NEW YORK (Reuters) Shares of American International Group Inc 5.8 percent yesterday after Bank of America raised its rating on the insurer to "buy" from "neutral," saying the risk-to-reward ratio has become "very attractive."

Analyst Alain Karaoglan, in a research note, said the shares should rebound as AIG's new chief executive Robert Willumstad gets to work pruning and weeding the insurer's sprawling global network of businesses, as he has promised to do in his first few months in office.

But Karaoglan challenged Willumstad, who was named CEO last month, to take a more aggressive stance in his review of the company than he has signaled to date.

"As the new CEO de-leverages, de-risks and simplifies, we see the market regaining confidence in the franchise, leading to the stock's multiple recovery," Karaoglan said in the research note. He cut his view for AIG's 2008 and 2009 earnings, and lowered his 12-month target on the shares.

AIG shares rose $1.46 to $26.53 in trading on the New York Stock Exchange.

The shares have tumbled in recent months and are down 50 percent since the beginning of the year.