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American International Group (AIG) Down 0.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for American International Group (AIG). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American International Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AIG Q3 Earnings and Revenues Beat Estimates

American International Group Inc. posted third-quarter 2019 operating income of 56 cents per share, missing the Zacks Consensus Estimate for earnings by 43.43%. In the year ago-quarter, the company reported loss of 34 cents per share.

Total revenues of $12 billion remained flat year over year.

Total net investment income of $3.4 billion remained unchanged year over year, reflecting higher interest and dividends and other investment income partially offset by lower alternative investment returns.

Total benefit expenses of $11.6 was down 10.4% year over year, due to lower policy holder benefit and losses.

The company incurred catastrophe loss of $511 million, down 68.6% year over year.

Adjusted return on equity was 4.4%, up 800 basis points year over year.
As of Sep 30, 2019, the insurer’s adjusted book value per share (excluding AOCI) was $57.6, up 3.6% year over year.

Strong Segment Results

General Insurance

Net premium written of $6.6 billion was down 3% year over year, due to a decline in premium international business, partly offset by higher premium written in the North America business.

The segment sustained underwriting loss of $249 million, which was narrower than the underwriting loss of $1.7 billion incurred in the year-ago quarter. Combined ratio of 103.7% improved 2070 basis points, due to lower catastrophe losses, continued underwriting actions, reinsurance and expense discipline.

Life and Retirement

The segment reported adjusted pre-tax income of $646 million, down 9.4% year over year, due to lower contribution from group, Life, and Individual Retirement subsegments.

Total revenues of $3.8 billion were up 22% year over year, primarily due to higher contribution from Institutional Markets, Life Insurance, and Individual Retirement business.

Financial Position

As of Sep 30, 2019, the company had long-term debt of $35.3 billion, up 2.3% from year-end 2018 level.

Total assets of $525 billion, as of Sep 30, 2019, were up 6.7% year over year.
 

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8.58% due to these changes.

VGM Scores

At this time, American International Group has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American International Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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