Salomon Lowers AIG Outlook

Analyst Ronald Frank says the insurer's near-term potential volatility has arguably increased

Salomon Smith Barney cut its estimates on American International Group (AIG ).

Analyst Ronald Frank says he no longer thinks it's realistic to target the insurance giant at a historically high 25% premium to the S&P 500 earnings multiple, which would exceed the stock's historic peak of about 10%.

Frank says AIG's near-term potential volatility has arguably increased, and he cut his $3.95 2003 earnings per share estimate to $3.75, based on what he thinks are conservative assumptions. He notes CEO Maurice Greenberg said he would be "disappointed" with normalized earnings per share growth (excluding the reserve charge) of 8%-10%.

Frank views the 70 cents per share after-tax reserve charge as a "rear view" look. He likes AIG's strong credit ratings and its intact, market-leading franchises, and is keeping his outperform rating. However, he slashed the $80 target to $60.

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