American International Group Inc. (AIG:US) warrants jumped to a 20-month high as the stock rallies amid optimism for improved business performance as the U.S. winds down a bailout of the insurer.
The warrants (2FWS:US) advanced 1.6 percent to $15.42 at 10:43 a.m. in New York. The contracts allow investors to buy AIG common stock at $45 apiece by Jan. 19, 2021. Shares of the New York- based insurer climbed 1.4 percent to $36.85.
AIG’s stock (AIG:US) has surged 59 percent this year, the best performance among 22 companies on the Standard & Poor’s 500 Insurance Index (S5INSU), as the U.S. Treasury Department sold a majority stake acquired in the company’s bailout. AIG will record a fourth straight profit (AIG:US) when the insurer reports quarterly results Nov. 1, according to analysts’ estimates (AIG:US), as the insurer works to improve results at its Chartis international property- casualty unit by shunning lower-priced business.
“AIG’s turnaround will be driven by management’s efforts to fix Chartis,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., wrote in a research note yesterday. “With clear catalysts to outperform in a stable market as the Treasury exits, and yet less downside than many more-levered financial names, AIG is our favorite ‘risk-on’ trade.”
The U.S. cut its stake (AIG:US) in AIG to 16 percent from 77 percent in four share sales this year, after acquiring 92 percent in a bailout that swelled to $182.3 billion during the financial crisis. The insurer bought back $13 billion of stock, helping boost per-share earnings.
The AIG warrants changed hands for more than $23 in January of 2011 in their first week of trading. They fell by more than half that year as the insurer faced losses from the earthquake and tsunami in Japan.
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