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AIG Divests Further to Gather Funds, Streamline Business
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In an effort to further streamline its business, American International Group, Inc. (AIG - Free Report) has announced that it will sell off its northern Vermont ski slope. The deal is expected to fetch $50 million and the buyer is Vail Resorts Inc, a Brookfield, CO-based company.
This deal comes right after the company’s just-released fourth-quarter operating loss that stemmed from underperformance in its commercial lines business. The company took a reserve charge of $5.6 billion in the segment which raised questions about its historical underwriting practices. The company had a two-year plan to improve profitability of the segment, but with significant loss in the quarter, it may be difficult for it to achieve its goal within the target time.
This will cause the company to again do plenty turnaround work to calm investors Carl Icahn and John Paulson, who are pressing the CEO to improve its performance. One of the company’s major goals to improve the performance of its commercial lines of business has not been achieved.
Although the company has been taking several strategic steps in recent times to return to profitability, its shares returned 8.1%, underperforming the Zacks categorized Insurance Multi-Line industry’s return of 13.6% in 2016. The weakness implies that investors are closely watching the several turnaround actions taken by the company and their outcome. We expect the stock to gain going forward as and when the growth initiatives start bearing fruit, resulting in clear visibility in the company’s profitability.
The CEO of AIG, Peter Hancock has been under attack by activist Carl Icahn and John Paulson for the company’s underperformance since the past many years.. He has therefore been taking every possible measure, shedding unprofitable and non-core businesses, entering into risk transfer deals, boosting share buybacks, increasing dividend, taking cost reduction measures, reducing exposure to hedge fund investment, forming a new executive leadership team among others.
To this end, concurrent with the fourth-quarter earnings release, the company increased its share repurchase authorization to $3.5 billion bringing the total amount it can repurchase to $4.7 billion. Also, last month, the company entered into a reinsurance agreement costing an estimated $10.2 billion, with National Indemnity Co. (NICO) a subsidiary of Berkshire Hathaway Inc. (BRK.B).
In the beginning of 2016, the company promised to return $25 billion to its shareholders by the end of 2017. In 2016, the company returned over $13 billion in capital, again. The company announced that it maintained its commitment to the $25 billion capital return target and is focused on doing so. To this effect, in 2016, the company completed or announced 10 transactions that are expected to result in over $10 billion of liquidity.
Coming back to the news, AIG will sell Stowe’s ski operations, related infrastructure and machinery, and the summer season on-mountain attractions. It, will, however, retain ownership of the majority of the Spruce Peak base area including resort properties – Stowe Mountain Lodge, Stowe Mountain Club – and future development rights. AIG will also continue to own the Stowe Country Club.
Similar to this deal, last year, the company completed the sale of the International Finance Centre Seoul (IFC Seoul) to Brookfield.
AIG carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the insurance space are Everest Re Group, Ltd. , The Progressive Corp. (PGR - Free Report) and American Financial Group Inc. (AFG - Free Report) . While Everest Re and The Progressive Corp. sport a Zacks Rank #1 (Strong Buy), American Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Everest Re posted a positive earnings surprise of 121.86% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters with an average positive surprise of 44%
American Financial Group posted a positive earnings surprise of 22.2% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters, with the average being 6.45%.
The Progressive Corp. posted a positive earnings surprise of 22% in the fourth quarter. It beat earnings estimates in two out of the last four reported quarters with an average beat of 1.32%.
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AIG Divests Further to Gather Funds, Streamline Business
In an effort to further streamline its business, American International Group, Inc. (AIG - Free Report) has announced that it will sell off its northern Vermont ski slope. The deal is expected to fetch $50 million and the buyer is Vail Resorts Inc, a Brookfield, CO-based company.
This deal comes right after the company’s just-released fourth-quarter operating loss that stemmed from underperformance in its commercial lines business. The company took a reserve charge of $5.6 billion in the segment which raised questions about its historical underwriting practices. The company had a two-year plan to improve profitability of the segment, but with significant loss in the quarter, it may be difficult for it to achieve its goal within the target time.
This will cause the company to again do plenty turnaround work to calm investors Carl Icahn and John Paulson, who are pressing the CEO to improve its performance. One of the company’s major goals to improve the performance of its commercial lines of business has not been achieved.
Although the company has been taking several strategic steps in recent times to return to profitability, its shares returned 8.1%, underperforming the Zacks categorized Insurance Multi-Line industry’s return of 13.6% in 2016. The weakness implies that investors are closely watching the several turnaround actions taken by the company and their outcome. We expect the stock to gain going forward as and when the growth initiatives start bearing fruit, resulting in clear visibility in the company’s profitability.
The CEO of AIG, Peter Hancock has been under attack by activist Carl Icahn and John Paulson for the company’s underperformance since the past many years.. He has therefore been taking every possible measure, shedding unprofitable and non-core businesses, entering into risk transfer deals, boosting share buybacks, increasing dividend, taking cost reduction measures, reducing exposure to hedge fund investment, forming a new executive leadership team among others.
To this end, concurrent with the fourth-quarter earnings release, the company increased its share repurchase authorization to $3.5 billion bringing the total amount it can repurchase to $4.7 billion. Also, last month, the company entered into a reinsurance agreement costing an estimated $10.2 billion, with National Indemnity Co. (NICO) a subsidiary of Berkshire Hathaway Inc. (BRK.B).
In the beginning of 2016, the company promised to return $25 billion to its shareholders by the end of 2017. In 2016, the company returned over $13 billion in capital, again. The company announced that it maintained its commitment to the $25 billion capital return target and is focused on doing so. To this effect, in 2016, the company completed or announced 10 transactions that are expected to result in over $10 billion of liquidity.
Coming back to the news, AIG will sell Stowe’s ski operations, related infrastructure and machinery, and the summer season on-mountain attractions. It, will, however, retain ownership of the majority of the Spruce Peak base area including resort properties – Stowe Mountain Lodge, Stowe Mountain Club – and future development rights. AIG will also continue to own the Stowe Country Club.
Similar to this deal, last year, the company completed the sale of the International Finance Centre Seoul (IFC Seoul) to Brookfield.
AIG carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the insurance space are Everest Re Group, Ltd. , The Progressive Corp. (PGR - Free Report) and American Financial Group Inc. (AFG - Free Report) . While Everest Re and The Progressive Corp. sport a Zacks Rank #1 (Strong Buy), American Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Everest Re posted a positive earnings surprise of 121.86% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters with an average positive surprise of 44%
American Financial Group posted a positive earnings surprise of 22.2% in the fourth quarter. It beat earnings estimates in three out of the last four reported quarters, with the average being 6.45%.
The Progressive Corp. posted a positive earnings surprise of 22% in the fourth quarter. It beat earnings estimates in two out of the last four reported quarters with an average beat of 1.32%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>