How AIG Stands To Prosper Under A Trump Presidency

Trump’s victory could prove to be a positive for American International Group Inc AIG, which would benefit from easing regulations and lower taxes, Argus’s Jacob Kilstein said in a report.

“We have a positive view of AIG’s leading position in global P&C and U.S. life insurance, efforts to lower costs and sell noncore assets, strong liquidity, and aggressive share buybacks,” Kilstein wrote. He maintains a Buy rating on the company, while raising the price target from $66 to $75.

AIG plans to spin off its mortgage insurance business. The company repurchased $2.3 billion worth of shares in Q3 and $946 million after the end of the quarter. It now has a remaining authorization of $4.4 billion. With these initiatives and a dividend hike, the return on equity could increase to 9 percent.

Prospects Under A Trump Presidency

AIG’s shares have recorded strong gains since the November election. “We expect AIG to benefit from reduced regulation and lower taxes under the new Republican administration,” Kilstein wrote.

Moreover, as the Fed raises interest rates, the company could earn more on its $260 billion bond portfolio.

Following the spinoff, a smaller AIG may find it easier to have its systemically important financial institution designation removed. This designation has raised the company’s regulatory costs. “It is also possible that the new Republican administration’s reduced financial regulation will remove the SIFI designation altogether,” the analyst added.