On Friday, BMO Capital maintained its optimistic stance on shares of American International Group (NYSE:AIG), reiterating an Outperform rating with a steady price target of $89.00. The firm's position follows AIG's announcement of the de-consolidation of Corebridge Financial (CRBG) and the subsequent sale of an approximate 20% stake in CRBG to Nippon Life.
The analyst from BMO Capital adjusted the firm's earnings per share (EPS) estimate for AIG for the year 2024, which saw a reduction of about 26%. This revision was made to reflect the removal of all earnings from CRBG, aligning with AIG's future reporting practices. The EPS estimates for the years 2025 and 2026 saw a modest increase, as the earnings from CRBG had already been excluded from those projections.
The de-consolidation of Corebridge Financial is a significant shift in AIG's business structure, marking a move away from the earnings contributions of this entity. The sale of the CRBG shares to Nippon Life represents a further step in this strategic realignment.
AIG's financial outlook, as projected by BMO Capital, suggests a transitional phase in 2024 with adjustments to the company's earnings profile. However, the outlook for the subsequent years indicates a stabilization as the company moves forward without the earnings from CRBG.
Investors and market watchers are keeping an eye on AIG as it navigates through these structural changes. The maintained price target of $89.00 by BMO Capital reflects a continued confidence in the insurance giant's performance potential amidst these developments.
In other recent news, American International Group (AIG) has undergone several significant transformations. Evercore ISI reduced AIG's stock target to $78 from $81, maintaining an in-line rating. This followed a comprehensive review that led to changes in the firm's financial forecasts for AIG, including a projected tax rate increase and variations in net investment income.
The firm also revised AIG's earnings per share (EPS) estimate for the second quarter of 2024 to $1.33, down from $2.00. On the other hand, Zurich Insurance has acquired AIG's global personal travel insurance and assistance business for $600 million, expanding its reach in the travel insurance market.
BofA Securities has raised the price target for AIG shares to $84.00, maintaining a Neutral rating, following a shift in its valuation approach. This adjustment comes in light of AIG's aggressive share repurchase strategy and the completion of the deconsolidation of Corebridge Financial, Inc.
AIG has also completed the deconsolidation of Corebridge Financial, Inc. for accounting purposes. Lastly, AIG's decision to sell down its Corebridge Financial (CRBG) stake is expected to streamline operations and potentially lead to significant gains in efficiency.
These are some of the recent developments that have taken place within AIG.
InvestingPro Insights
As American International Group (AIG) restructures and progresses through its transitional phase, BMO Capital's maintained Outperform rating and price target of $89.00 is bolstered by key financial metrics and strategic moves by the company. AIG's market capitalization stands at a robust $49.76 billion, reflecting its significant presence in the insurance industry.
The company's adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q1 2024 is at an attractive 10.6, which could indicate a potentially undervalued stock compared to industry averages. Additionally, AIG has demonstrated a commitment to shareholder returns, with a notable dividend yield of 2.13% and a 25% dividend growth rate in the same period.
InvestingPro Tips highlight AIG's aggressive share buyback strategy and high shareholder yield, which can be appealing to investors looking for companies with proactive capital return policies. Moreover, AIG's status as a prominent player in the insurance industry remains intact, despite short-term obligations surpassing liquid assets. Investors may take comfort in the fact that analysts predict profitability for the company this year, with AIG having been profitable over the last twelve months.
For those seeking more comprehensive analysis and additional InvestingPro Tips, AIG has 6 more tips listed on InvestingPro. Interested readers can unlock these insights and more by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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