Is American International Group Inc (AIG) a Good Stock to Buy?

Ace and Travelers are actually valued at premiums to book value, meaning that the market is heavily discounting AIG’s assets not only relative to book but also relative to how it values the assets of AIG’s peers. The gap is quite narrow as far as the forward P/E goes, however, with each carrying a forward P/E of 11. We’d also note that revenue growth rates in Q4 2012 compared to the fourth quarter of 2011 were considerably lower at Ace and Travelers than at AIG.

We can also compare American International Group Inc (NYSE:AIG) to The Chubb Corporation (NYSE:CB) and toHartford Financial Services Group Inc (NYSE:HIG). Chubb has a similar status to Ace and Travelers: trading well above the book value of its equity (in fact, the P/B ratio here is 1.5). With trailing and forward P/Es of 16 and 13, respectively, and not particularly strong recent financial performance, we would avoid the stock. Hartford actually does look cheap, and might make for a good substitute for AIG if investors just don’t want to buy that stock. The value metrics are very attractive, with a similar P/B ratio to AIG’s and with analyst expectations implying a forward P/E of 8. We’d be interested in learning more about the company.

In general, American International Group Inc (NYSE:AIG) seems to represent a better value than its peers- particularly if we compare its P/B ratio to those of some other insurers- and over the medium term we’d expect that institutional investors will come around to buying shares even after the company’s poor performance during the financial crisis. Hartford looks interesting as well.

Disclosure: I own no shares of any stocks mentioned in this article.