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Bank Of America: AIG Earnings Show Improvement In US Commercial Insurance

Bank Of America: AIG Earnings Show Improvement In US Commercial Insurance
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American International Group Inc (NYSE: AIG) reported fourth-quarter results Thursday that which were encouraging enough for Bank of America Merrill Lynch to turn bullish on the stock.

The Analyst

BofA's Jay Cohen upgraded American International Group's stock from Neutral to Buy with a price target boosted from $65 to $70.

The Thesis

AIG's Q4 was "encouraging," but the most obvious highlight was good results in the company's U.S. commercial insurance business — a source of concern and earnings drag over the past three years, Cohen said in the upgrade note. In fact, the segment's loss reserves "developed favorably," which Cohen said he views as an "unexpected and welcome change."

Other favorable aspects in the earnings report include an improvement in the underlying loss ratio and the U.S. personal insurance business, showing it is still a "reliable performer," the analyst said. In addition, AIG's underlying margin was the best recorded in some time, and even if this trend doesn't continue, it should at the very least modestly improve the outlook, Cohen said. 

AIG shares have come under some selling pressure since late January and are now trading near $58 per share, which is a key support level over the past 18 months, the analyst said.

AIG's earnings show management addressed multiple issues which plagued the company over the past five year, and the company should now be able to offer "relatively cleaner earnings" in 2018 and 2019, according to BofA. 

Price Action

Shares of American International Group were up 0.80 percent Friday midday at $58.89. 

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Photo from Wikimedia. 

Latest Ratings for AIG

Dec 2018Wells FargoMaintainsOutperformOutperform
Nov 2018BarclaysMaintainsOverweightOverweight
Nov 2018Evercore ISI GroupDowngradesOutperformIn-Line

View More Analyst Ratings for AIG
View the Latest Analyst Ratings

Posted-In: Bank of America Commercial Insurance insurance Jay Cohen Personal InsuranceAnalyst Color Analyst Ratings Best of Benzinga


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