AIG's Third Quarter Dinged by Catastrophes and Capital Markets, but Underlying Trend Positive

American International Group's third-quarter results were affected by catastrophe losses and capital market movements, but the company's underlying trajectory is largely the same, as the insurer continues to make strides to improve its underwriting results. While AIG's adjusted annualized return on equity of 4% was not impressive, it was also not unexpected, given the impact that catastrophes typically have on third-quarter results. We will maintain our $65 fair value estimate and no-moat rating. We see the shares as modestly undervalued and believe that the market has been slow to appreciate the improvements management has made.