Back to top

Image: Bigstock

What's in Store for American International (AIG) Q3 Earnings?

Read MoreHide Full Article

American International Group Inc. (AIG - Free Report) is set to report third-quarter 2020 results on Nov 5, after the market closes.

In the second quarter, the company’s earnings of 66 cents per share missed the Zacks Consensus Estimate by 1.5%. The bottom line also declined 53.8% year over year, primarily due to higher catastrophe losses incurred on account of the COVID-19 pandemic, lower revenues and elevated costs.

Q3 Estimates

The Zacks Consensus Estimate for this  multiline insurer’s quarterly earnings is pegged at 68 cents per share, indicating 21.43% growth from the year-ago quarter’s reported figure.

The consensus estimate for quarterly revenues stands at $11.5 billion, implying a 4.28% fall from the year-ago quarter’s reported number.

Factors Likely to Impact Q3 Results

The company’s property and casualty (P&C) business has been exposed significantly to severe catastrophe and weather-related losses for a while now. This induced volatility to its underwriting results and also weighed on its bottom-line growth.

Management recently announced that its third-quarter 2020 catastrophe loss estimates, net of reinsurance, in the company’s General Insurance segment totaled $790 million before tax. This included $185 million of estimated catastrophe losses for claims related to COVID-19, principally, in its travel, event cancellation, trade credit, property, agriculture and casualty books of business.

Third-quarter non-COVID-19 catastrophe loss of $605 million is expected to have considered windstorms and tropical storms in the Americas and Japan as well as wildfires on the west coast. Such heavy losses are likely to have affected the company’s underwriting margins in the General Insurance segment.

AIG also announced estimated figures of its annual actuarial assumption update for the Life & Retirement and Legacy segments, based on the assumption of lower interest rates.

In this regard, AIG’s earnings results might reflect a third-quarter 2020 charge of $7 million after tax ($9 million pretax) on net income, attributable to AIG common shareholders, which in turn, might have included an expense of $22 million pretax in the Life & Retirement segment and a benefit of $13 million pretax in the Legacy segment. All these costs are likely to have dented the segment’s margin in the third quarter.

Earnings Surprise

The company has an unimpressive earnings surprise history. Its bottom line surpassed estimates in only one of the trailing four quarters (and missed the mark on the other three occasions), the average miss being 32.67%. This is depicted in the graph below:

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

What Our Model Says

Our proven model predicts 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.

Earnings ESP: American International has an Earnings ESP of -9.05%. 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 #4 (Buy).

Stocks Worth a Look

Here are a few stocks worth considering from the same space as these have the right combination of elements to beat on earnings in the upcoming quarterly results.

Manulife Financial Corp. (MFC - Free Report) has a Zacks Rank #3 and an Earnings ESP of +3.85%, currently.

Envestnet Inc. (ENV - Free Report) has a Zacks Rank #2 and an Earnings ESP of +2.35%, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. (MGA - Free Report) has a Zacks Rank of 2 and an Earnings ESP of +1.92%, currently

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5,
Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

Click Here, See It Free >>