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American International Group (AIG) Up 3.9% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for American International Group, Inc. (AIG - Free Report) . Shares have added about 3.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
American International Group reported fourth-quarter 2016 operating income of $0.84 per share that missed the Zacks Consensus Estimate by 48%. Earnings compared favorably with the prior-year quarter loss of $1.10 per share.
Total general operating and other expenses decreased 9.6% year over year to $2.5 billion due to the company’s cost-reduction initiatives. Lower loss adjustment expenses, advisory fee expenses and marketing and acquisition costs drove the improvement.
Quarterly Segment Highlights
Commercial Insurance
Net premiums written were down 20% year over year to $3.7 billion due to strategic portfolio actions and premiums ceded under the previously announced Swiss Re quota share transaction. Combined ratio of 241.6% deteriorated 5530 basis points year over year, due to an increase in loss ratio which was impacted by adverse reserve development.. The segment’s pre-tax operating loss of $5 billion widened from a loss of $2.4 billion in the prior-year quarter.
Consumer Insurance
Net operating revenues inched up 0.7% year over year to $6 billion due to growth in personal insurance net premiums written and increase in group retirement and life insurance revenues. Benefit expenses, however, decreased 5.8% to $5 billion owing to lower general operating expenses.
Pre-tax operating income of $970 million increased 55.8% driven by the significant improvement in underwriting results in Personal Insurance and higher income from alternative investments in hedge funds across all Consumer Insurance operating segments.
Financial Position
At the end of 2016, the insurer’s adjusted book value per share (excluding AOCI and DTA and including dividend growth) dipped 0.6% year over year to $58.57.
For 2016, return on equity (ROE) was 0.6%, down 310 bps year over year. This was due to a steep decline in after-tax operating income.
Share Buyback and Dividend Update
For 2016, American International Group returned a total of $13.1 billion of capital to shareholders.
The company repurchased 47.5 million common shares for $3.0 billion and 2.4 million warrants for $46.0 million during the fourth quarter. Through Feb 14, 2017, the company has repurchased an additional 18.4 million common shares for $1.2 billion.
On Feb 14, 2017, The board of directors authorized an additional increase of $3.5 billion to its previous repurchase authorization that resulted in an aggregate remaining authorization of approximately $4.7 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four downward revisions for the current quarter compared to one upward. In the past month, the consensus estimate has shifted downward by 9.7% due to these changes.
American International Group, Inc. Price and Consensus
At this time, American International Group's stock has a subpar Growth Score of 'D', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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American International Group (AIG) Up 3.9% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for American International Group, Inc. (AIG - Free Report) . Shares have added about 3.9% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
American International Group reported fourth-quarter 2016 operating income of $0.84 per share that missed the Zacks Consensus Estimate by 48%. Earnings compared favorably with the prior-year quarter loss of $1.10 per share.
Total general operating and other expenses decreased 9.6% year over year to $2.5 billion due to the company’s cost-reduction initiatives. Lower loss adjustment expenses, advisory fee expenses and marketing and acquisition costs drove the improvement.
Quarterly Segment Highlights
Commercial Insurance
Net premiums written were down 20% year over year to $3.7 billion due to strategic portfolio actions and premiums ceded under the previously announced Swiss Re quota share transaction.
Combined ratio of 241.6% deteriorated 5530 basis points year over year, due to an increase in loss ratio which was impacted by adverse reserve development..
The segment’s pre-tax operating loss of $5 billion widened from a loss of $2.4 billion in the prior-year quarter.
Consumer Insurance
Net operating revenues inched up 0.7% year over year to $6 billion due to growth in personal insurance net premiums written and increase in group retirement and life insurance revenues.
Benefit expenses, however, decreased 5.8% to $5 billion owing to lower general operating expenses.
Pre-tax operating income of $970 million increased 55.8% driven by the significant improvement in underwriting results in Personal Insurance and higher income from alternative investments in hedge funds across all Consumer Insurance operating segments.
Financial Position
At the end of 2016, the insurer’s adjusted book value per share (excluding AOCI and DTA and including dividend growth) dipped 0.6% year over year to $58.57.
For 2016, return on equity (ROE) was 0.6%, down 310 bps year over year. This was due to a steep decline in after-tax operating income.
Share Buyback and Dividend Update
For 2016, American International Group returned a total of $13.1 billion of capital to shareholders.
The company repurchased 47.5 million common shares for $3.0 billion and 2.4 million warrants for $46.0 million during the fourth quarter.
Through Feb 14, 2017, the company has repurchased an additional 18.4 million common shares for $1.2 billion.
On Feb 14, 2017, The board of directors authorized an additional increase of $3.5 billion to its previous repurchase authorization that resulted in an aggregate remaining authorization of approximately $4.7 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four downward revisions for the current quarter compared to one upward. In the past month, the consensus estimate has shifted downward by 9.7% due to these changes.
American International Group, Inc. Price and Consensus
American International Group, Inc. Price and Consensus | American International Group, Inc. Quote
VGM Scores
At this time, American International Group's stock has a subpar Growth Score of 'D', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.