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Bernstein cuts AIG, says no reason to own the stock

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Sept 1 | Tue Sep 1, 2009 10:27pm IST

Sept 1 (Reuters) - Bernstein Research downgraded American International Group (AIG.N) to "underperform" from "market perform", and said there is no reason for shareholders to continue owning the stock.

Shares of the giant insurer, which was bailed out by the U.S. government, fell as much as 21 percent to $36.02 Tuesday. It was the biggest percentage loser on the S&P 500 index .SPX, which itself was down about 2 percent, dragged by financials.

"AIG's current stock price gives virtually no weight to the possibility that the common equity is worth zero," analyst Todd Bault said in a note to clients.

The analyst has a price target of $10 on AIG's stock, significantly below the stock's Monday closing price of $45.33. Political risk at the company is still considerable, with a very real possibility that the government reduces support once AIG is no longer deemed a systemic risk, Bault said.

New York-based AIG is on the hook to repay more than $80 billion in U.S. government bailout loans extended last year, when the insurer nearly collapsed under the weight of mortgage-related derivative losses.

Analyst Bault said instead of actual financial events like earnings or asset sales, rumors may be the biggest factor driving the AIG stock price, and the company has become fodder for endless rounds of media and blog speculation.

AIG shares were trading down $7.83 at $37.50 on the New York Stock Exchange. They rose to a high of $55.9 last Friday, more than doubling in value since closing at $23.42 on Aug. 17.

(Reporting by Anurag Kotoky in Bangalore; Editing by Maju Samuel)

((anurag.kotoky@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: anurag.kotoky.thomsonreuters.com@reuters.net)) Keywords: AIG/RESEARCH BERNSTEIN

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