Analysts responded favorably to American International Group's investor meeting yesterday, noting the company should comfortably weather Katrina losses.
Bank of America equity analyst Brian Meredith said CEO Martin Sullivan's comments on pricing trends mean that the attractive returns on equities the commercial lines have been experiencing "should persist into at least 2007 now."
"Commentary on pricing after the hurricanes was in line with our expectations with price increases in primary property, marine and energy businesses," Mr. Meredith wrote.
Prudential analyst Jay Gelb agreed.
"As the largest writer of domestic commercial p-c insurance, AIG should be well positioned to benefit from higher prices for short-tail lines in areas hit by the hurricane," he wrote.
But with the impact on global industry capital from Katrina at only 5 percent, Mr. Gelb was less optimistic that worldwide pricing will see much firming from the storm.
Mr. Gelb noted the company does not plan to return capital to shareholders in the immediate future, but plans to reinvest in the business. "AIG has not historically repurchased much stock, but it could repurchase stock or increase the dividend if opportunities to reinvest excess capital diminish," he wrote.
In that regard, Mr. Gelb said he had the feeling that the company is at least not ruling out disposal of its non-insurance lines of business, mostly in financial services.
"These lines are capital intensive and complex, and in our view could be considered a distraction," he wrote. "We would view the disposition of these lines as a favorable catalyst for AIG because the company can then aggressively repurchase stock."
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