AIG keeps increasing its book value year over year. Annual compounded growth rate last 3 years was 13,24%. AIG's goal from now on until 2017 is to grow its book value by 10% yearly. Book value has increased by 13,22% last 12 months. Buybacks under book value is ongoing. ROE target long term is 10%. Last 12 months ROE was 6,69%.
What is this business worth?
Asset value: Tangible book value per share currently is at 77,69 USD/share.
Last years book value increase of 13,22% and AIG's goal of increasing 10% year on year until 2017 is realistic. Buybacks are contributing alot to this. With an annual requirement of 10% return AIG is worth at least book value. 44% upside currently.
Earnings power value: 10% required return a year equals an upside of 28% looking at last 5 years average earnings. Earnings have to come up from average last 3 years numbers though to justify book value if disregarding buybacks.
Disclosure: The author had a long position when this post/analysis was written.