My last post on AIG concluded that a target of $60-$70 per share over the medium term did not seem unreasonable. However, given the difficulty in predicting a number of moving items in their results and the competitive insurance market, AIG didn’t excite me enough to get involved. Based upon a quick review of the results over H1 2014, that remains my view.
Q2 results were flattered by a gain of over $2 billion on the aircraft leasing sale. Overall the operating results were steady for H1, as the graph below shows, trending towards an approximate $10 billion operating income for 2014. Core earnings from P&C and life & retirement have been steady at approximately $2.5 billion each for the year to date.
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Analysts have an average EPS estimate of $4.62 for 2014, roughly the same as 2013, and $5.00 for 2015 which supports a target share price in the low to mid sixties. The AIG “discount” continues with the stock trading around 80% of book (excluding Accumulated Other Comprehensive Income), as per the graph below.
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Some may argue that this discount is harsh given how far AIG has come. I’m not yet convinced that AIG deserves to come off the naughty step and get a more normal valuation.
This blog represents my personal views and is not reflective of the views or opinions held by any company or employer I work for currently or have worked for in the past. The views expressed herein are based solely upon publicly available data. No views expressed herein should be taken as an endorsement to take any particular course of action in the markets. The basis of this blog is that different views should be expressed and readers make up their own minds on the what they believe and act accordingly.
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