The firm said it initiated coverage on the global insurance provider as it believes the company's combined ratio of 99% might be overstated by 7 points, and it could reduce its ratio to 92%, adding 55 cents to American International's earnings.
Shares of American International Group are up by 0.56% to $55.35 in pre-market trading on Monday.
Separately, TheStreet Ratings team rates AMERICAN INTERNATIONAL GROUP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AMERICAN INTERNATIONAL GROUP (AIG) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- AMERICAN INTERNATIONAL GROUP has improved earnings per share by 13.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, AMERICAN INTERNATIONAL GROUP increased its bottom line by earning $6.08 versus $4.27 in the prior year. For the next year, the market is expecting a contraction of 24.3% in earnings ($4.61 versus $6.08).
- AIG, with its decline in revenue, underperformed when compared the industry average of 19.7%. Since the same quarter one year prior, revenues fell by 10.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Insurance industry and the overall market, AMERICAN INTERNATIONAL GROUP's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AIG Ratings Report
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