On Thursday, JPMorgan shifted its stance on American International Group (NYSE:AIG), upgrading the stock from Neutral to Overweight, while adjusting the price target to $89.00 from a previous $93.00. The financial firm expressed a more positive view on AIG's prospects, citing several improvements within the company's operations.
The upgrade reflects JPMorgan's recognition of AIG's enhanced underwriting, reserves, and risk management. The firm acknowledges that while initially hesitant due to potential dilution from the CRBG separation and other concerns, the current consensus earnings per share (EPS) forecasts appear more reasonable and potentially conservative. Additionally, AIG's stock valuation has become more attractive after its recent underperformance relative to the market.
JPMorgan's bullish outlook is based on the expectation of significant EPS growth for AIG over the coming years. The firm also notes AIG's reduced exposure to risks commonly faced by commercial insurers and highlights the company's high capital flexibility. These factors contribute to JPMorgan's positive assessment.
Furthermore, JPMorgan finds AIG's current valuation compelling, factoring in the value of its deferred tax asset, estimated at approximately $5 per share. The firm also anticipates that AIG will experience above-average EPS growth in the near future, strengthening the case for the upgrade.
In other recent news, American International Group (AIG) reported a 38% year-over-year increase in adjusted after-tax income to $775 million in Q2 2024. General Insurance net premiums grew by 7%, and underwriting income reached $430 million.
AIG's consolidated net investment income also saw a 14% increase, totaling $884 million. Following these results, several financial institutions adjusted their outlook on AIG. BMO Capital raised its price target from $87.00 to $90.00, citing the benefits from AIG's structural transactions and deferred tax assets utilization.
However, HSBC reduced its price target to $82, Deutsche Bank to $86, and TD Cowen to $80, each maintaining their respective ratings on the stock. In addition to these financial developments, AIG appointed Keith Walsh as its new Executive Vice President and Chief Financial Officer, effective from October 21, 2024.
InvestingPro Insights
JPMorgan's upgrade of AIG aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at $48.68 billion, reflecting its significant presence in the insurance industry. AIG's revenue for the last twelve months as of Q2 2024 was $45.92 billion, with a notable revenue growth of 16.0% over the same period.
InvestingPro Tips highlight AIG's financial strength and management strategy. The company has maintained dividend payments for 12 consecutive years, demonstrating a commitment to shareholder returns. This is further supported by the current dividend yield of 2.12%. Additionally, management has been aggressively buying back shares, which could potentially boost earnings per share and align with JPMorgan's expectation of significant EPS growth.
It's worth noting that AIG's Price to Book ratio is 1.1, suggesting the stock may be reasonably valued relative to its book value. This metric, combined with JPMorgan's view on AIG's attractive valuation, provides investors with additional context for assessing the stock's potential.
For investors seeking a deeper understanding of AIG's financial health and prospects, InvestingPro offers 8 additional tips, providing a more comprehensive analysis of the company's position in the insurance sector.
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