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On Jan 21, we upgraded life and property-casualty (P&C) insurer – American International Group Inc. (AIG - Analyst Report) to Outperform based on the successful restructuring of its operations with the divestment of its aircraft leasing unit – International Lease Finance Corporation (ILFC).

Why the Upgrade?

Estimates of AIG have risen ahead of its fourth-quarter 2013 earnings results, following the long pending divestment of ILFC to AerCap Holdings in an attractive deal worth $5.4 billion, expected to close by mid-2014. ILFC is the only major-most asset left for disposition at AIG, paving way for increasing capital flexibility.

Alongside, the improved insurance fundamentals and financial leverage in 2013 have also sustained growth. These factors also bode well for efficient capital deployment.

Although a deteriorated investment portfolio amid intense competition and low interest rate environment raise some risks going ahead, we expect the company to benefit from its scale of operations, pricing improvements and disciplined expense management in the upcoming quarters along with a recovery in the economy.

On Oct 31, AIG reported its third-quarter 2013 results, wherein, both operating earnings of 96 cents per share and total revenue of $14.83 billion topped the Zacks Consensus Estimate of 93 cents and $10.1 billion, respectively.

However, both earnings and revenues lagged the year-ago results by 3.0% and 11.3%, respectively. Overall, AIG delivered positive earnings surprises in all the last 4 quarters with an average beat of 102.4%.

The Zacks Consensus Estimate for 2013 inched up 0.9% to $4.38 per share in the last 60 days. The same for 2014 was pegged at $4.26 a share, up 0.5% during the same period.

With the Zacks Consensus Estimate for both 2013 and 2014 trending upward, the company now has a Zacks Rank #2 (Buy).

Other Insurers That Warrant a Look

Other top-ranked insurers like Cigna Corp. (CI - Analyst Report), CNA Financial Corp. (CNA - Snapshot Report) and ACE Ltd. (ACE - Analyst Report) also warrant a look. All these stocks sport a Zacks Rank #1 (Strong Buy).

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