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Despite Activists, AIG Core Seen As 'Weaker' By Analysts

Despite Activists, AIG Core Seen As 'Weaker' By Analysts
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Credit Suisse’s Thomas Gallagher maintained a Neutral rating for American International Group Inc (NYSE: AIG), while reducing the price target from $65 to $61.

The company reported its 4Q net operating loss at $1.10 per share, mainly on account of its previously announced $3.6 billion of development in the P&C business in the previous year as well as lower returns from alternatives.

“After making AIG’s normalizing adjustments highlighted in the financial supplement (i.e. cats, alternative returns, DIB/GCM, PICC investment returns, accounting refinements, WC discount rate change, IBNR claims, and PYD) the normalized EPS, as defined by the company, is $0.99 which compares to our core estimate of $1.16 for the 4th quarter,” analyst Thomas Gallagher wrote.

Related Link: Icahn Rep Paulson To Join AIG Board

The quarterly earnings miss was mainly driven by the lower-than-expected performance of the property casualty business in both commercial and personal lines.

The EPS estimates for 2016, 2017 and 2018 have been reduced from $4.85 to $4.40, from $5.70 to $5.45 and from $6.67 to $6.42, respectively.

Gallagher mentioned that the reduction in price target reflects:

  • The lower earnings estimates
  • A lower multiple on the life insurance business reflective of peer valuations
  • The “reduction of excess capital in our sum of the parts as we believe most of the excess capital will be deployed by YE 2017”

Image Credit: "AIG Lobby at 70 Pine Street" by David Shankbone - Own work. Licensed under CC BY 3.0 via Wikimedia Commons.

Latest Ratings for AIG

Feb 2018BarclaysMaintainsOverweightOverweight
Feb 2018Bank of AmericaUpgradesNeutralBuy
Dec 2017Deutsche BankUpgradesSellHold

View More Analyst Ratings for AIG
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas Short Ideas Price Target Reiteration Analyst Ratings Trading Ideas General


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