AIG stock is Wednesday's IBD Stock of the Day. Shares of the insurance giant are just below a buy point in a 12-week base.
American International Group shares are tracking toward a second-straight monthly advance, amid the prospect of rising interest rates, a rebound in consumer spending and higher insurance premiums. It also follows efforts by the company to cut costs, modernize operations and spin off its life and retirement business.
AIG Stock
AIG stock was down 3.4% to 58.84 in the stock market today. Shares had pulled back after rising recently to just short of a 62.64 buy point in a cup base. The stock could form a handle over the next several sessions.
The stock's relative strength line has risen since the end of December. Shares have a strong 97 Composite Rating. Their EPS Rating is 92.
AIG reports fourth-quarter earnings on Feb. 16.
Along with AIG stock, Travelers Companies, another insurer, was down 1.2% on Wednesday. The stock was within range of a 163.39 buy point of a base. That pattern shows up as a flat base on a weekly chart.
'Well-Positioned' For Rebound
AIG offers property and casualty insurance and financial services, and is working to exit its life insurance and retirement services units. The New York-based company reports that it has customers in more than 80 nations and jurisdictions, and makes money from insurance premiums, fees and investments.
AIG stock has moved higher since 2020, when insurers stockpiled cash reserves in preparation for a wave of insurance claims related to the coronavirus pandemic. Earnings suffered, as the pandemic hit AIG's travel, property and other insurance businesses. But the picture improved as the economy began reopening.
"AIG is well-positioned to leverage a post-Covid-19 recovery on several fronts," CFRA analysts said in a report in June. "Its General Insurance unit is a leading commercial lines insurer, poised to benefit from an increased demand for coverage amid an economy recovery."
Barclays kept the stock at an equal weight rating in a Jan. 6 note, and lowered its price target to 59, from 60.
A 'Hard Market'
More recently, the Federal Reserve has signaled it will raise interest rates. The relationship between insurer profits and interest rates is complex. But there are ways in which higher rates can lift insurance stocks and boost profitability.
AIG has also been trying to make its operations leaner and strengthen its digital infrastructure. In November, it selected Amazon Web Services as a cloud-services provider.
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Earlier that month, it closed a deal with Blackstone under which the investment manager would buy a 9.9% stake in AIG's life and retirement segment and manage an initial $50 billion of that segment's investment portfolio. AIG is grooming the life and retirement business to be a stand-alone company.
AIG also bought back $1.1 billion in stock during the third quarter. It redeemed $1.5 billion in debt.
"The overall view is that the market is remaining firm in what will be the third year of upward price increases, which is not unusual for a hard market," William Blair analysts who follow AIG stock wrote this month in a research note about the insurance industry.
"The continued pricing power should be relatively good news in the near term for most stocks in the sector," they continued.
