Deutsche Bank Downgrades AIG Amid Valuation Call

In a report published Tuesday, Deutsche Bank analyst Joshua Shanker downgraded the rating on

from Buy to Hold, while maintaining the price target at $64. American International's shares surged in 1H15, bringing the stock "largely where we think it will trade this time next year," analyst Joshua Shanker said. While Shanker continues to believe that there is multi-year upside to the company's stock, the near-term opportunity has declined considerably following the jump in shares. In the report Deutsche Bank noted, "The U.S. Court of Federal Claims rendered a decision today in Starr Int'l v. U.S. that the 2008 bailout of AIG included an "illegal exaction" of property, but that no damages were due to the plaintiff since bankruptcy would have been the likely outcome of no government intervention. Insofar as there are some investors favorably inclined to buy AIG shares who were waiting for this difficult-to-quantify overhang to pass, there could be some incremental investor purchasing following this news." Although there is a downgrade in rating, the company's stock has positive catalysts. American International has recently sold most of its stake in

. Moreover, the company has made other, smaller non-core disposals. Considering these disposals and the core cash earnings power of the company's subsidiaries and tax assets, American International would announce a hike in its current plans to return $6-7B in cash to shareholders during 2015. "Our current estimate is $9B, but it is not out of the question that an even larger capital return plan could happen," Shanker added.