American International Group, Inc.
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) is looking to establish its leadership in the General Insurance business and to this end, it aims to separate its Life and Retirement segment.
Last October, management announced its intention to split the Life and Retirement business from AIG via an IPO of 19.9% of the unit.
At the latest conference call, the company informed that it is already receiving inquiries from interested parties.
The company currently believes that an initial disposition of 19.9% of Life and Retirement, whether through a minority IPO or a sale to a third party, will generate net proceeds, which can partly be utilized in future share repurchases. It also intends to use the funds for de-leveraging and investing in business growth.
The company also hinted at contemplating inorganic growth opportunities that will be accretive to its businesses.
After suffering weak revenues from the past many years, the company’s
General insurance business looks like gaining ground. This improvement is the outcome of CEO Brian Duperreault’s strategy to reshape AIG by detaching the units that create negligible value for the company.
AIG has been exhibiting a downtrend since the global financial crisis hit in 2008. The insurer got a bailout package of nearly $180 billion from the government and has ever since sold numerous assets to first repay the relief amount and then to streamline its operations.
After remaining at rock bottom, the property and casualty insurance rates are firming up now. Within the General Insurance segment, the Commercial Insurance lines are likely to do well in 2021 on the back of strengthening rates.
In the recently reported quarter, the company missed on earnings by 4.1% due to catastrophes losses including the coronavirus pandemic. Despite these losses, the company’s General Insurance segment delivered gains with a 1.9 and 5.6 percentage point improvement in the combined ratio from the respective 2019 and 2018 reported level.
In 2020, the company’s share price declined 26% compared with 8.9% decline in the industry.
Along with working on growing its top line, the company is making efforts to restore its margins by cost-control efforts.
We believe, these efforts will aid the company’s results in 2021.
American International carries a Zacks Rank #4 (Sell), presently.
Old Republic International’s bottom line beat estimates in each of the last four quarters, the average being 65.77%.
Earnings of Alleghany and Cincinnati Financial beat estimates in two of the trailing four quarters (missed the mark in the other two), the average surprise being 34.08% and 4.01%, respectively.
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