BofA Securities analyst Joshua Shanker downgraded American International Group Inc AIG to Neutral from a Buy rating but raised the price target to $77 (from $75).
Despite strong fourth-quarter results, the analyst is bearish on the stock as he expects the company to face several difficulties in 2024.
Last week, AIG reported quarterly earnings of $1.79 per share, which beat the analyst consensus estimate of $1.64 by 9.15%. The company reported fourth-quarter net premium written of $5.61 billion, an increase of 3% year-over-year.
First, the analyst projects difficult year-over-year comparables for both top-line numbers and margins as 2024 results exclude the Validus reinsurance business recently sold to RenaissanceRe, which had higher underwriting margins than the majority of its business.
Also, the commercial P&C loss ratios have peaked, making it difficult for AIG to improve its loss ratio pro forma for the Validus sale, writes the analyst.
Shanker sees AIG’s EPS as about 10% lower than the current forecast owing to Corebridge Financial Inc CRBG plan to divest its U.K. life insurance business, operating as AIG Life Limited.
Following fourth-quarter results, the analyst anticipates a slower trend toward higher investment yields for 2024. Shanker estimates EPS of $7.30 (vs. $7.46 estimate) for 2024, $8.55 (vs. street view of $8.36) for FY25, and $9.25 (vs. consensus: $9.06) for FY26.
Price Action: AIG shares are trading lower by 1.73% at $68.83 on the last check Tuesday.
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