The company's recent reinsurance deal with Berkshire Hathaway should reduce some uncertainty going forward.
Brett Horn, CFA
08:13 AM | Email Article
’s fourth-quarter results were ugly but not necessarily surprising. AIG’s key historical issue has been adverse reserve development in commercial casualty lines, and the company stayed true to this pattern with $5.6 billion in adverse reserve development leading to $3.1 billion loss in the quarter and a modest loss for the full year. While this is discouraging and highlights the fact that the company still faces major operational issues, especially as much of the charge relates to recent accident years, we think its recent reinsurance deal with Berkshire Hathaway will materially reduce risks on this front going forward. We will maintain our $74 fair value estimate and reiterate our no-moat rating. AIG is clearly not a strong franchise, but we continue to believe the market is modestly underrating its long-term potential.
Brett Horn, CFA, is a senior equity analyst for Morningstar.
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