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Analyst Expresses Concerns Over AIG's Loss Reserves

Posted on 01 Dec 2009

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On Monday, American International Group (AIG) was one of the market's biggest laggards as Sanford Bernstein analyst Todd Bault cut his price target 40% on concerns about the insurer's loss reserves that could have "major ramifications" going forward.

Mr. Bault's analysis showed loss reserves were $11 billion short, with most of the deficiency in three casualty lines: Workers Compensation, General Liability and Professional Liability. One reason he offered: AIG has been using less reinsurance.

The company declined to comment. That kind of shortfall could complicate its ability to retain customers and repay government debts. Shares fell 4.90, or 15%, to 28.40.