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?
