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Why Should You Add American International to Your Portfolio?

Zacks Equity Research

American International Group, Inc. AIG is well-poised for progress on the back of its inorganic growth profile and cost-saving measures.

The stock sports a Zacks Rank #1 (Strong Buy) and a favorable Value Score of B. Our research shows that stocks with an impressive Value Score of A or B when combined with a top Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investment space.

Shares of this company have dipped 1.2% in a year’s time against its industry’s rise of 3.3%.

AIG has been concertedly focusing on streamlining its business over the past few years, which in turn, enabled it to effectively allocate its capital and leverage its operating performance. Since 2008, the company has executed over 50 asset sales and divestitures, generating proceeds in excess of $100 billion. The transactions were made to raise funds for repayment of the bailout amount to the U.S. government and simplifying the company’s structure, which had huge unrelated operations to create substantial synergistic benefits.

Apart from divestures, the company acquired a number of entities to boost its capabilities. Certain buyouts made over the last few quarters have helped it strengthen position in Life & Retirement businesses and  General Insurance business.

AIG has forged a strategic alliance with The Carlyle Group to build DSA Re into a standalone provider of reinsurance, claims handling and run-off management solutions for long-dated, complex risks to the global insurance industry. This transaction is expected to help the company manage its legacy liabilities, honor its policy obligations and maximize its financial flexibility, thus further allowing it to free up capital and participate in the flourish of its business.

The company’s cost-containment measures are also noteworthy. It was able to bring down expenses in 2016, 2017 and 2018 on the back of lower headcount, certain divestments and freezing of pension plans. We expect these measures to boost its operating margins going forward.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $4.96, indicating a skyrocketing increase of 323.9% on 3.6% higher revenues of $49.25 billion from the year-ago reported figures.

For 2020, the Zacks Consensus Estimate for earnings per share stands at $5.09, up 2.7% on $48.67 billion revenues from the prior-year reported number.

Other Key Picks

Investors interested in the same space might also take a look at some other top-ranked stocks like James River Group Holdings, Ltd. JRVR, MGIC Investment Corporation MTG and Kemper Corporation KMPR.

James River Group provides specialty insurance and reinsurance services in the United States. It delivered average four-quarter positive surprise of 4.7% and a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MGIC Investment Corporation provides private mortgage insurance, other mortgage credit risk management solutions and ancillary services in the United States. It came up with average four-quarter beat of 23.4% and has a Zacks Rank #1.

Kemper Corporation offers property and casualty, and life and health insurance to individuals and businesses in the United States. The company has a Zacks Rank of 2 and managed to pull off average four-quarter beat of 12.1%.

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Kemper Corporation (KMPR) : Free Stock Analysis Report
American International Group, Inc. (AIG) : Free Stock Analysis Report
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James River Group Holdings, Ltd. (JRVR) : Free Stock Analysis Report
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