AIG Warrants Reach 20-Month High as Stock Gains

American International Group Inc. (AIG) 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 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 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 when the insurer reports quarterly results Nov. 1, according to analysts’ estimates, 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 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.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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