AIG Stock Down 7% This Year, Will It Continue To Suffer?
Zacks Investment Research | Sep 04, 2017 10:06PM ET
The stock of American International Group Inc. (NYSE:AIG) seems to be in rough waters. The company is struggling with property and casualty market challenges that are dragging down revenues of one of its most important segment — Commercial Insurance.
Other macro factors such as low interest rates, currency exchange rates, credit and equity market conditions, catastrophic claims events are also acting as dampeners.
Whats dragging down the stock
AIG’s top line has suffered over the years from declining premium due to disciplined underwriting, competitive market conditions and reduction in business due to numerous divestitures taken.
This is evident from shrinking revenues since 2010 (except in 2012) that continued till the first half of 2017. The company is unlikely to see any respite in the coming quarters as a highly competitive property and casualty market, and continued business dispositions will keep the top line under pressure.
AIG is aggressively looking to mend its commercial lines business but has also confessed to a tough market environment, which may require axing of some lines that fail to meet profitability targets. This will lead to forgone business which will further compress top-line growth.
The company became a victim of its own mammoth size with numerous unrelated business under its umbrella that created very little or no synergy. Many of its low return-generating business lines along with an ailing industry dragged down results to such an extent that it led activist investor Carl Icahn to call for rapid reforms at the company.
Icahn demanded the sale of non-core parts of the company and reduction of its size to a manageable level. Management therefore took a number of steps aimed at rightsizing operations by cutting workforce, divesting units, reducing expense, making leadership changes, and returning funds to shareholders through share buyback and dividend payments.
Though these measures helped in cutting costs and returning capital to share holders, the company was unable to address revenue-growth challenges in Commercial Insurance.
Share Price Performance
Year to date, shares of AIG have lost 7.1%, significantly underperforming the Zacks Investment Research
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