Investing.com -- Shares of American International Group (NYSE:AIG) declined by 4% after Goldman Sachs downgraded the insurance giant from Buy to Neutral, adjusting the price target from $83.00 to $79.00.
The move came as Goldman Sachs analyst Alex Scott expressed concerns about the company's Commercial Lines loss ratio, which is expected to deteriorate more than previously anticipated. Scott cited AIG's significant exposure to pricing pressure in specialty property lines, Financial Lines, and large accounts as the primary reasons for the downgrade.
In a statement, Scott said, "AIG’s Commercial Lines loss ratio will deteriorate more than expected in coming years." This comment reflects the analyst's view that the challenges AIG faces in certain segments of its business could impact its financial performance.
Despite the downgrade, Scott acknowledged the positive aspects of AIG's ongoing transition to a standalone property and casualty (P&C) insurer, particularly after divesting its CRBG unit. The transition is seen to promote better valuation and capital flexibility for AIG, but these factors were not enough to prevent the stock's decline in response to the downgrade.
Investors reacted to the analyst's projections, adjusting their positions in anticipation of the potential impact on AIG's profitability. The downgrade suggests a shift in market sentiment, as the insurance company's stock adjusts to new expectations set by market experts.
AIG's stock movement reflects the market's immediate response to the analyst's report and serves as a reminder of the influence that analyst ratings and forecasts can have on stock prices. As AIG continues to navigate its restructuring efforts and address the areas of concern highlighted by Goldman Sachs, investors will likely monitor the company's progress closely in the coming quarters.
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