Updated from 2:15 p.m. EDT

After falling more than 18% this year, shares of

American International Group

(AIG) - Get Report

could be poised for a turnaround as the company's post-Sept. 11 pricing adjustments start accruing to the bottom line, an analyst argued.

"The company will be one of the major beneficiaries of the new era of the P&C industry and the issues and concerns are already discounted in the stock," said Alain Karaoglan, an analyst at Deutsche Bank Securities, who upgraded AIG to buy from market perform in a research note on Wednesday.

In the aftermath of the terrorist attacks on Sept. 11, a spike in demand for property and casualty insurance enabled sellers to charge much higher premiums. Within the industry, the current pricing environment is considered to be a "hard market," whereby sellers have substantial leverage over buyers.

Property and casualty insurance premiums are up 20% to 30% this year, compared to last year. And some analysts think that the current market has the potential to last longer than previous ones.

"In 2001, property and casualty insurers lost $100 billion in capital," said Clifford Gallant, an analyst at investment bank Keefe, Bruyette & Woods. "The drivers for high premiums are still in place."

To be sure, AIG is a more complex and diversified company than other property and casualty insurers such as

Chubb

(CB) - Get Report

or

AllState

(ALL) - Get Report

.

"It is not right to compare it to other property and casualty insurers," said Mark Lane, an analyst at William Blair, "especially since the company's life insurance business generates half of its earnings."

In valuing AIG -- which has a $170 billion market cap -- analysts typically compare the insurer to the broader market and blue-chip financial services names. Karaoglan, for one, looks at AIG's valuation relative to three metrics -- the

S&P 500

, the top 30 companies in the S&P 500, and

General Electric's

(GE) - Get Report

multiple. Based on two out of three of those standards, GE's valuation being the exception, the analyst concludes AIG is a buy.

AIG currently trades at 16.5 times Karaoglan's 2003 earnings estimate of $3.90. His price target of $75 is 19 times his 2003 earnings estimate and a 16% upside from Tuesday's close.

"The stock has been adversely affected by accounting and succession concerns," Lane said.

In the first quarter, the insurance company posted earnings of $1.98 billion, or 75 cents a share, a 6.7% increase from $1.86 billion, or 70 cents a share, in the same period a year ago.

"A lot of

those concerns are fully discounted into its valuation," said Lane. "I do not see another global financial services company that will be able to produce the same kind of earnings."