Market Overview

AIG Notches Upgrade Ahead Of Q1 Report On Fundamental Improvements

AIG Notches Upgrade Ahead Of Q1 Report On Fundamental Improvements
Related AIG
Benzinga's Top Upgrades, Downgrades For January 15, 2019
10 Biggest Price Target Changes For Monday

Shares of insurer American International Group Inc (NYSE: AIG) have underperformed the S&P 500 Index year-to-date, prompting an analyst upgrade. 

The Analyst

Buckingham Research Group analyst Amit Kumar upgraded AIG from Underperform to Neutral and increased the price target from $52 to $55.

The Thesis

AIG stock is now priced in line with Buckingham's anticipated valuation, with the excitement seen after the appointment of new CEO Brian Duperreault now tapering off, Kumar said in a Friday note.

"From this point onward we anticipate the stock to move [in] lockstep with true fundamental improvements in the AIG story," the analyst said.

Commercial pricing continues to improve after earnings reports from Travelers Companies Inc (NYSE: TRV) and W. R. Berkley Corp (NYSE: WRB). The improvement has been at a slower pace, Kumar said. 

While noting that Travelers' and W.R. Berkley's results revealed steady underlying trends, the analyst said AIG could potentially hold the line on underlying commercial loss ratios, eliciting a positive reaction from investors.

AIG's business mix is potentially levered to rising rates, with life insurance accounting for 50 percent of earnings, Kumar said. 

Buckingham's 2018 estimates are 5-6 percent below the consensus, even as the firm projects a likely upward revision to Street estimates.

"A 1-percent improvement in [the] general insurance commercial lines loss ratio would add 13 cents or 2 percent [to the] 2018 EPS estimate." 

Macro trends could stabilize for AIG, with the worst-case scenario suggesting a sideways move in the stock, Kumar said. If the company is able to report a clean quarter May 2, investor concerns could be allayed, according to Buckingham. 

The Price Action

AIG shares were up 1.2 percent at the time of publication Friday at $56.22. 

Related Links:

How AIG Stands To Prosper Under A Trump Presidency

UBS Gets Bullish On Insurance Stocks

Photo by Marc Bryan-Brown via Wikimedia. 

Latest Ratings for AIG

Jan 2019Compass PointInitiates Coverage OnNeutral
Dec 2018Wells FargoMaintainsOutperformOutperform
Nov 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for AIG
View the Latest Analyst Ratings

Posted-In: Amit Kumar Buckingham Research GroupAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (AIG + TRV)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

With Its Global Network Of Customers, Vayana Network Looks To Simplify Supply Chain Finance For Businesses Of All Sizes

Munster: Amazon Leads In Automated Retail, A $50B Opportunity