Analyst: Justin Garber

1
American International Group

• Analyst Justin Garber
• November 27, 2007

2
What they do

• AIG serves commercial, institutional, and
  individual customers through an extensive
  property-casualty and life insurance and
  retirement services network
• General Insurance
• Life Insurance Retirement Services
• Financial Services
• Asset management

3
Segment Roundup
For 3 months ended September 30, 2007

• General Insurance
• Constitutes 42.8 of total revenues
• Operating profits decreased (7) when compared to
  the same period in 2006 due to adverse Domestic
  General, and Foreign General results
• DBG writes virtually all classes of business
  insurance
• Domestic Personal Lines incurred higher than
  normal losses from discontinued businesses and
  increased accident claims
• UGC experienced increased claims from high
  loan-to-value first and second-lien mortgage
  insurance
• Foreign General incurred higher than normal
  losses from the June 2007 U.K. floods and other
  claims

4
Segment Roundup
For 3 months ended September 30, 2007

• Life Insurance Retirement Services
• Constitutes 42.3 of total revenues
• Decrease in operating profits of (19) when
  compared to the same period in 2006 due to
  volatility in securities markets
• Lower domestic investment income and higher net
  capital gains losses was partially offset by
  strong foreign life insurance production

5
Segment Roundup
For 3 months ended September 30, 2007

• Financial Services
• Constitutes 9.3 of total revenues
• Operating profits decreased by (43) when
  compared to the same period in 2006 largely due
  to the deterioration of the housing market
• Valuation loss on Super Senior credit default
  swaps written on CDOs
• Lower origination of real estate loans
• Losses offset by increased aircraft leasing

6
Segment Roundup
For 3 months ended September 30, 2007

• Asset Management
• Constitutes 6.1 of total revenues
• 99 increase in operating profit when compared to
  the same period in 2006 largely do to an increase
  in institutional asset management
• Increased management fees resulting from growth
  of assets under management

7
Strengths

• Strong enterprise risk management process
• Has the financial wherewithal and expertise to
  take advantage of opportunities in the current
  market
• Product and service diversification

8
Weaknesses

• United Guaranty Corporation (UGC)
• Losses in first second-lien mortgages expected
  to continue over the next several quarters
• 3 of the 4 business segments have an operating
  decrease when compared to the same 3rd quarter
  period in 2006
• Personal lines insurance
• Risk of catastrophe loss

9
Opportunities

• Build attractive new General Insurance businesses
• Diverse offerings allow AIG to seek out
  profitable opportunities
• AIGCFG seeks out new opportunities in emerging
  markets around the world

10
Threats

• Possible continuation of the downward housing
  market trend
• Financial markets volatility
• Pricing pressures from competition

11
Peer Comparison
12
Time Series Analysis
13
Intrinsic Value

• 3-Stage DDM 47.81
• Discount rate 10
• High growth rate 11.85

14
Recommendation

• Hold
• Financial strength
• Diverse offerings and expertise in finding
  profitable opportunities
• Ability to weather the current market conditions
• Shown growth in Asia