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AIG Q1 Earnings Beat on Strong Performance From Segments

Zacks Equity Research

American International Group Inc. AIG posted first-quarter 2019 operating income of $1.58 per share, beating the Zacks Consensus Estimate for earnings by 47%. In the year-ago quarter, the company had posted earnings of $1.04 per share.

The recent results reflect strong gains in the company’s General Insurance and Life and Retirement segments.

Total revenues of $12.5 billion were up 6.8% year over year.

Total net investment income of $3.9 billion increased 19% year over year due to favorable performance in the equity markets and narrowing of spreads in the credit markets.

Total benefit expenses of $11.3 was up 8.1% year over year, due to higher policy holder benefit and losses.

American International Group, Inc. Price, Consensus and EPS Surprise

American International Group, Inc. Price, Consensus and EPS Surprise | American International Group, Inc. Quote

Strong Segment Results

General Insurance

Net premium written of $6 billion was down 2.2% year over year, due to a decrease in premium international business, partly offset by higher premium written in the North America business.

The segment reported underwriting income of $179 million, compared with an underwriting loss of $251 million in the year-ago quarter. Combined ratio of 97.4% improved 640 basis points, due to a decline in both expense ratio and loss ratio.

Life and Retirement

The segment reported fourth-quarter adjusted income of $711 million, up 1.3% year over year, attributable to strong results at Life and Retirement and Life Insurance sub-segments. Total revenues of $4.2 billion were up 21.5% year over year primarily due to higher contribution from Institutional Markets and Life and Retirement market.

Financial Position

As of Dec 31, 2019, the insurer’s adjusted book value per share (excluding AOCI) was $66.89, down 1.1% year over year.

Core adjusted return on equity was 13.4%, compared with 8.6% a year ago.

As of Mar 31, 2019, the company had long-term debt of $35.8 billion, up 6.5% year over year.

Total assets of $512 billion, as of Mar 31, 2019, were up 2.8% year over year.

Our Take

AIG posted impressive results after six quarters of earnings miss. Both its segments, General Insurance and Life and Retirement, put up a solid show. Particularly impressive was the company’s achievement of its margin target in General Insurance segment. Management expects to post underwriting profit in all the quarters of 2019, which boosted investor confidence.

The company’s cost saving measures, use of reinsurance and earning accretion from recent acquisitions have generated gains.

We believe its turnaround initiatives are now beginning to yield results, which is expected to support its stock price.

AIG carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among the other players from the insurance industry that have reported first-quarter earnings so far, the bottom line of Torchmark Corporation TMK, RLI Corporation RLI and W.R. Berkley Corp. WRB beat the respective Zacks Consensus Estimate by 3.14%, 20.3% and 54%.

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