On Monday, UBS analyst Brian Meredith (NYSE:MDP) increased the price target for American International Group (NYSE:AIG) shares to $92, up from the previous $86, while reiterating a Buy rating on the stock. Meredith’s update follows a notable decline in AIG’s stock price earlier in the month, which he views as a compelling entry point for investors interested in a property and casualty (P&C) insurer showing signs of growth and return on equity (ROE) improvement.
Meredith explained that the revision in the price target is due to a combination of factors, including the stabilization of consensus estimate revisions after the deconsolidation of AIG’s subsidiary Corebridge and the sale of its Travel business. He anticipates potential gains from enhanced growth and margin improvements. According to Meredith, AIG’s operational leverage will be crucial in boosting its ROE, and the company’s strong presence in the excess and surplus (E&S) market, including operations at Lloyd’s, should support growth in the coming years.
Additionally, investments in artificial intelligence are expected to drive productivity enhancements. AIG’s recent strategic partnership vehicle (SPV) with Blackstone (NYSE:BX) is also poised to provide extra capacity and attractive fee income. With a market capitalization of $46.07 billion and a P/E ratio of 23.8, Meredith sees potential for AIG to engage in accretive mergers and acquisitions that could further enhance its market position. Discover comprehensive valuation metrics and growth potential analysis in AIG’s detailed Pro Research Report, available exclusively on InvestingPro.
The lowered earnings per share (EPS) estimate for fiscal year 2025, now at $6.15, reflects the impact of higher aviation and energy losses in the first quarter of 2025, as well as a slightly reduced share repurchase program due to an increase in share price. Nonetheless, the forecast for fiscal year 2026 remains unchanged at $7.80 EPS.
The revised price target by UBS takes into account a roll-forward to the first quarter of 2026 for the target book value per share (BVPS) excluding accumulated other comprehensive income (AOCI) and a higher 2026 operating ROE excluding AOCI forecast (10.2% compared to 9.4% previously). The price target assumes AIG’s shares will trade at 1.2 times the twelve-month forward BVPS excluding AOCI, with an additional $4 attributed to the value of the deferred tax asset (DTA).
In other recent news, American International Group (AIG) announced a new $7.5 billion share repurchase program, which includes $3.4 billion remaining from a previous authorization, set to begin on April 1, 2025. This development was unveiled alongside AIG’s Investor Day, where the company outlined ambitious financial targets, including an Operating Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) exceeding 20% from 2025 to 2027 and a core operating Return on Equity (ROE) target of 10% to 13%. Keefe, Bruyette & Woods analysts have maintained an Outperform rating on AIG, raising their price target to $98, citing the company’s transformation and innovative AI capabilities as drivers for future growth. They project EPS estimates of $6.25 and $7.85 for 2025 and 2026, respectively, with a new 2027 EPS estimate of $8.65. TD Cowen also reaffirmed its Hold rating on AIG with a price target of $86, noting the company’s significant progress and strategic plans shared during the Investor Day. Both firms recognize AIG’s efforts to enhance profitability through improved underwriting margins and capital management. AIG’s management has also committed to maintaining a General Insurance expense ratio under 30% and increasing dividends per share by over 10% CAGR for 2025 to 2026. These recent developments reflect AIG’s strategic direction and the confidence of analysts in the company’s growth prospects.
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