American International Group (American International Group) Predictability Rank

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What is American International Group Predictability Rank?

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

American International Group Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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American International Group (American International Group) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Insurance » American International Group Inc (NYSE:AIG) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

AIGpA.PFD:USA AIG:Mexico AINNd:UK AINN:Germany AINN:Germany AINN:Germany AINN:Germany AIGB34:Brazil AIG:Austria AIG:Argentina

Address

1271 Avenue of the Americas, New York, NY, USA, 10020

Website

https://www.aig.com

American International Group is one of the largest insurance and financial services firms in the world and has a global footprint. It operates through a wide range of subsidiaries that provide property, casualty, and life insurance. The company recently spun off its life insurance operations (Corebridge), but still retains a majority stake.

Executives

Edward Lee Dandridge	officer: EVP, Chief Marketing & Comms	C/O THE BOEING COMPANY, 100 RIVERSIDE PLAZA, MC 5003-1001, CHICAGO IL 60606-1596
Kathleen Carbone	officer: VP & Chief Accounting Officer	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Vanessa Ames Wittman	director	C/O MARSH & MCLENNAN COMPANIES, INC., 1166 AVENUE OF THE AMERICAS, NEW YORK NY 10036
Diana M Murphy	director	C/O LANDSTAR SYSTEM INC, 13410 SUTTON PARK DR S, JACKSONVILLE FL 32224
Paola Bergamaschi	director	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Luciana Fato	officer: EVP and General Counsel	AMERICAN INTERNATIONAL GROUP, INC., 1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Thomas Allen Bolt	officer: EVP and Chief Risk Officer	C/O AMERICAN INTERNATIONAL GROUP, INC., 1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
John G Rice	director	GENERAL ELECTRIC COMPANY, 41 FARNSWORTH STREET, BOSTON MA 02210
John P Repko	officer: EVP and Chief Info. Officer	AMERICAN INTERNATIONAL GROUP, INC., 1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Hunter Constance	officer: EVP, Head of Strategy & ESG	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Glazer Rose Marie E.	officer: EVP, CHRO & Corp Secretary	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Kevin T. Hogan	officer: EVP - Life & Retirement	180 MAIDEN LANE, NEW YORK NY 10038
Sabra R. Purtill	officer: EVP and Chief Risk Officer	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Claude E. Wade	officer: EVP, Hd of Ops & Chief Dig Off	1271 AVE OF THE AMERICAS, NEW YORK NY 10020-1304
Lisa Buckingham	officer: EVP Ent Desgn and L&R Sep	150 N RADNOR CHESTER ROAD, RADNOR PA 19087