Does American International Group Inc (AIG) Have Any Fight Left?

Metlife has taken advantage of this great opportunity. In 2010, it completed a purchase of American Life Insurance Company (Alico) from AIG, vastly expanding Metlife’s insurance and employee benefits business and giving the company a much larger worldwide exposure. Alico was a big part of AIG’s growth segment and has great potential for profits in the future.

Metlife also has a relatively low price/book of 0.77, putting it at a fairly attractive price. It is also noteworthy that Metlife’s business is more concentrated in life insurance, the risk of which is much easier to deduce, making it a much safer business whose net premiums will almost always be positive.

Prudential Financial Inc (NYSE:PRU), a focused life insurer with an undervalued stock at a price/book of 0.84, has also been hurting from the poor yields sustained by the Fed. While the Fed has been holding these rates, Prudential has been strengthening its balance sheet and improving its liquidity, so that it will be ready to spring when the Fed eases up. Despite this bad economic environment for insurers, Prudential has been managing to still find room to grow, with an 11.11% sales increase last year.

The Bottom Line

American International Group Inc (NYSE:AIG) might still be a little black-and-blue from its fall, but the company has toughened up, reinvested, and refocused back on its main businesses. It’s still positioned as a world market leader in the lucrative insurance business with much room to grow.

With Bernanke’s promise to stop the Fed’s stimulus plan in mid-2014, interest rates will be reverting back to profitable levels for fixed-income instruments, bringing back higher profitability to the insurance industry, and in turn moving these stocks more toward book value. AIG seems to have the greatest margin of safety among these three insurers, with the lowest price/book, and stronger operations giving it the most room to run. Consider jumping in on these great value plays while you still can.

Ken is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Does AIG Have Any Fight Left? originally appeared on Fool.com and is written by Ken Conte.

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