On Monday, Keefe, Bruyette & Woods updated their outlook on American International Group (NYSE:AIG), reducing the price target slightly from $88.00 to $87.00. The firm continues to recommend an Outperform rating for the insurance giant's shares.
The adjustment follows AIG's third-quarter earnings report and subsequent conference call for the fiscal year 2024. Keefe, Bruyette & Woods analyst Meyer Shields cites the company's third-quarter performance, which exceeded expectations, as a reason for maintaining a positive outlook. However, the revised price target reflects a modest recalibration based on anticipated increases in expenses, share counts, and losses from Other Operations.
The firm has also revised its earnings per share (EPS) estimates for AIG. The 2024 EPS estimate has been increased to $5.10, up from $4.85, acknowledging the company's third-quarter outperformance. On the other hand, projections for 2025 and 2026 have been lowered to $6.70 and $7.70, respectively, down from previous estimates of $6.80 and $7.85.
Despite the slight adjustments to future EPS estimates and the price target, Keefe, Bruyette & Woods expresses confidence in AIG's potential for profitable premium growth, effective expense controls, and aggressive capital return strategy. The analyst anticipates these factors will contribute to AIG's market outperformance in the upcoming 12 months and beyond.
In other recent news, American International Group, Inc. (AIG) reported robust financial performance for the third quarter of 2024, marked by a 31% year-over-year increase in adjusted after-tax income to $798 million and a 19% rise in consolidated net investment income to $897 million. The company also saw a significant reduction in catastrophe losses. AIG's underwriting income reached $437 million, and the firm's calendar year combined ratio was a commendable 92.6%.
The company returned approximately $1.8 billion to shareholders through stock repurchases and dividends. Despite the impact from natural catastrophes, AIG managed to trim its CAT losses by 80% compared to 2012. It is preparing for a disciplined reinsurance market in the upcoming January renewal season.
AIG is also launching AIG Next (LON:NXT), aiming to streamline operations and achieve $500 million in savings by 2025. The company anticipates a core operating return on equity of 10% for 2025.
InvestingPro Insights
To complement Keefe, Bruyette & Woods' analysis, recent data from InvestingPro offers additional insights into AIG's financial position and market performance. The company's market capitalization stands at $47.28 billion, reflecting its significant presence in the insurance industry. AIG's price-to-earnings ratio (adjusted) for the last twelve months as of Q3 2024 is 11.79, suggesting a relatively modest valuation compared to earnings.
InvestingPro Tips highlight that AIG has maintained dividend payments for 12 consecutive years, demonstrating a commitment to shareholder returns that aligns with the analyst's note on the company's aggressive capital return strategy. This is further supported by a current dividend yield of 2.12% and a dividend growth of 11.11% over the last twelve months.
The company's profitability is underscored by an operating income of $4.57 billion and an EBITDA of $8.5 billion for the last twelve months as of Q3 2024. These figures support Keefe, Bruyette & Woods' positive outlook on AIG's potential for profitable growth.
It's worth noting that InvestingPro offers 8 additional tips for AIG, providing investors with a more comprehensive analysis of the company's prospects. These tips can be accessed through the InvestingPro product, offering valuable insights for those looking to delve deeper into AIG's financial health and market position.
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