American International Group, Inc.AIGNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $326.11 per share(market-calibrated)

+314.0%

Upside to Fair Value

Current

$78.77

Pure Model

$346.39

Fair Value

$326.11

Bull Case

$423.29

Bear Case

$281.55

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $346.39.

What's Driving This Ratingfor AIG

✓

CapEx already efficient

CapEx at 0.00% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 17.35% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $10.1B (25.77% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 8.78% in Year 1 to 2.50% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $402.40/share (23.1x terminal FCF) while exit multiple gives $290.39/share (14.0x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 85.50% indicates efficient cash generation. FCF reaches $13.6B by Year 10 (34.94% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.60

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)7.19%

Cost of Debt

Pre-tax Cost of Debt7.14%

Tax Rate20.16%

After-tax Cost of Debt5.70%

Equity Weight (E/V)82.89%

Debt Weight (D/V)17.11%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (82.89% × 7.19%) + (17.11% × 5.70%)

= 6.94%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$29.1B	$32.6B	$34.5B	$36.3B	$39.1B
EBIT	$5.1B	$5.7B	$7.3B	$8.6B	$10.1B
Tax	$1.0B	$1.1B	$1.5B	$1.7B	$2.0B
NOPAT	$4.0B	$4.5B	$5.8B	$6.8B	$8.0B
+ Depreciation	$4.4B	$4.9B	$5.2B	$5.5B	$5.9B
- Capex	--	--	--	--	--
- Δ NWC	$705M	$389M	$253M	$265M	$286M
Free Cash Flow	$7.7B	$9.0B	$10.8B	$12.1B	$13.6B
Discount Factor	0.935	0.818	0.715	0.625	0.511
Present Value	$7.2B	$7.4B	$7.7B	$7.5B	$7.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$13.6B

Terminal Growth Rate2.50%

WACC6.94%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$315.3B

PV of Terminal Value$161.2B

Exit Multiple Method

Year 10 EBITDA$16.0B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$191.5B

PV of Terminal Value$97.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$74.1B

PV of Terminal Value$161.2B

Enterprise Value$235.3B

(-) Net Debt$7.9B

Equity Value$227.4B

Shares Outstanding565M

Price per Share$402.40

Exit Multiple Method

PV of Projected FCFs$74.1B

PV of Terminal Value$97.9B

Enterprise Value$172.0B

(-) Net Debt$7.9B

Equity Value$164.1B

Shares Outstanding565M

Price per Share$290.39

Pure Model Fair Value

$346.39

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.94%	$456.50	$495.28	$549.98	$616.80	$592.23
5.94%	$374.42	$395.00	$421.56	$457.16	$507.39
6.94%	$319.02	$331.32	$346.39	$365.30	$389.71
7.94%	$278.28	$286.23	$295.64	$306.95	$320.81
8.94%	$246.62	$252.04	$258.30	$265.61	$274.27

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$281.55

257.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.75

Base Case

$346.39

339.8% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.60

Bull Case

$423.29

437.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.51

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.78%

Year 3 Revenue Growth4.14%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin17.35%

Terminal EBIT Margin28.00%

Tax Rate20.16%

Historical Capex / Rev0.00%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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