Goldman Sachs Adds American International Group (AIG) to Conviction Buy List
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(Updated - August 8, 2016 8:46 AM EDT)
Goldman Sachs upgraded American International Group (NYSE: AIG) from Buy to Conviction Buy with a price target of $68, implying upside of 15%. Analyst Michael Nannizzi said visibility on margin gives him more confidence.
"We reiterate our Buy rating and add shares of AIG to the Americas Conviction List after a strong 2Q result which we believe added another leg to our thesis on AIG. Our view to this point has been premised almost entirely on capital deployment; however, having had some time to digest 2Q results, we believe that the ‘wedge is under the door’ on near-term margin improvement as the near-term outlook on underwriting returns, due to both the support of reinsurance and the impact of targeted non-renewals. In addition, we believe that the combination of macro factors and AIG-specific attributes provides an increasingly attractive risk/reward," said Nannizzi.
Discussing catalysts, the analyst said, "We expect further confirmation on the path towards margin expansion as the year progresses. On the capital deployment side, which remains a core element of our thesis, we believe that the company may also be closer to a solution on securitizing its life reserves, which AIG highlighted in its strategy outlook could provide $4-5bn in additional capital. Although these transactions are already factored into our forecast for share repurchases through 2017, a more rapid resolution could move up the timetable on buybacks. Higher rates could also be a positive catalyst for AIG, but absent a move higher in the yield curve we now see ballast from two AIG-specific elements: margin improvement and capital deployment."
Shares of American International Group closed at $59.10 yesterday.
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