AIG Earnings: It’s Been a Long Road, but AIG Is Generating Acceptable Returns

We’ve long believed that under capable management, AIG would be able to generate acceptable returns given time. The company now appears to be validating that belief with a tangible adjusted annualized return on equity of 10% in the quarter, and both sides of the business contributing roughly equally to that return. While it will take more than one quarter to confirm that the company is no longer destroying value, we believe AIG can hold this ROE level. We will maintain our $66 fair value estimate for the no-moat company and see shares as slightly undervalued.