As of February 14, 2014, U.S. insurance company AIG intended to cut 3% employees worldwide, according to Financial Times. On Thursday, the company announced that the severance pay for 1500 is $ 265 million, thus, AIG continues to reorganize its business.
As of April 10, 2014, AIG had some problems with underwriting profits, nevertheless, despite several problems in the past the company shows some improvements. Smart investors are focusing on the business and the actions of management: by making unpopular moves today, AIG is taking a long-term bet that a simplified, streamlined company down the road will be much more profitable than its current state (Fool.com).
A Chart of the Company’s Stock Performance
As of April 17, 2014, at 4:00 p.m. AIG’s share price was $50.82.
In comparison with the previous year company’s share price increased by $12.26.
Market capitalization of AIG is $74.40B.
Accounting Ratio Analysis
Working Capital = Current Assets – Current Liabilities. Working capital discloses the condition of the financial position of a company than any other indicator. It tells what would be left if a company raised all of its short term resources, and used them to pay off its short term liabilities. As regards AIG there were no Current Liabilities as of December 31, 2013, so Working Capital included Current Assets in the amount of USD 60,626 Mio.
Stockholders’ Equity = Total Assets – Total Liabilities. It is given in the Balance Sheet and amounts to USD 100,470 Mio. Stockholders’ Equity of AIG means that, for example, after liquidation of all company’s assets, its stockholders will be rewarded.
Debt/Equity ratio = Total Liabilities / Total Stockholders’ Equity = USD 440,829 Mio / USD 100,470 Mio = 4.4. Debt/Equity ratio measures that the dominant role of company’s debt-holders over its owners is 4.4 times higher. So AIG is mostly financed by debtors.
Asset turnover is an activity ratio = Total Revenue / Total Assets = USD 68,678 Mio / USD 541,329 Mio = 0.13. Asset turnover ratio means that AIG uses 13% of its assets, and its sales are produced based on 13% of its assets.
A Description of the Company
American International Group, Inc. (AIG) is the financial conglomerate, the largest U.S. insurance company, one of the world leaders in the field of personal and property insurance (other than life insurance) with 95 years of experience. It operates in more than 100 countries serving more than 80 million customers worldwide. The company occupies the 2nd position among the largest U.S. insurance companies (Fortune 500, 2013), possessing the largest global distribution network and the most diversified portfolio. Total revenue for 2013 was USD 68.7 billion. Net income after tax amounted to USD 9 billion+.
AIG history began in 1919 in Shanghai (China). Founder of the Group Cornelius Vander Starr was the first in China an American entrepreneur, who was involved in the insurance of the local population. Jobs in Shanghai lasted until 1949 since Mao Zedong proclaimed the formation of People’s Republic of China. A year later, in 1950 the company headquarters moved to New York. In parallel with this the expansion began in other regions – Latin America, Europe, and the Far East.
Currently, global business of AIG is a variety of financial services, insurance, asset management, trading in the securities market, air transport leasing, lending and private investment, direct investment, property management and retirement savings programs.
Interesting About the Company
Awards and achievements of AIG: Best International Insurance Company, Business Insurance in 2013, Global Finance 2013; Best International Insurance Company of corporate property, liability of directors and officers, employer’s liability, environmental and cyber risks, Global Finance, 2013; Best Company in introduction of new approaches in resolving insurance claims, The Claims Awards, 2013; Best Company in risks’ measurement and evaluation, Business Insurance, 2013; CyberEdge is the best innovative product, Mena Insurance Review Award, 2013, Celent Research and Consulting Firm, 2012; Award for innovative solutions, Business Insurance, 2012 (AIG, 2014).
The Company’s Competitors
Allianz SE is the German Insurance Company, one of the largest in the world, classified as a systemically important to the global economy.
ING Groep N.V. is the Dutch financial conglomerate providing services in the banking, insurance and asset management.
AXA Group is the French company specializing in the provision of insurance services.
The Future Outlook for This Company
U.S. insurance giant American International Group in the current year is going to enter the market of Islamic insurance, namely Malaysia, the dynamic development of the economy of this country and the rapid pace of takaful market expansion led Western insurers be interested in Islamic financial services. Insurance company, which until 2008 was the largest in the world, will present relevant Islam Islamic reinsurance services by June 2014, and eventually deploy in the Malaysian market a full range of takaful services as Anthony Lee, the general director of the AIG Malaysian unit, informed.
In the short term, the company will provide a high probability of timely fulfillment of all liabilities, both current and emerging during the activity. In the medium term, the probability of performance is high in a stable macroeconomic and market indicators.
In the midst of the 2008 crisis, the U.S. government rescued AIG from bankruptcy, allocating to the insurer $182 billion, and receiving in return 92% of shares. However, a number of minority shareholders found that the conditions for financial assistance were unfair and resulted in billions of dollars of losses suffered by shareholders. The government, in turn, argued that without its intervention, the losses would be much greater.
In 2011 the suit was initiated by Maurice Greenberg, the former AIG CEO. First, on behalf of several investors and then tried to get accession of the insurer to process. However, the company decided not to suit.
It paid to the government of the profits at the end of 2012. It paid 100% of the debt and additional $22.7 billion. Then share was worth about $34, and it was the perfect time to purchase it. Now many investors look at earnings per share of the company and see the value within 2.1 over the last four quarters. This provides an indication of P/E above 20, which is twice higher than in comparable companies. Only due to this company’s shares are able to be bought cheaper than liquidation price of $67.2.
Faruk, Ishfaque. “AIG May Not Look Great Right Now, But It Has Huge Potential.” The Motley Fool, n. p. 10 April 2014. Web <http://www.fool.com/investing/general/2014/04/10/aig-may-not-look-great-right-now-but-it-has-huge-p.aspx>
“American International Group, Inc. (AIG)”, Yahoo! Finance, n. p., 2014. Web <http://finance.yahoo.com/echarts?s=aig+interactive>
“American International Group, Inc. (AIG)”, Company Website, n. p., 2014. Web <http://www.aig.com/home_3171_411330.html>
“Fortune 500”, CNN Money, n. p., 2014. Web <http://money.cnn.com/magazines/fortune/fortune500/>
“American International Group Inc.”, The New York Times, n. p., 19 April 2014. Web <http://www.ft.com/home/europe>