Before the Call: AIG Tries to Rebound

If you're an AIG (NYSE: AIG  ) investor, last quarter wasn't a whole lot of fun. The company posted its first quarterly loss in more than five years. Will tomorrow's news be better? It could hardly be worse.

We'll have time aplenty to dissect the specific numbers after the news comes out. But before we begin obsessing over AIG's short-term progress, let's use these last few hours to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 100,000 investors for their views on well over 5,600 companies, AIG among them. Here's what Fools have to say about the company and its long-term prospects.

Up or down?
More than 1,400 investors have submitted ratings on AIG. Their verdict: Um, where can I buy some portfolio insurance?

Granted, roughly nine CAPS investors in 10 expect AIG to beat the market. Then again, most Fools tend to take a "if you can't say anything nice ..." approach to rating stocks on CAPS. Because a 10% "unfavorable" sentiment may be more significant than it at first appears, AIG scores just three stars out of five possible on CAPS -- not the worst, but hardly the best:

Property & Casualty Insurance Group

CAPS Rating

Berkshire Hathaway  (NYSE: BRK-A  ) (NYSE: BRK-B  )

*****

Montpelier Re  (NYSE: MRH  )

*****

White Mountains  (NYSE: WTM  )

****

Travelers (NYSE: TRV  )

***

AIG

***

Hartford Financial  (NYSE: HIG  )

***

Allstate (NYSE: ALL  )

***

Wall Street vs. Main Street
But if you think most investors are wearing rose-colored glasses, the folks up on Wall Street must be donning blinders, they're so hot for this stock. Sixteen of the 17 analysts who've taken buy/sell positions on AIG endorse it -- which is curious, considering that the stock has lagged the S&P 500 by a good 26 points over the past year.

Bull pitch
Leading the charge of the bulls on AIG is CAPS player SafeAndCheap, whose name suggests a preference for insurance stocks -- and whose CAPS rating is in the top two-tenths of a percent of investors, which suggests some skill in stock picking. S&C writes: "Granted, it's hard to know everything AIG has exposure to, and some assets are anything but transparent. But AIG's recent headline risk (e.g., swap exposure) has punished the stock too much. It's hard to make a serious dent in AIG's balance sheet and substantially diminish its moat. Many of the saviest old pros in investing are long and getting longer on AIG."

Hard to argue with that. After all, AIG still sports a decent combined ratio of just a hair above 90. The fact that one of its worst quarters ever barely nicked AIG's ratio, leaving it practically indistinguishable from the performance of standouts like Markel and Berkshire Hathaway, suggests that it's going to take a lot worse news than what we've already seen to make a "dent" in AIG's long-term profits.

Bear pitch
So how do you trump a savvy investor citing other savvy investors, making well-reasoned arguments, and having a record of getting these kinds of things right? It's not going to be easy, but one AIG-watcher is willing to give it a whirl. What's more, this one used to work for the company. And so we turn now for the top-rated bear pitch to GatorSF, who told us in February: "Legal problems, corruption, questionable underwriting practices should undercut the companies solid profits. i see more trouble ahead in the short-run. Long run all depends on how the company correct itself. The company is efficient but worke's morale is lower, as well as the wages. ( i used to work for AIG) not sure if lower wages are a good cost cut in the long-run."

Who said that?
To learn more about the wise Fools who penned these words, examine their records (and see whether they know whereof they speak), and to explore the plethora of additional financial data we've put together on the company, just click here.


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