American International Group (NYSE:AIG): Lowering Estimates on weakness in P&C segments - UBS

UBS is out cautious on American International Group (NYSE:AIG) this morning lowering their Street high target of $44 to $32 after taking down estimates.

Weak P&C operating trends
Commercial Insurance/Foreign General combined ratios (excluding current-year catastrophes) deteriorated to 105%/103% in 3Q09, from ~100%/~93% in 1H09 and ~101%/~92% in ‘08. UBS expects continued weakness in AIG’s core P&C segments over the near- and intermediate-terms.

Lowering ’10-’12 operating EPS outlook given weakness in P&C segments
They are lowering their ’10-’12 operating EPS estimates, in part to reflect combined ratio pressures in AIG’s core P&C segments—which could negatively impact AIG’s plans to consider an IPO of Chartis (AIG’s Commercial Insurance unit), as discussed in a recent Reuter’s article.

Restructuring of government terms becoming less likely
AIG’s prospects for restructuring its terms with the government seem less likely, given more negative sentiment surrounding government’s support of AIG. While UBS still thinks more lenient terms would be mutually beneficial to taxpayers and AIG shareholders, government support for improved terms is not clear to us.

Valuation—Lowering price target to $32
Firm's probability-adjusted valuation suggests a value of $32 (from $44), reflecting changes in their outlook on possible restructuring of government terms and P&C margins.

Notablecalls: UBS was pretty much the only firm that had anything positive to say about AIG. Now it looks like they are getting cold feet as well, taking down their Street high $44 target.

Nothing but negative catalysts ahead.

With futures in red , AIG may see accelerated selling.