Ignore the Noise and Buy AIG (AIG) on Post-Earnings Weakness, BMO Capital Says

BMO Capital analyst Charles Sebaski reiterated an Outperform rating and boosted his price target on American International Group (NYSE: AIG) to $60.00 (from $58.00) following Q1 results, saying patient investors will be rewarded by ignoring the quarterly noise.

Sebaski commented, "Despite 1Q14 results coming in materially ahead of consensus, investors on Tuesday decided to sell-off AIG stock pushing it down more than 4% for the day; a move we believe seemed short sighted, given the many positives we saw in the quarter. These included a sizeable share repurchase of $867mm, the approvals for the sale of ILFC, and a continued strong earnings generation from AIG Life & Retirement at $1.4 billion of pre-tax operating income. However concern over the P&C division accident year combined ratio, which was 10 bps higher than 1Q13 at 97.3%, seemed to take precedent above everything else combined. We see a couple issues with this line of thinking; 1) 1Q13 was one of the P&C division’s best quarter in years (a very high hurdle); 2) Expecting too much of a P&C improvement to be delivered in 2014; and 3) Too high of a discount to AIG Life & Retirement earnings relative to P&C earnings."

The firm is raising 2014 and 2015 operating EPS to $4.55 and $5.55, respectively.

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 $50.54 yesterday.

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