Is AIG a Once-In-A-Generation Opportunity?

American International Group (NYSE:AIG) has become a “once-in-a-generation opportunity,” Sanford C. Bernstein analysts wrote in a recent research note seen by Jags Report. They predicted that shares of AIG, which are currently “about half of book value,” will outperform the sector and the price-to-book multiple will improve this year.

The analysts compared the changes undergone by post-bailout AIG to another company that has just completed demutualization, a process by which an insurer transitions from a mutual to a public company. “The clearest analogue of course, is Metlife,” wrote Bernstein’s analysts. “MET’s then-CEO Robert Benmosche, dramatically outperformed expectations at MET after it demutualized. And now, of course, he runs AIG.”

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MetLife (NYSE:MET) made its initial public offering in 2000. Under Benmosche’s  guidance, the company transitioned from a mutual insurance company, owned by the individuals and corporations that held its policies, to one owned by stockholders. In the last years of the twentieth century, MetLife was left behind as many other insurance companies were able to reap proceeds from securities. But with the restructuring changes implemented by Benmosche, the insurer saw its lagging profits recover.

In the research note, Bernstein raised its rating on shares of AIG to outperform and increased the price target to $45…

While AIG’s reputation was sullied by the federal government’s multi-billion dollar bailout of it in 2008, “it is same company only in name now,” wrote Todd Sullivan of the financial blog ValuePlays. In his explanation of the positive assessment of the insurance company, he noted that the new management had made dramatic progress. AIG has also drawn attention for its recent revenue growth and stock performance.

Of all the research analysts covering AIG, 13 have given the stock a buy rating, one has rated its shares overweight, and eight have issued a hold rating.

Bernstein’s rating upgrade came the same day chairman Steve Miller announced that AIG was “done playing defense.” He told The Wall Street Journal’s Neal Lipschutz at the World Economic Forum in Davos, Switzerland, that since the American taxpayers had been paid off, the company could begin focusing on its future. In the past few years AIG made numerous divestitures to make its business fit “an insurance company balance sheet” and to pay off the bailout. Now the insurer is going in a new direction. According to Miller, AIG’s next transaction will be an acquisition.

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