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AIG Q4 Earnings Miss Estimates on Catastrophe Losses

Zacks Equity Research

American International Group Inc. AIG incurred fourth-quarter 2018 operating loss of 63 cents per share against the Zacks Consensus Estimate for earnings of 47 cents. In the year-ago quarter, the company posted earnings of 57 cents per share.

Results were negatively impacted by performance in both equity and credit markets, catastrophe losses, as well as modest net unfavorable prior-year loss reserve development largely due to underwriting decisions in 2016 and prior years.

Total net investment income of $2.8 billion declined 20% year over year due to the impact of alternative investments and equity market declines.

Net pre-tax catastrophe losses of $798 million in the fourth quarter of 2018 increased 4.2% year over year.

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

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

General Insurance Segment Reports Loss


Net premium written of $6.4 billion was up 9% year over year led by an increase in premium from North America, which gained from the acquisition of Glatfelter, along with higher premiums in International business.

The segment reported pre-tax loss of $722 million compared with income of $13 million in the prior-year quarter. Underwriting loss of $1.1 billion deteriorated from a loss of $846 million incurred in the year-earlier period. Combined ratio of 115% deteriorated170 basis points, primarily owing to an increase in loss ratio.

Life and Retirement Unit Results Weak

The segment reported fourth-quarter adjusted pre-tax income of $623 million, down 20% year over year, attributable to soft results across its divisions, Individual Retirement, Group Retirement and Institutional markets. Premium and fees of $8.17 billion were down 2.5% year over year to $8.2 billion primarily due to a plunge in premiums from Institutional Markets.

Share Repurchase

In the fourth quarter, AIG bought back shares and warrants worth $750 million. Moreover, it increased the share repurchase authorization to $2.0 billion.

Financial Position

As of Dec 31, 2018, the insurer’s adjusted book value per share (excluding AOCI) was $54.95, down 0.4% year over year.

Core adjusted return on equity was (4.6%) compared with 4.2% a year ago.
As of Dec 31, 2018, the company had long-term debt of $34.5 billion, up 9.2% year over year.

Total assets of $492 billion, as of Dec 31, 2018, were down 1.2% year over year.

Zacks Rank and Performance of Other Insurers

AIG carries a Zacks Rank #5 (Strong Sell).

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

Among other Multi Line insurers that have reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation MTG, Radian Group Inc. RDN and W.R.Berkley Corp. WRB beat their respective fourth-quarter estimates.

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