A month has gone by since the last earnings report for American International Group (AIG). Shares have added about 8.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American International Group 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 drivers.
AIG Q4 Earnings Miss Estimates on Catastrophe Losses
American International Group Inc. incurred fourth-quarter 2018 operating loss of 63 cents per share against the Zacks Consensus Estimate for earnings of 47 cents. In the year-ago quarter, the company posted earnings of 57 cents per share.
Results were negatively impacted by performance in both equity and credit markets, catastrophe losses, as well as modest net unfavorable prior-year loss reserve development largely due to underwriting decisions in 2016 and prior years.
Total net investment income of $2.8 billion declined 20% year over year due to the impact of alternative investments and equity market declines.
Net pre-tax catastrophe losses of $798 million in the fourth quarter of 2018 increased 4.2% year over year.
General Insurance Segment Reports Loss
Net premium written of $6.4 billion was up 9% year over year led by an increase in premium from North America, which gained from the acquisition of Glatfelter, along with higher premiums in International business.
The segment reported pre-tax loss of $722 million compared with income of $13 million in the prior-year quarter. Underwriting loss of $1.1 billion deteriorated from a loss of $846 million incurred in the year-earlier period. Combined ratio of 115% deteriorated170 basis points, primarily owing to an increase in loss ratio.
Life and Retirement Unit Results Weak
The segment reported fourth-quarter adjusted pre-tax income of $623 million, down 20% year over year, attributable to soft results across its divisions, Individual Retirement, Group Retirement and Institutional markets. Premium and fees of $8.17 billion were down 2.5% year over year to $8.2 billion primarily due to a plunge in premiums from Institutional Markets.
In the fourth quarter, AIG bought back shares and warrants worth $750 million. Moreover, it increased the share repurchase authorization to $2.0 billion.
As of Dec 31, 2018, the insurer’s adjusted book value per share (excluding AOCI) was $54.95, down 0.4% year over year.
Core adjusted return on equity was (4.6%) compared with 4.2% a year ago.
As of Dec 31, 2018, the company had long-term debt of $34.5 billion, up 9.2% year over year.
Total assets of $492 billion, as of Dec 31, 2018, were down 1.2% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, American International Group has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
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 #5 (Strong Sell). We expect a below average return from the stock in the next few months.