Analysts express optimism about AIG’s recovery

Analysts have expressed optimism about the outlook for American International Group (AIG) after it implemented steps to improve performance and changed management.

American International Group’s (AIG) US casualty business resulted in a $3 billion group loss in the fourth quarter of 2016 and in the resignation of CEO Peter Hancock.

“While AIG has been a difficult name to get comfortable with due to reserve challenges and other items in the recent past, we have a positive view of the management change and like the steps the company has taken to improve performance,” CreditSights analysts commented in a May 30 report.

In the fourth quarter of 2016, AIG increased reserves by $5.6 billion to prop up the US casualty operations. AIG has replaced Hancock with Brian Duperreault, who was chairman and CEO of Bermuda-based Hamilton Insurance Group.

CreditSights had earlier in May upgraded AIG to an “Outperform” from “Market perform”.

One of the analysts’ top concerns had been a potential split of the company as suggested by some investors. “We were pleased to hear AIG’s new CEO Brian Duperreault’s statements that he didn’t come here to break the company up, [he] came here to grow it.”

Duperreault plans to develop the potential represented by the Hamilton/Two Sigma/AIG partnership called Attune, a technology-enabled platform that serves the particular needs of the small and medium-sized company insurance market in the US.

In addition, AIG and Two Sigma Insurance Quantified (TSIQ), a data science provider, will enter into a partnership to leverage TSIQ’s insurance-focused data science and technology expertise for a broad spectrum of commercial insurance underwritten globally by AIG.

Another key concern had been the potential impact of a downgrade by ratings agency AM Best, where AIG had been under review since it reported the fourth quarter reserve charge.

“Our upgrade of AIG had partially reflected our expectation of a favourable outcome, so we were relieved to hear last week that AM Best had affirmed its ratings for the company and removed it from review,” the analysts said.

Going forward, CreditSigths’s greatest concern regarding the company is future underwriting performance and reserve levels. “While it is still hard for us to get totally comfortable, recent comments from Duperreault have been encouraging and he has a very strong underwriting background,” the analysts commented.

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