American International Group's (AIG) commentary over preference for re-levering the underwriting engine via top-line growth instead of capital return sent the stock lower after its Q2 results, RBC Capital Markets said in a Friday note.

The capital commentary and preference came even as market conditions become more competitive, the report said. The company reported its Q2 results late Thursday.

To the positive, the note pointed to the company reaffirming its targets for 2027, which are largely baked into RBC estimates.

The report said AIG remains over-capitalized for its current premium profile, with new CEO showing support for growth into the capitalization base, via M&A or organic opportunities, over shrinking the balance sheet via capital return.

"While valuation remains cheap and M&A growth is paying off, we believe shares will be range-bound and remain Sector Perform," it said. RBC raised its price target to $87 from $85.

Price: 78.02, Change: -0.76, Percent Change: -0.96