Hot Research
Without Greenberg, AIG Stock too Risky
Updated March 16, 2005 9:44 am ET / Original Jan. 22, 2020 12:50 am ET
American International Group Inc. (AIG: NYSE)
By Raymond James & Associates ($63.40, March 14, 2005)
WE ARE LOWERING our rating on American International Group's stock to Underperform from Market Perform.
The Wall Street Journal and The New York Times are reporting that AIG's chief executive officer of 38 years – Hank Greenberg – is planning to resign due to the increasing number of regulatory investigations into the company.
While it is possible that Greenberg could remain as non-executive chairman, the uncertainties associated with the potential departure of AIG's longstanding patriarch could outweigh all other issues relating to the company in the near term.
While there are a number of extraordinarily capable and talented executives at AIG who could assume the CEO responsibilities, we note that management changes at large insurance companies are invariably associated with even more management departures and restructuring/other charges.
AIG currently trades as 12.3x our 2005 earnings per share estimate, which compares with the average P/E multiple of 17.9x for the Dow 30. AIG sells at a premium valuation to most publicly traded insurance companies.
Given all of the uncertainties, AIG's risk/reward ratio does not look attractive at this point.
--C. Gregory Peters
American International Group Inc.