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American International Group (AIG) Up 21.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for American International Group (AIG - Free Report) . Shares have added about 21.7% 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 catalysts.
AIG Beats Q3 Earnings Estimates
American International Group Inc.'s third-quarter 2020 adjusted operating earnings of 81 cents per share outpaced the Zacks Consensus Estimate by 30.7%.
The bottom line also improved 44.6% year over year, primarily driven by premium rate hikes, and underwriting and reinsurance actions implemented to enhance business mix across the company’s Commercial Lines business. Reduced costs have also benefited the results, which were partially offset by catastrophe losses and lower revenues.
Total revenues of $11.3 billion declined 5.4% year over year. The top line also missed the Zacks Consensus Estimate by 1.1% due to reduced premiums and dip in policy fees.
Total net investment income of $3.8 billion improved 11.5% year over year.
Total benefit, losses and expenses of $9.9 billion declined 15.5% year over year due to lower policyholder benefits and losses incurred, interest credited to policyholder account balances, amortization of deferred policy acquisition costs. and general operating and other expenses.
The company incurred catastrophe losses, net of reinsurance of $790 million, which surged 59% year over year. The reported quarter’s catastrophe losses have stemmed primarily from $605 million related to several weather-related events and $185 million of estimated COVID-19 losses.
Adjusted return on equity was 5.8% compared with 4.1% in the year-ago quarter.
As of Sep 30, 2020, the insurer’s adjusted book value per share was $56.78, up 1.4% year over year.
Segmental Update
General Insurance
Net premiums written of $5.9 billion were down 11% year over year due to lower premiums in the company’s North America and International businesses.
The segment reported an underwriting loss of $423 million, wider than the prior-year quarter’s loss of $249 million. Combined ratio of 107.2 deteriorated 350 basis points (bps) due to intensified catastrophe losses.
Life and Retirement
Premium and fees declined 9% year over year to $1.4 billion, due to weaker contribution from Life Insurance, partly offset by higher contribution from Individual Retirement, Group Retirement and Institutional Markets sub-segments.
The segment reported adjusted pre-tax income of $975 million, which surged 51% year over year courtesy of robust contribution from Individual Retirement, Group Retirement, Life Insurance and Institutional Markets sub-segments.
Notably, the company disclosed its intention to separate the Life & Retirement business from AIG last month.
Financial Position
AIG exited the third quarter with cash of $3.2 billion, up 11.7% from 2019 end.
As of Sep 30, 2020, the company had long-term debt of $28.7 billion, up 12.8% from 2019-end level.
Total assets of $577.2 billion increased 9.9% from the level at 2019 end.
Shareholder equity was $64.1 billion, down 2.4% from 2019-end level.
Dividend Update
Concurrent with third-quarter earnings release, AIG’s board of directors announced quarterly cash dividend of 32 cents per share. The dividend will be paid on Dec 28, 2020 to shareholders of record as on Dec 14.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, American International Group has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, American International Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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American International Group (AIG) Up 21.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for American International Group (AIG - Free Report) . Shares have added about 21.7% 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 catalysts.
AIG Beats Q3 Earnings Estimates
American International Group Inc.'s third-quarter 2020 adjusted operating earnings of 81 cents per share outpaced the Zacks Consensus Estimate by 30.7%.
The bottom line also improved 44.6% year over year, primarily driven by premium rate hikes, and underwriting and reinsurance actions implemented to enhance business mix across the company’s Commercial Lines business. Reduced costs have also benefited the results, which were partially offset by catastrophe losses and lower revenues.
Total revenues of $11.3 billion declined 5.4% year over year. The top line also missed the Zacks Consensus Estimate by 1.1% due to reduced premiums and dip in policy fees.
Total net investment income of $3.8 billion improved 11.5% year over year.
Total benefit, losses and expenses of $9.9 billion declined 15.5% year over year due to lower policyholder benefits and losses incurred, interest credited to policyholder account balances, amortization of deferred policy acquisition costs. and general operating and other expenses.
The company incurred catastrophe losses, net of reinsurance of $790 million, which surged 59% year over year. The reported quarter’s catastrophe losses have stemmed primarily from $605 million related to several weather-related events and $185 million of estimated COVID-19 losses.
Adjusted return on equity was 5.8% compared with 4.1% in the year-ago quarter.
As of Sep 30, 2020, the insurer’s adjusted book value per share was $56.78, up 1.4% year over year.
Segmental Update
General Insurance
Net premiums written of $5.9 billion were down 11% year over year due to lower premiums in the company’s North America and International businesses.
The segment reported an underwriting loss of $423 million, wider than the prior-year quarter’s loss of $249 million. Combined ratio of 107.2 deteriorated 350 basis points (bps) due to intensified catastrophe losses.
Life and Retirement
Premium and fees declined 9% year over year to $1.4 billion, due to weaker contribution from Life Insurance, partly offset by higher contribution from Individual Retirement, Group Retirement and Institutional Markets sub-segments.
The segment reported adjusted pre-tax income of $975 million, which surged 51% year over year courtesy of robust contribution from Individual Retirement, Group Retirement, Life Insurance and Institutional Markets sub-segments.
Notably, the company disclosed its intention to separate the Life & Retirement business from AIG last month.
Financial Position
AIG exited the third quarter with cash of $3.2 billion, up 11.7% from 2019 end.
As of Sep 30, 2020, the company had long-term debt of $28.7 billion, up 12.8% from 2019-end level.
Total assets of $577.2 billion increased 9.9% from the level at 2019 end.
Shareholder equity was $64.1 billion, down 2.4% from 2019-end level.
Dividend Update
Concurrent with third-quarter earnings release, AIG’s board of directors announced quarterly cash dividend of 32 cents per share. The dividend will be paid on Dec 28, 2020 to shareholders of record as on Dec 14.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, American International Group has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, American International Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.