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What Awaits American International's (AIG) Earnings in Q2?

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American International Group Inc. (AIG - Free Report) is set to report second-quarter 2020 results on Aug 3, 2020.

In the year-ago quarter, the company’s earnings missed estimates by 86.75% due to weak revenues and COVID-19-related losses.

Factors Likely to Impact Q2 Results

In the company’s General Insurance segment, its second-quarter results are likely to incur losses related to Travel, Contingency, Commercial Property, Trade Credit and Workers’ Compensation due to COVID-19 adversity. Further, this is likely to have drained the company’s underwriting profit in the segment. The Zacks Consensus Estimate for adjusted pre-tax income from the General Insurance segment is pegged at $614 million, indicating a 37.3% decline from the year-ago reported figure.

Within the General Insurance segment, the net premium written from North America  is likely to have fueled growth in the assumed reinsurance business as well as Retail and Wholesale Property business. Also, a strong rate increase in Commercial Lines is expected to have aided the segment's top line, partially offset by underwriting actions taken through 2019. The Zacks Consensus Estimate for net premium written from North America is pegged at $3.19 billion, implying a 3.4% dip from the year-earlier reported number.

Within the General Insurance segment, net premium from International business is likely to have reflect lower production, primarily due to underwriting actions taken through 2019 as well as soft premiums from run-off business, which in turn, might have been partially offset by higher premium rates. The Zacks Consensus Estimate for net premium written from International business is pegged at $3.09 billion, suggesting a 5.6% decrease from the prior-year reported figure.

Net investment income is also expected to have been dragged down, given the low interest rate environment.

In the company’s Life and Retirement segment, it is likely to have taken a hit from soft Fixed Annuities deposits due to lower interest rates.
On Jun 2, 2020, the company completed the sale of a majority interest in Fortitude Group Holdings, LLC, the reinsurer of the majority of AIG’s Legacy Portfolio, to The Carlyle Group and T&D Holdings.

Earnings Surprise

The company’s bottom line surpassed estimates in two (and missed in the other two) of the last four quarters, the average negative surprise being 26.75%. This is depicted in the graph below:

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

Earnings Whispers

Our proven model does not predict 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. But that is not the case here

Earnings ESP: American International has an Earnings ESP of -10.30%. 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 #5 (Strong Sell).

Stocks Worth a Look

Some insurance stocks worthy considering from the same space with the right combination of elements to come up with an earnings beat this time around are:

American Financial Group (AFG - Free Report) has an Earnings ESP of +21.45% and a Zacks Rank of 3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marsh McLennan Companies (MMC - Free Report) has an Earnings ESP of +3.95% and a Zacks Rank #3, presently.

Allstate Corporation (ALL - Free Report) has an Earnings ESP of +11.10% and is Zacks #3 Ranked at present.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
 

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