AIG is US’ Largest Insurer by Market Value

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This isn’t necessarily news, but it was a little surprising to me to notice that AIG has the largest market cap among the members of KBW’s Insurance Index, which includes both P&C and Life insurers.   Since it also has the lowest price to book multiple among the top eight companies, that means it has the largest book value as well though.

$AIG lists $98 B of shareholder’s equity compared to ~$65 B at $MET and ~$25 B at $TRV.  In terms of net written premium, AIG did $38 B in 2012, while MET and TRV did $38 B and $22 B respectively.

I’m not an expert on AIG, but the numbers imply to me that on a premiums/capital basis the new AIG is less levered than its peers.  In insurance, like all financial businesses, leverage drives annual returns (until it doesn’t).  This could mean that as a plain vanilla insurance company AIG may have a difficult time generating reasonable ROE’s at this level of capitalization.  Alternatively it could always expand into ancillary lines of business, say, like, selling credit default swaps?

Insurance Companies by Book Value