On Tuesday, BofA Securities adjusted its stance on American International Group (NYSE:AIG), downgrading the insurance giant's stock from Buy to Neutral while modestly increasing the price target to $77.00, up from the previous $75.00. The revision follows a solid fourth-quarter performance in 2023, where AIG showed strong results in both its General Insurance business and Corebridge, indicating effective operational execution across most of its divisions.
The reassessment by BofA Securities comes amid anticipated challenges for AIG in the year ahead. The firm expects the insurer to face tough year-over-year comparisons for its revenue and margins, particularly as the 2024 figures will no longer include contributions from the Validus reinsurance business, which was recently divested to RenaissanceRe (NYSE:RNR). The sold unit had boasted higher underwriting margins compared to AIG's remaining operations.
The analyst from BofA Securities highlighted that despite the well-known sale of Validus, it would still pose difficulties for AIG in demonstrating year-over-year improvements to its investors. This outlook is set against a backdrop where commercial property and casualty (P&C) loss ratios are believed to have reached their peak, as evidenced by the Underperform ratings on other industry players such as Chubb (NYSE:CB) Limited, CNA Financial Corporation, and The Travelers Companies (NYSE:TRV), Inc.
The market environment for AIG is becoming increasingly challenging, with the loss ratio improvements likely to be less attainable post-Validus sale. The company's ability to maintain or better its loss ratio, a key measure of insurance profitability, is uncertain without the high-margin business it once had.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.