AIG Struggles Despite Strong Q3 Earnings as Analysts Remain Optimistic
Underperformance in the Market
American International Group, Inc. (AIG), a prominent global insurance firm based in New York, boasts a market cap of $48.5 billion. AIG offers a wide range of insurance and financial services, including property casualty insurance, life insurance, and retirement solutions, through a strong multichannel distribution network.
Comparative Market Analysis
Over the past 52 weeks, AIG’s stock performance has lagged behind the broader market. While AIG shares increased by 20.5%, the S&P 500 Index ($SPX) climbed 35.8%. In 2024, AIG saw a year-to-date (YTD) rise of 13.7%, which is still below the SPX’s impressive 24.3% gain.
Further analysis reveals that AIG has not kept pace with the US Insurance iShares ETF (IAK), which has generated a strong 37.7% return over the past year and a 31.1% gain YTD.
Q3 Earnings Report and Market Reaction
On November 4, AIG released its Q3 earnings, causing a slight increase in its stock price. The company reported adjusted earnings of $1.23 per share, exceeding Wall Street’s projected $1.13 per share. Additionally, AIG declared general insurance net premiums written of $6.4 billion and finished the quarter with a commendable total debt-to-capital ratio of 17.9%, along with parent liquidity of $4.2 billion.
Future Earnings Forecast and Analyst Opinions
Looking ahead to the current fiscal year ending in December, analysts predict AIG’s earnings per share (EPS) will drop by 26.5% year-over-year to $4.99. AIG’s earnings surprise history presents a mixed picture; it beat the consensus forecast in three of the last four quarters but fell short once.
Among 18 analysts evaluating AIG stock, the consensus rating is “Moderate Buy,” which includes 10 “Strong Buy” ratings, two “Moderate Buys,” and six “Holds.” This outlook is slightly more positive compared to three months ago when only nine analysts assigned a “Strong Buy” rating.
Analysts Adjust Price Targets
On November 5, RBC Capital analyst Mark Dwelle raised AIG’s price target from $80 to $87, maintaining an “Outperform” rating. He highlighted expectations for strong property and casualty (P&C) pricing trends and attractive combined ratios for Q1, despite facing hurdles in improving core underwriting margins.
The average price target now stands at $84.72, indicating a potential 10% upside from current levels. However, the highest price target of $90 implies a possible rally of up to 16.9%.
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On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
