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American International Group Inc. (AIG) Target Price: $62.4 American International Group Inc STRONG BUY AIG US Current Price: $55.33 American International Group Inc. (AIG) Target Price: $62.4 American International Group, Inc. (AIG), incorporated on June 9, 1967, is a world’s MARKET DATA largest insurance organization. The Company provides a range of property casualty Price (closing 12/05/14) $55.3 insurance, life insurance, retirement products , mortgage insurance and other financial Diluted shares (in M) 1,399.9 services to customers in more than 130 countries. It diverse offerings include products Market cap ($ in M) 77,457.2 and services that help businesses and individuals protect their assets, manage risks and Net Debt ($ in M) 34,290.0 provide for retirement security. It earns revenues primarily from insurance premiums, EV ($ in mn) 111,747.2 policy fees from universal life insurance and investment products, and income from Exchange NYSE investments. In May 2014, the Company completed the sale of 100% inte rest in International Lease Finance Corporation (ILFC) to AerCap Holdings N.V. In Aug’14, it Industry Insurance AVISE ANALYTICS AVISE ANALYTICSagreed to AVISEacquire ANALYTICSAgeas Protect Limited AVISEfrom ANALYTICSAgeas Group AVISEfor consideration ANALYTICSof £305 AVISEmn. ISIN ANALYTICS AVISEUS0268747849 ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE BloombergANALYTICS AVISEAIG:US ANALYTICS INVESTMENTAVISE ANALYTICSRATIONALE AVISE ANALYTICS AVISE ANALYTICS AVISE ReutersANALYTICS AVISEAIG.N ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS •AVISEStrategic ANALYTICSmove to stimulate AVISEprofitability ANALYTICS AVISE ANALYTICS AVISE $ in M 2013 2014e 2015e 2016e AIG’s consistent efforts to realign its core operations via selling non-core assets including ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE SALES 64,258 64,901 65,809 67,191 the recent divestment of last major non-core asset, ILFC, are delivering positive results. ANALYTICS AVISE ANALYTICS It’sAVISERoE improved ANALYTICSto 9.2% AVISEin FY13 ANALYTICSfrom 3.5% in FY AVISE12. The ANALYTICSCompany’s re-pricing AVISEinitiatives %growthANALYTICS(3.4%) AVISE1.0% 1.4%ANALYTICS2.1% AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Adj. EbITDA 16,559 17,463 17,052 17,374 along with cost cutting measures and active spread management act as potential ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE %margin 25.8% 26.9% 25.9% 25.9% earnings catalyst. The successful integration of pending Ageas Protect Ltd. acquisition is Adj. PATANALYTICS9,221 10,037 AVISE9,696 ANALYTICS10,064 likelyAVISEto reinforceANALYTICSAIG’s market AVISEposition ANALYTICSin the U. KAVISE. ANALYTICS AVISE %marginANALYTICS14.3% 15.5% AVISE14.7% ANALYTICS15.0% AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE • ANALYTICS2013 2014e AVISE2015e ANALYTICS2016e AVISEImproving ANALYTICSfinancial leverage AVISEhighlights ANALYTICSless Balance AVISESheet ANALYTICSrisk AVISE ANALYTICS AVISE ANALYTICS AIGAVISEhas ANALYTICSsignificantly reduced AVISEits ANALYTICSlong te rm debt AVISEobligations ANALYTICSfrom $106. 4AVISEbn in FY 10 to EV/SalesANALYTICS1.8 AVISE1.7 ANALYTICS1.6 1.5 $AVISE36.2 bn ANALYTICSin 3Q14 leading AVISEto improved ANALYTICSfinancial AVISEleverage ANALYTICSand better coverage AVISEratios . Its EV/A.EBITDAANALYTICS6.9 AVISE6.3 ANALYTICS6.3 5.9 interestAVISE coverageANALYTICSratio AVISErose from ANALYTICS4.2x in FY11 AVISEto 7.4x ANALYTICSduring 3Q14. TheAVISECompany’s Forward Pb 67.8 78.6 85.8 93.6 aggressive move to replace its higher coupon debt with lower coupon debt by early ANALYTICS AVISE ANALYTICS redemption/repurchaseAVISE ANALYTICS continue to deliver operating leverage. Narrow Balance Sheet SHAREHOLDINGS risk and near-record shareholders’ equity indicates AIG’s improving financial strength. Top 10 Institutions (%) • The Vanguard Group, Inc. 5.0 Attractive valuation – AIG stock presently trading at discount to its book value AIG stock presently trades at 0.75x its tangible book value/sh of $69.3 which fully SSgAAVISEFunds Management, Inc. ANALYTICS AVISE ANALYTICS4.4 AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Fairholme Capital Management LLC 4.2 discounts its RoE of 8% compared with its peer group average RoE of ~12%. The Company BlackRockANALYTICSFund Advisors AVISE ANALYTICS3.6 AVISEreinitiated ANALYTICSits dividend AVISEpayment ANALYTICSafter five years AVISEin 2013 ANALYTICSand intends AVISEto repurchase Harris Associates LPANALYTICS AVISE ANALYTICS2.6 AVISEadditional ANALYTICSshares worth AVISE$1.5 bn ANALYTICSafter undertaking AVISE~$3 .ANALYTICS4 bn share buyback AVISEin FY14 till Capital Research & Management Co.ANALYTICS AVISE ANALYTICS2.3 AVISEdate. Improving ANALYTICSoperating AVISEca s h ANALYTICSflows and liquidity AVISEposition ANALYTICSprovides visibility AVISEto provide Wellington Management Co. LLPANALYTICS AVISE ANALYTICS2.2 AVISEconsistent ANALYTICSfuture returns AVISEto its shareholders ANALYTICSthrough AVISEdividends ANALYTICSand buyback AVISEprogram . Waddell & Reed Investment Mgmt Co. 1.3 HotchkisANALYTICS& Wiley Capital Mgmt LLC AVISE ANALYTICS1.3 AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Northern Trust Investments, Inc.ANALYTICS AVISE ANALYTICS1.2 AVISEHURDLES ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Total 28.0 ANALYTICS AVISE ANALYTICS AVISE• Exposure ANALYTICSto natural and AVISEman-made ANALYTICScatastrophe AVISErisks, interest ANALYTICSrate and AVISEregulatory risks ANALYTICS AVISE ANALYTICS AVISE• ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE REPORT CARD Modestunfavorable reserve development continue to impede underwriting results ANALYTICS AVISE ANALYTICS AVISE• Large underwritingANALYTICSlosses AVISEand/or ANALYTICSrise in financial AVISEleverage ANALYTICSmay trigger rating AVISEdowngrade ManagementANALYTICS AVISE ANALYTICSA AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Financials A ANALYTICS AVISE ANALYTICS AVISEANALYST ANALYTICSNOTE AVISE ANALYTICS AVISE ANALYTICS AVISE CatalystsANALYTICS AVISE ANALYTICSA AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ValuationANALYTICS AVISE ANALYTICSA AVISEAIG exit ANALYTICSfrom government AVISEownership, ANALYTICSfinancial AVISEturnaround ANALYTICSand strategic AVISEtransformation is set to improve its competitive advantage. The Company is on track to achieve its long- ANALYTICS AVISE ANALYTICS AVISEterm goal ANALYTICSof 10% ROE for AVISEFY15 andANALYTICSachieve average AVISEannual ANALYTICSpercentage growthAVISEof its EPS ANALYTICS AVISE ANALYTICS AVISEin the ANALYTICSmid-teens through FY15 driven by earning potentials from its P&C and life- retirement segments and disciplined claims and expense management. We are attracted to its valuation, recent management changes and strong asset class, expect the stock to trade at a price of $62.4 in 18 months, based on expected average P/Eand P/b multiples. American International Group Inc Revenue model of AIG Mortgage Guaranty Others, $949 $2,971, 8% 1% AIG Life & Retirement Instituti $20,590 onal, $7,875, 34% 38% Retail AIG $12,715 Property 62% Casualty, Consumer $39,709, Insurance, 65% AVISE$13,601 ANALYTICS, AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE 34% Commerci ANALYTICS AVISE ANALYTICSal AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICSInsurance AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE $23,127 ANALYTICS AVISE ANALYTICS58% AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE AIGANALYTICSProperty Casualty AVISE(65 %ANALYTICS) AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE BasedANALYTICSon net premiums AVISEwritten ANALYTICSin 2012, AIG AVISEProperty ANALYTICSCasualty is the AVISElargest ANALYTICScommercial insurer AVISEin the ANALYTICSU.S. and Canada AVISE. We are the largest U.S. based property casualty insurer in Europe, and the largest foreign property casualty insurer in China. Inaddition, AIG ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE Property Casualty was first to market in many developing nations and is well positioned toenhance its businesses in countries such asANALYTICSBrazil, China through AVISEstrategic ANALYTICSrelationships AVISEwith PICCANALYTICSLife Insurance AVISECompany ANALYTICSLimited (PICC AVISELife) and ANALYTICSIndia with the AVISETata Group . ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE • ANALYTICSCasualty: Includes AVISEgeneral ANALYTICSliability, commercial AVISE ANALYTICSautomobile AVISEliability, ANALYTICSworkers' compensation, AVISE ANALYTICSexcess casualty AVISEand crisis ANALYTICSmanagement insurance AVISE ANALYTICS. Casualty also includes AVISErisk ANALYTICSmanagement AVISEand other ANALYTICScustomized structured AVISE ANALYTICSprograms for large AVISEcorporate ANALYTICScustomers and AVISEmultinational ANALYTICScompanies AVISE. ANALYTICS AVISE ANALYTICS AVISE ANALYTICS AVISE • ANALYTICSProperty: Includes AVISEindustrial, ANALYTICSenergy-related AVISEand ANALYTICScommercial property insurance products, which cover exposures to man- made and natural disasters, including business interruption. • Specialty: Includes aerospace, environmental, political risk, trade credit, surety and marine insurance, and various product offerings for
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