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American International Group (AIG) Up 10.2% 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 10.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
American International Q4 Earnings Miss, Revenues Beat
American International's fourth-quarter 2020 adjusted operating earnings of 94 cents per share missed the Zacks Consensus Estimate by 4.1%.
The bottom line also declined 8.7% year over year due to higher catastrophe (CAT) loss including COVID-19 CATs as well as an unfavorable prior-year loss reserve development, partially offset by improved alternative investment returns. The decrease also reflects the sale of Fortitude in the second quarter of 2020.
Total revenues of nearly $12 billion dipped 0.8% year over year due to reduced premiums, dip in policy fees and lower investment income. The top line, however, beat the Zacks Consensus Estimate by 8.53%.
Total net investment income of $3.2 billion decreased 7% year over year.
Total benefit, losses and expenses of $10.23 billion declined 5.1% year over year owing to lower policyholder benefits and losses incurred, interest credited to policyholder account balances and amortization of deferred policy acquisition costs.
Adjusted return on capital employed was 4.4%, down 230 basis points year over year.
As of Dec 31, 2020, the insurer’s adjusted book value per share was $57.01, up 0.4% from Sep 30, 2020.
Segmental Update
Weak Performance at General Insurance
Net premium written slipped 5% year over year to $5.6 billion due to lower contribution from North American Personal lines business.
The segment reported an underwriting loss of $171 million against the underwriting gain of $12 million in the year-ago quarter. The underwriting loss included $545 million of CATs, reflecting $367 million of non-COVID-19 CATs, primarily related to hurricanes Sally, Zeta, Laura and Delta and $178 million of COVID-19 CATs, primarily related to Travel, Contingency and Validus Reinsurance, Ltd.
The General Insurance combined ratio was 102.8, reflecting a 3- point increase year over year.
Life and Retirement
Life and Retirement reported an adjusted pre-tax income of $1.03 billion, up 20% year over year on increased contribution from Individual and Group Retirement, and Institutional Markets.
Premiums were $950 million, reflecting a decrease of 4% year over year. Premiums and deposits increased 4% year over year on Institutional Markets activity, partially offset by lower Fixed and Index Annuities, and Group Retirement deposits.
On Oct 26, 2020, AIG announced its intention to separate its Life and Retirement business. Decisions are yet to be taken on the structure of the initial disposition of up to a 19.9% interest in the Life and Retirement business.
Capital Position (Dec 31, 2020)
AIG exited the fourth quarter with cash of $2.8 billion, down 1% from 2019 end.
The company’s long-term debt of $28.1 billion decreased 2.2% sequentially.
Total equity of $67.2 billion slid 0.3% year over year.
Total assets of $586.5 billion increased 11.7% from the level at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
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 D. 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 indicates a downward shift. 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 10.2% 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 10.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
American International Q4 Earnings Miss, Revenues Beat
American International's fourth-quarter 2020 adjusted operating earnings of 94 cents per share missed the Zacks Consensus Estimate by 4.1%.
The bottom line also declined 8.7% year over year due to higher catastrophe (CAT) loss including COVID-19 CATs as well as an unfavorable prior-year loss reserve development, partially offset by improved alternative investment returns. The decrease also reflects the sale of Fortitude in the second quarter of 2020.
Total revenues of nearly $12 billion dipped 0.8% year over year due to reduced premiums, dip in policy fees and lower investment income. The top line, however, beat the Zacks Consensus Estimate by 8.53%.
Total net investment income of $3.2 billion decreased 7% year over year.
Total benefit, losses and expenses of $10.23 billion declined 5.1% year over year owing to lower policyholder benefits and losses incurred, interest credited to policyholder account balances and amortization of deferred policy acquisition costs.
Adjusted return on capital employed was 4.4%, down 230 basis points year over year.
As of Dec 31, 2020, the insurer’s adjusted book value per share was $57.01, up 0.4% from Sep 30, 2020.
Segmental Update
Weak Performance at General Insurance
Net premium written slipped 5% year over year to $5.6 billion due to lower contribution from North American Personal lines business.
The segment reported an underwriting loss of $171 million against the underwriting gain of $12 million in the year-ago quarter. The underwriting loss included $545 million of CATs, reflecting $367 million of non-COVID-19 CATs, primarily related to hurricanes Sally, Zeta, Laura and Delta and $178 million of COVID-19 CATs, primarily related to Travel, Contingency and Validus Reinsurance, Ltd.
The General Insurance combined ratio was 102.8, reflecting a 3- point increase year over year.
Life and Retirement
Life and Retirement reported an adjusted pre-tax income of $1.03 billion, up 20% year over year on increased contribution from Individual and Group Retirement, and Institutional Markets.
Premiums were $950 million, reflecting a decrease of 4% year over year. Premiums and deposits increased 4% year over year on Institutional Markets activity, partially offset by lower Fixed and Index Annuities, and Group Retirement deposits.
On Oct 26, 2020, AIG announced its intention to separate its Life and Retirement business. Decisions are yet to be taken on the structure of the initial disposition of up to a 19.9% interest in the Life and Retirement business.
Capital Position (Dec 31, 2020)
AIG exited the fourth quarter with cash of $2.8 billion, down 1% from 2019 end.
The company’s long-term debt of $28.1 billion decreased 2.2% sequentially.
Total equity of $67.2 billion slid 0.3% year over year.
Total assets of $586.5 billion increased 11.7% from the level at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
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 D. 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 indicates a downward shift. Notably, American International Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.