AIG Falls as Bernstein Cites Risk to ILFC DealMegan Hickey and Zachary Tracer
American International Group Inc. fell in New York trading as Sanford C. Bernstein & Co. cut its earnings projections on the prospect that delays in the sale of a plane-leasing unit extend the wait to resume share buybacks.
AIG slumped 68 cents, or 1.5 percent to $44.47 at 11:12 a.m., the biggest decline in the 22-company Standard & Poor’s 500 Insurance Index.
The insurer said yesterday it is open to new offers for its International Lease Finance Corp. and may pursue an initial share sale of the business after extending for a second time a deadline for a group of Chinese investors to buy the unit. The group, led by New China Trust Co. Chairman Weng Xianding, agreed in December to pay $4.2 billion for an 80 percent stake in ILFC.
“We think investors should recognize an announcement of the deal’s termination may soon be coming -- and would expect the shares to be weak on any headline making clear that the deal is definitively off,” Bernstein analysts led by Josh Stirling said in a note today. “The revised purchase contract shows evidence of AIG itself beginning to disengage from these buyers.”
Steven Lipin, a spokesman for the acquirers at Brunswick Group, declined to comment. Matt Gallagher, an AIG spokesman, didn’t respond to a request for comment.
AIG Chief Executive Officer Robert Benmosche has been targeting share repurchases to help boost the New York-based company’s operating return on equity to 10 percent by the end of 2015. He has said the sale of ILFC would simplify the company and reduce its debt, which he considers an essential step before resuming buybacks.
“As the probability of a successful near-term closing declines, we are recognizing this delay in our forecasts for capital returns, and shift the timing of the firm’s dividends and buybacks back by a quarter” to the last three months of this year, the Bernstein analysts wrote.
Stirling is now projecting earnings of $4.03 a share this year at AIG, down from his prior estimate of $4.10.