On Thursday, Evercore ISI increased its price target for Corebridge Financial (NYSE:CRBG) to $34.00, up from the previous $31.00, while maintaining an Outperform rating on the stock. The adjustment follows an announcement from AIG (NYSE:AIG) regarding a significant share transaction with Nippon Life.
AIG disclosed it has agreed to sell about 120 million shares of Corebridge common stock to Nippon Life, a major Japanese mutual life insurer, for $31.47 per share, totaling approximately $3.8 billion.
This sale represents a 20% stake in Corebridge at the time of the agreement. Additionally, AIG has committed to retaining a 9.9% ownership in Corebridge for two years post-closing. Nippon Life also holds a 20% interest in Resolution Life, which has strategic connections to BX, a 9.9% owner of CRBG that oversees more than $60 billion of its general account.
The transaction is expected to push AIG's deconsolidation of Corebridge to early 2025 unless another stake is sold beforehand. Although AIG will have to wait until the first quarter of 2025 to receive the $3.8 billion from the deal, the execution price is seen as favorable compared to the timing.
Post-deal, AIG is anticipated to have an additional 23% stake in Corebridge, which it is likely to divest. By then, Corebridge may potentially engage in a risk transfer agreement, potentially freeing up a substantial amount of capital and positively impacting Corebridge shares.
AIG could technically sell the remaining 23% stake in Corebridge before the Nippon transaction concludes, but it is believed that such a move would only occur if the sale could be executed at a price comparable to or higher than the $31.47 per share paid by Nippon Life.
In light of this news, the raised price target for Corebridge from $31 to $34 assumes a 10x free cash flow multiple on the projected 2025 earnings, reducing most of the share-related discount in the valuation.
However, with AIG expected to sell around $4.3 billion worth of shares after this deal, a moderate 5% discount was maintained in the valuation to account for this remaining stake.
InvestingPro Insights
As Corebridge Financial (NYSE:CRBG) navigates through its significant share transaction with Nippon Life, real-time data and insights from InvestingPro can offer a deeper understanding of the company's financial health and market position. Corebridge's adjusted market capitalization stands at $18.45 billion, reflecting its substantial presence in the financial services sector. The company's price to earnings (P/E) ratio for the last twelve months as of Q1 2024 is 9.93, indicating a potentially attractive valuation compared to industry peers. Despite a slight decline in revenue growth by -1.96% over the last twelve months, Corebridge's quarterly revenue growth shows a robust increase of 36.93% for Q1 2024, suggesting a positive trajectory for the company's financial performance.
InvestingPro Tips highlight that Corebridge is expected to see net income growth this year and has received upward earnings revisions from 5 analysts for the upcoming period, signaling confidence in its future profitability. Additionally, the company pays a significant dividend to shareholders, with a high dividend yield of 6.9%, and has experienced a large price uptick over the last six months. These factors, combined with Corebridge's strong returns over the past year, including a 110.39% one-year price total return, position it as a prominent player in the financial services industry.
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