AIG's Resilient Hyperinflation Strategy Leads To Analyst Upgrade

Shares of American International Group Inc AIG have climbed almost 20% over the past six months.

American International Group’s reserves have fared better than expected over the past two hyperinflationary years, as the company offers around 33% lower insurance policy limits, according to BMO Capital Markets.

The American International Group Analyst: Michael Zaremski upgraded the rating for American International Group from Market Perform to Outperform, while raising the price target from $72 to $83.

The American International Group Thesis: With lawsuit/social inflationary pressures expected to persist into 2024, the company’s higher reinsurance reliance is “now more of a positive,” as this offers its shareholders higher social inflationary protection than peers, Zaremski said in the upgrade note.

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“Related, given AIG’s loss ratio profit margin trendline is running meaningfully better than peers, we estimate AIG’s 2024 reinsurance costs are likely to rise much less than peers,” the analyst wrote.

The improvement trajectory of American International Group’s expense ratio is its “main lever to a sustainable double-digit RoE level; a process that can be accelerated once AIG’s operations are fully de-coupled from Corebridge (AIG's life business),” he added.

AIG Price Action: Shares of American International Group were up 6.9% to $67.31 at the time of publication Tuesday.

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