AIG: Not Too Late to Jump In

NEW YORK ( TheStreet) -- Waiting for a pullback to get into AIG ( AIG)? Don't wait.

Shares will open sharply higher Friday following strong earnings and a surprise announcement of capital returns. Many investors are still waking up to the fact that AIG is back, which is why the shares still trade at 75% of book value versus an average of 119% for the largest U.S. multiline insurers.

"With the firm making progress on their underwriting, starting to grow in Life, and now buying back stock and adding a dividend, we see the company making clear progress, and with this once feared and still under-owned name trading at less than 75% of book, we doubt this clear value will long persist," wrote Josh Stirling, analyst at Sanford Bernstein, in a note published Friday.

Stirling has an outperform on AIG, but many of his peers still rate AIG a neutral. They were on AIG's earnings call Friday morning trying to clear the fog from their brains. They didn't understand, for example, how AIG could start returning capital before it has sold or spun off its ILFC aircraft leasing unit. They wanted to know if ratings agencies think AIG is being too aggressive. They are, in short, still waking up to the AIG turnaround.

Bears note that much of AIG's 30% earnings beat comes from investments

There is a reason Fairholme Capital CEO Bruce Berkowitz made AIG his largest holding as he bought every beaten up financial stock he could find in 2010. He saw tremendous value there. The company remains his largest holding.

Insurance is a conservative business, and in that context AIG CEO Bob Benmosche looks like a wild man to some analysts. But he's making sensible decisions. He's turned this company around. The fact that AIG imploded in 2008 is not relevant to today's company. Once everyone wakes up to that, AIG will still be a solid insurance stock delivering a steady dividend. At the moment, however, it still trades at a discount to the rest of the industry. The discount is unwarranted. Meaningless. It pertains to a company that no longer exists. It won't last long.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.