UBS analysts believe Corebridge Financial, Inc (CRBG) will be able to achieve its 12% to 14% plus return on equity (ROE) target by mid-2025 through a combination of expense saves, capital return and improved spreads.
In a note to client, they initiated coverage on shares of the former AIG Life & Retirement with a ‘Buy’ rating and a 12-month target price of $22, viewing Corebridge’s higher macro sensitivity on rising credit concerns relative to peers as being more than discounted in the stock’s current valuation.
“We believe that CRBG's improving capital return position will add 10 basis points (bps) to its estimated ROE profile in 2023 and 100 bps by 2025, supported by an annual dividend of about $600 million per year and a total payout ratio (including share repurchases) of 60-65%,” the analysts wrote.
They added that putting capital return aside, they expect improving spread based income driven by higher investment leverage relative to peers in the higher interest rate environment.
Analysts at UBS also believe Corebridge could see its valuation re-rate higher as AIG sells down its remaining 64% stake following the initial IPO that priced in September 2022 and subsequent secondary offering in June 2023.
Shares of Corebridge Financial rose 1.6% to $17.52 in mid-afternoon trading on Thursday but have fallen 13% year to date.
Contact Sean at sean@proactiveinvestors.com