AIG Advances as BofA Says Buybacks Make Insurer Top Pick

Jan 28, 2014 4:26 pm ET

(Updates share gain starting in the first paragraph.)

Jan. 28 (Bloomberg) -- American International Group Inc. jumped the most in almost eight weeks after Bank of America Corp. said it expects the insurer to buy back $10 billion of stock during the next two years.

AIG gained 2.5 percent to $48.46 at 4:15 p.m. in New York. Bank of America analysts led by Jay Cohen named AIG the top pick among property and casualty insurers for 2014 in a research note to clients today.

Chief Executive Officer Robert Benmosche, 69, is seeking to return more capital to shareholders after repaying a U.S. bailout in late 2012. In August, he announced the first dividend since 2008 and a stock repurchase program of $1 billion. The CEO last month reached a deal to sell New York-based AIG’s plane- leasing unit for $5 billion.

The sale “should pave the way for more aggressive capital management actions,” the analysts wrote.

AIG will probably benefit from better underwriting and higher prices for commercial coverage, they said. Expenses should decline after remaining “elevated” the past two years because of investments in risk analysis and financial reporting systems, according to the analysts.

AerCap Holdings NV agreed to buy AIG’s International Lease Finance Corp. for $3 billion in cash and the balance in stock. The insurer had sought to sell ILFC since 2008, the year it received a government rescue that swelled to $182.3 billion.

AIG has rallied 30 percent in the past year. That compares with the 22 percent gain of the 81-company Standard & Poor’s 500 Financials Index.

--With assistance from Zachary Tracer in New York. Editors: Dan Kraut, Steve Dickson