Fitch Ratings, a global rating agency, recently raised its outlook on AIG (NYSE:AIG) to positive from stable recognizing AIG’s stronger competitive position in several markets. AIG is still working hard to regain lost ground after it booked huge losses on credit default swaps and needed a government led bailout during the financial crisis. Fitch Ratings still maintains its ‘BBB’ investment grade rating on AIG, two notches above speculative grade but has an improved outlook on the company which reflects AIG’s improved liquidity and financial profile over the past year after the insurer shed some operations and de-leveraged. [1] AIG is one of the largest insurance companies in the world and competes with MetLife (NYSE:MET), Prudential Financial (NYSE:PRU), Hartford Financial (NYSE:HIG), Manulife Financial (NYSE:MFC).
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Standard & Poor’s Ratings Services also lifted its outlook on AIG last February on expectations of a consistent operating performance by the company. S&P rates AIG at ‘A-’, two notches above Fitch’s rating on AIG.
A.M. Best Co. also recently affirmed the credit and debt ratings of AIG and its subsidiaries and upgraded its outlook to stable from negative. The revised stable outlook of AIG is based on AIG’s successful recapitalization in January last year, raising funds from the market through debt and equity in 2010 and 2011, the execution of new credit facilities and disposing of redundant assets which has enhanced AIG’s liquidity and has helped the company to pay out a chunk of the government bailout debt. [2]
We have a price estimate of $19.72 on AIG’s stock, about 25% below its current market price.
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Notes:- Fitch Boosts AIG Outlook To Positive After Scheduled Review, WSJ, Feb 3, 2012 [↩]
- A.M. Best Elevates AIG to Stable, Zacks, Jan 30, 2012 [↩]
