Goldman Sachs Adds American International Group (AIG) to Conviction Buy List

(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."

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 $59.10 yesterday.

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