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What's in Store for American International (AIG) Q3 Earnings?

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Zacks Equity Research
·4 min read
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American International Group Inc. AIG is set to report third-quarter 2020 results on Nov 5, after the market closes.

In the second quarter, the company’s earnings of 66 cents per share missed the Zacks Consensus Estimate by 1.5%. The bottom line also declined 53.8% year over year, primarily due to higher catastrophe losses incurred on account of the COVID-19 pandemic, lower revenues and elevated costs.

Q3 Estimates

The Zacks Consensus Estimate for this  multiline insurer’s quarterly earnings is pegged at 68 cents per share, indicating 21.43% growth from the year-ago quarter’s reported figure.

The consensus estimate for quarterly revenues stands at $11.5 billion, implying a 4.28% fall from the year-ago quarter’s reported number.

Factors Likely to Impact Q3 Results

The company’s property and casualty (P&C) business has been exposed significantly to severe catastrophe and weather-related losses for a while now. This induced volatility to its underwriting results and also weighed on its bottom-line growth.

Management recently announced that its third-quarter 2020 catastrophe loss estimates, net of reinsurance, in the company’s General Insurance segment totaled $790 million before tax. This included $185 million of estimated catastrophe losses for claims related to COVID-19, principally, in its travel, event cancellation, trade credit, property, agriculture and casualty books of business.

Third-quarter non-COVID-19 catastrophe loss of $605 million is expected to have considered windstorms and tropical storms in the Americas and Japan as well as wildfires on the west coast. Such heavy losses are likely to have affected the company’s underwriting margins in the General Insurance segment.

AIG also announced estimated figures of its annual actuarial assumption update for the Life & Retirement and Legacy segments, based on the assumption of lower interest rates.

In this regard, AIG’s earnings results might reflect a third-quarter 2020 charge of $7 million after tax ($9 million pretax) on net income, attributable to AIG common shareholders, which in turn, might have included an expense of $22 million pretax in the Life & Retirement segment and a benefit of $13 million pretax in the Legacy segment. All these costs are likely to have dented the segment’s margin in the third quarter.

Earnings Surprise

The company has an unimpressive earnings surprise history. Its bottom line surpassed estimates in only one of the trailing four quarters (and missed the mark on the other three occasions), the average miss being 32.67%. This is depicted in the graph below:

American International Group, Inc. Price and EPS Surprise

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

American International Group, Inc. price-eps-surprise | American International Group, Inc. Quote

What Our Model Says

Our proven model predicts an earnings beat for American International this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise.

Earnings ESP: American International has an Earnings ESP of -9.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, American International carries a Zacks Rank #4 (Buy).

Stocks Worth a Look

Here are a few stocks worth considering from the same space as these have the right combination of elements to beat on earnings in the upcoming quarterly results.

Manulife Financial Corp. MFC has a Zacks Rank #3 and an Earnings ESP of +3.85%, currently.

Envestnet Inc. ENV has a Zacks Rank #2 and an Earnings ESP of +2.35%, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. MGA has a Zacks Rank of 2 and an Earnings ESP of +1.92%, currently

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Manulife Financial Corp (MFC) : Free Stock Analysis Report
 
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American International Group, Inc. (AIG) : Free Stock Analysis Report
 
Envestnet, Inc (ENV) : Free Stock Analysis Report
 
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