Goldman Sachs Upgrades American International Group (AIG) to Buy

Goldman Sachs upgraded American International Group (NYSE: AIG) from Neutral to Buy with a price target of $63.00 (from $50.00). Analyst Michael Nannizzi noted that AIG has accretive options outside of buybacks.

"We raise our rating on shares of AIG to Buy and set a new 12-month $63 price target as we believe investors should move their focus from capital deployment to capital generation. We believe AIG will generate SIFI-high capital and is best positioned among SIFI candidates to deploy capital accretively into its core businesses if large-scale buybacks are not a near-term option. Our positive stance on AIG does not represent a more favorable view of regulation than we had previously held, but instead is based on our view that AIG’s “second best” deployment option is underappreciated by investors," said Nannizzi.

"Buybacks are unquestionably the most accretive option for excess capital. But if full deployment via buybacks is not an option because of regulatory considerations, we believe AIG can uniquely benefit from growth in high-ROE, capital-intensive lines in both P&C and Life where it is under-exposed, he continued.

• 1) P&C: AIG could further “re-risk” its P&C busines by writing more property and retaining more risk. If AIG chooses this path to deploy capital, returns are likely to notionally improve but become more volatile.
• 2) Life: AIG could continue its recent trend of growth in capital-consuming, high-margin products like annuities. This path would also lead to higher but potentially more volatile returns."

For an analyst ratings summary and ratings history on American International Group click here. For more ratings news on American International Group click here.

Shares of American International Group closed at $52.49 yesterday.

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