American International Group Inc. warrants jumped to the highest since January 2011, the month the contracts began trading, as the stock rallied on speculation results will improve at the insurer’s largest business.
The warrants advanced 5.7 percent to $16.43. The contracts allow investors to buy AIG common stock at $45 apiece by Jan. 19, 2021. Shares of the New York-based insurer climbed 3.8 percent to $40.09 and are up about 22 percent in the past year, fueled by the repayment in late 2012 of a U.S. bailout.
AIG’s stock will probably climb to $44 in the next 12 months, Paul Newsome, of Sandler O’Neill & Partners LP, said in a note to investors last week after analysts met with leaders of the property-casualty division. The operation, AIG’s largest, has been seeking to increase sales outside the U.S. and to individual consumers to boost returns.
“AIG’s property-casualty unit should see better underwriting results in the near future,” Newsome said in the April 2 note. “The company’s restructuring efforts remain on track, and we should see improved profitability.”
The insurer, which was majority owned by the U.S. for more than four years starting in 2008, unveiled a plan in 2010 to issue warrants to shareholders. The transfer, which was made in 2011, was part of an effort to dissuade investors from dumping the insurer’s stock amid its restructuring, people familiar with the plan said at the time.
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.