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Can American International (AIG) Q2 Earnings Deliver a Beat?

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American International Group, Inc. (AIG - Free Report) is scheduled to report second-quarter 2021 results on May 5, after market close.

Q2 Estimates

The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $1.19 per share, indicating a surge of 80.3% from the year-ago quarter’s reported figure.

The consensus mark for quarterly revenues stands at $11.56 billion, suggesting a 1.41% decrease from the year-ago period’s reported number.
Factors to Note

Under the company’s General Insurance segment and Commercial Insurance business are likely to have grown on improved retention and higher rates. In the first quarter, global commercial premium was up 22%.
The company projected significant growth for North America personal line business in the second quarter. However, the same is expected to have been driven by the syndicate 2019 reinsurance   ceded of $150 million in the second  quarter of 2020.

The ceding  of premium in the last reported quarter caused a decline in premium, which might not have been repeated in the second quarter of 2021. Thus, the low base effect of last year will buoy personal segment this time. From the June-quarter onward, personal net premium growth is expected to have been stabilized on an ongoing basis.

On the last earnings, management had said that overall, for North America, both personal and commercial combined net written premium growth  would be between 35% to 40% over the prior-year quarter’s reported figure.

Net premium growth in International commercial business is expected to be roughly plus 7%.

Net investment income is likely to have gone up on higher income from alternative investments and equity securities.

On the expense front, both interest expense and gross operating expenses are expected to have decreased on debt repayments and lower corporate expenses. However, underwriting profitability might have taken a hit from catastrophe losses.

Share repurchases made by the company in the period under review are likely to have provided a cushion to its bottom line. It had intended to complete the $230 million worth share buyback program by the end of the second quarter.

Earnings Surprise

The company’s bottom line missed estimates in two of the trailing four quarters, surpassing the mark in the remaining two. It has a four-quarter earnings surprise of 7.79%, on average. This is depicted in the graph below:

What the Quantitative Model States

Our proven model predicts an earnings beat for American International this time around. The combination of a positive  Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.

Earnings ESP:  American International has an Earnings ESP of +8.82%. This is because the Most Accurate Estimate of $1.02 is pegged higher than the Zacks Consensus Estimate of 98 cents. You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter.

Zacks Rank:  American International carries a Zacks Rank #2, currently.  You can see  the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

Among the many insurance companies that already reported earnings for the second quarter, the bottom-line results at W.R.Berkley Corp. (WRB - Free Report) , Chubb Limited (CB - Free Report) and The Hartford Financial Services Group, Inc. (HIG - Free Report) beat the respective Zacks Consensus Estimate by 21.9%, 22.3% and 75.2%.