Goldman Sachs Adds AIG To Conviction Buy List

Goldman Sachs’ Michael Nannizzi believes a combination of macro factors and attributes specific to American International Group Inc AIG creates an increasingly attractive risk/reward profile for the stock.

Nannizzi reiterated a Buy rating on the company, with a price target of $68.

Added To Conviction List

Adding American International Group to Goldman Sachs’ Americas Conviction List, following the robust 2Q results, the analyst mentioned that “the ‘wedge is under the door’ on near-term margin improvement as the near-term outlook on underwriting returns, due to both the support of reinsurance and the impact of targeted non-renewals.”

Nannizzi expects the company to provide further details on its path to margin expansion as the year progresses.

Related Link: Why Reverse Churning Is About To Become A Bid Advisor Concern

Future Catalysts

With regard to capital deployment, the analyst believes American International Group might be closer to a solution on securitizing its life reserves. The company had highlighted as part of its strategy outlook that this could add $4-$5 billion in additional capital.

“Although these transactions are already factored into our forecast for share repurchases through 2017, a more rapid resolution could move up the timetable on buybacks,” Nannizzi stated.

The analyst also believes higher rates could prove to be a positive catalyst for the company, although in the absence of an increase in the yield curve, there could be pressure from company-specific factors, such as margin improvement and capital deployment.

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