15 Best Stocks to Buy According to Hosking Partners

4. American International Group, Inc. (NYSE:AIG)

Hosking Partners’ Stake Value: $85,237,023

Percentage of Hosking Partners’ 13F Portfolio: 3.15%

Number of Hedge Fund Holders: 61

American International Group (AIG) is a global finance and insurance corporation operating in over 80 countries. The company has three main business segments: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary. The General Insurance division covers Commercial and Personal Insurance, as well as U.S. and International operations. The Life & Retirement segment includes Group and Individual Retirement, Life Insurance, and Institutional Markets.

American International Group, Inc. (NYSE:AIG) is an insurance products provider for commercial, institutional, and individual customers. It reported strong results in Q2 2024, with a 38% year-over-year increase in adjusted after-tax income, reaching $775 million. The company’s homeowners insurance benefits from its scale, offering features like high deductibles up to $10,000. AIG is focused on achieving a return on equity (ROE) of over 10% through disciplined underwriting, expense management, and capital optimization.

The company has also made strategic progress by selling its stake in life insurer Corebridge and repositioning its portfolio through various divestitures. This business turnaround is expected to support AIG’s future growth. The company’s earnings growth is anticipated to come from its emphasis on underwriting excellence and strict expense control. The repositioning of its underwriting portfolio has allowed AIG to achieve high-quality growth in both admitted and non-admitted markets, with multiple avenues to deploy capital towards the best risk-adjusted returns. Analysts at BMO Capital Markets have raised their price target for AIG from $88.00 to $89.00 and rated the company as “Outperform” on May 13th.

ClearBridge Value Equity Strategy stated the following regarding American International Group, Inc. (NYSE:AIG) in its first quarter 2024 investor letter:

“One example of our internal return engine is our continued large position in American International Group, Inc. (NYSE:AIG), which we have owned for roughly 10 years. We originally bought AIG at a greater than 30% discount to our initial estimate of business value. This entry point assumed minimal improvements in the business but allowed us to absorb some inevitable downdrafts along the way that we took advantage of to build our position. The key, however, is that during this period AIG management dramatically improved their business. The company has compounded intrinsic business value per share at a double-digit rate by reducing risks as management overhauled their underwriting process, strengthened their balance sheet, cut expenses and operational complexity and structurally improved returns on equity. A major source of added lift came from intelligent capital allocation: shares outstanding have been more than cut in half during this period, as management bought back roughly 5% of the company annually below intrinsic business value.

However, this valuation-driven return engine can only create so much lift on its own. We are always looking for big opportunities to create external lift in our returns from dramatic shifts in markets. The first comes from exploiting market extremes, where the long-term probabilities are very much in our favor, while the second comes from investor underreactions to big shifts in pricing power that can be exploited through our valuation-driven lens.”