient player in the insurance sector, balancing underwriting discipline with growth in high-margin niches. The company’s market strength lies in its ability to underwrite complex risks, supported by deep actuarial expertise and a strong brand. While facing competition from both traditional insurers and insurtech disruptors, AIG maintains a competitive edge through its scale, diversified product mix, and strategic focus on profitability over volume. Its presence in North America and international markets provides geographic diversification, mitigating regional volatility. AIG’s emphasis on digital transformation and operational efficiency further enhances its ability to adapt to evolving customer needs and regulatory landscapes.

Revenue Profitability And Efficiency

AIG reported revenue of $27.25 billion, with net income of $3.35 billion, reflecting disciplined underwriting and cost management. The diluted EPS of $5.06 underscores solid profitability, while operating cash flow of $3.27 billion indicates healthy liquidity generation. The absence of capital expenditures suggests a lean operational model, with resources allocated toward risk management and shareholder returns rather than heavy infrastructure investments.

Earnings Power And Capital Efficiency

The company’s earnings power is evident in its robust net income and EPS, supported by a balanced mix of underwriting profits and investment income. AIG’s capital efficiency is reflected in its ability to generate substantial cash flow without significant capital outlays, allowing for reinvestment in high-return segments and debt reduction. The beta of 0.7 indicates lower volatility relative to the market, appealing to risk-averse investors.

Balance Sheet And Financial Health

AIG’s balance sheet shows $1.37 billion in cash and equivalents against $9.79 billion in total debt, suggesting manageable leverage. The company’s liquidity position is adequate, with operating cash flow covering interest obligations comfortably. The lack of capital expenditures further bolsters financial flexibility, enabling strategic allocations toward growth or shareholder distributions.

Growth Trends And Dividend Policy

AIG’s growth is driven by its focus on profitable underwriting and expansion in high-demand segments like cyber insurance. The dividend payout of $1.60 per share signals a commitment to returning capital to shareholders, supported by stable cash flows. While growth may be moderate, the company’s disciplined approach ensures sustainable returns without overextending its balance sheet.

Valuation And Market Expectations

With a market cap of $47.2 billion, AIG trades at a valuation reflecting its steady earnings and defensive sector positioning. Investors likely price in expectations of continued underwriting improvements and stable annuity sales. The low beta aligns with its role as a relatively stable investment in volatile markets, though growth prospects may be tempered by industry-wide margin pressures.

Strategic Advantages And Outlook

AIG’s strategic advantages include its global scale, diversified product offerings, and strong brand recognition. The outlook remains cautiously optimistic, with opportunities in specialty insurance and retirement solutions offset by competitive and regulatory challenges. Continued focus on digital transformation and cost efficiency will be critical to maintaining its market position and delivering long-term shareholder value.

Sources

Company filings, market data