Deutsche Bank downgraded shares of American International Group Inc. AIG from Hold to Sell on in the wake of CEO Peter Hancock’s resignation.
Deutsche called Hancock’s resignation — which came mid-board meeting last Wednesday, according to the Wall Street Journal — a “negative catalyst.”
The lack of a known successor in AIG’s C-suite “indicates indecision from the board regarding strategic direction and the lack of a Plan B for an outcome [that] must have been considered since allowing activists onto the board a year ago,” research analyst Joshua Shanker said in a note.
Hancock will remain in place until a successor is named, AIG said in a statement.
Deutsche lowered its price target for AIG shares from $61 to $57.
The insurance company’s pledge to make $12.2 billion in buybacks this year could be at risk. Shanker said, “If the buyback were suspended, we believe the stock will fall.”
He went on to say AIG may not be generating the cash needed to support a multibillion-dollar buyback, and could be temporarily supporting the plan using life insurance inflows.
AIG’s two-year strategic plan, announced in January 2016, will likely continue to be followed until a new CEO is found, Shanker said.
“We would argue AIG’s Board of Directors is actually looking to hire a CEO with a plan and that the current strategy is merely in place until a new strategy is developed.”
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