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Ambac stock soars after Puerto Rico restructure; AIG down ahead of segment IPO

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Ambac stock soars after Puerto Rico restructure; AIG down ahead of segment IPO

American International Group Inc. shares traded up and down in the days following the announcement that SAFG Retirement Services Inc., the parent company of AIG's life and retirement business, has filed for an IPO.

Equity markets finished the week ending April 1 in almost the same spot as they began, with the S&P 500 edging up 0.06% to 4,545.86. The S&P 500 Insurance Index rose 0.18% to 602.30.

Following the IPO, AIG's life and retirement business will be rebranded as Corebridge Financial. AIG expects to continue to own more than 50% of Corebridge once it goes public.

CFRA analyst Cathy Seifert applauded AIG's move, saying that there seems to finally be a comprehensive revamping plan after 15 years and multiple other attempts at restructuring and cost cutting.

"I think the steps that they are taking ... will ultimately lead to an increase in AIG's legacy and AIG's valuation to the degree that they are able to become more of a pure-play property casualty insurer and are able to reduce exposure to the capital intensive life insurance business," Seifert said in an interview.

Although Seifert said she generally felt like investors are looking at the IPO favorably, she does still have a few concerns. For example, Seifert pointed out that the IPO market is "not exactly on fire" right now and said it is a risk to undertake the transaction in a more muted market environment.

"I will also say that my sense is that the marketplace is receptive to IPOs of companies with a history of profitability and a workable business model that are generating cash flow," Seifert said. "My expectation is the life company is in that position."

Wells Fargo analyst Elyse Greenspan said in a note that AIG's stock is getting "appropriate value" for its property and casualty business. Greenspan also pointed out the potential for "greater upside" once there is more capital flexibility after the life and retirement IPO.

"While this filing solidifies that an IPO is forthcoming, we still await details on the size of the IPO, as well as the use of its proceeds," Greenspan said.

In the end, AIG's stock finished the week down 1.12%.

Several other insurance companies disclosed deal-related news this week.

UnitedHealth Group Inc. announced earlier this week that it would buy LHC Group Inc., a large in-home healthcare service provider, for $170 per share in cash, placing the value of the deal somewhere around $5.4 billion.

"In our view, the deal captures the strategic need to get closer to patients in the home, which will become increasingly important in a value-based construct," UBS analyst Kevin Caliendo said in a note.

The deal is expected to close in the second half of the year. For this week, UnitedHealth's stock was basically flat.

Also this week, Prudential Financial Inc. completed the sale of a $31 billion block of traditional variable annuities to Fortitude Reinsurance Company Ltd. Prudential's stock ended the week in the red, with a decline of 2.04%.

Elsewhere, Ambac Financial Group Inc.'s shares jumped as the company disclosed the restructuring of Puerto Rico exposure by subsidiary Ambac Assurance Corp. and the estimated impact of recent litigation developments on its representation and warranty subrogation recoverable. Ambac expects those actions to result in a positive impact of between $210 million and $250 million on its first-quarter earnings.

Ambac was the week's biggest winner as its stock price jumped 16.36%.