Wednesday - Goldman Sachs has downgraded shares of American International Group (NYSE:AIG) from Buy to Neutral, adjusting the price target from $83.00 to $79.00. The revision reflects an anticipated total return opportunity of 11%.
According to InvestingPro data, AIG, currently valued at $45.28 billion, appears undervalued based on its Fair Value analysis. The change in rating is based on expectations of a worsening loss ratio in AIG's Commercial Lines, influenced by the company's significant exposure to competitive pricing pressures in several insurance markets.
Analysts at Goldman Sachs pointed out specific concerns about American International Group's Commercial Lines, which are likely to see a deteriorating loss ratio. The areas of concern include specialty property lines within U.S. and London markets, Financial Lines, and large accounts. These segments are expected to experience more pricing pressure than previously anticipated. InvestingPro data shows that six analysts have recently revised their earnings expectations downward, with revenue projected to decline in the current year.
The updated outlook from Goldman Sachs comes despite acknowledging the positive aspects of AIG's ongoing transformation into a standalone property and casualty (P&C) insurer. This transition includes the divestiture of CRBG, which is seen as a move that could enhance AIG's valuation and capital flexibility.
Goldman Sachs' revised price target of $79.00 for AIG stock, down from the previous target of $83.00, suggests a modest reduction in the expected performance of the company's shares over the next 12 months. The new target takes into account the potential headwinds the insurer may face in the near future.
The report concludes with a recognition of the benefits stemming from AIG's strategic shift, yet it emphasizes the challenges ahead due to the anticipated loss ratio deterioration in key areas of AIG's business. The firm's analysts have adjusted their stance accordingly, moving AIG's stock rating to reflect a more cautious outlook.
In other recent news, American International Group (AIG) showcased a robust financial performance in the third quarter of 2024. The insurance giant reported a 31% year-over-year increase in adjusted after-tax income to $798 million and a 19% rise in consolidated net investment income to $897 million. AIG's underwriting income reached $437 million, and the firm's calendar year combined ratio was a commendable 92.6%.
In addition, AIG has successfully completed the sale of notes totaling approximately ¥100 billion. This transaction included several notes with varying interest rates and maturity dates, underwritten by Mizuho (NYSE:MFG) Securities USA LLC, Morgan Stanley (NYSE:MS) & Co. International plc, and SMBC Nikko Securities America, Inc.
The company also launched AIG Next (LON:NXT), a project aimed at streamlining operations and achieving $500 million in savings by 2025. Moreover, AIG returned approximately $1.8 billion to shareholders through stock repurchases and dividends.
Keefe, Bruyette & Woods recently adjusted its outlook on AIG, maintaining an Outperform rating while slightly reducing the price target from $88.00 to $87.00. The firm also updated its earnings per share estimates for AIG for the upcoming years, factoring in the company's third-quarter performance.
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