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American International (AIG) Q2 Earnings Beat, Revenues Up Y/Y

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American International Group, Inc. (AIG - Free Report) reported second-quarter 2021 adjusted operating earnings of $1.52 per share, which surpassed the Zacks Consensus Estimate by 27.7%. The bottom line more than doubled itself year over year.

The company’s results were driven by robust underwriting performance across General Insurance segment and substantial drop in catastrophe losses, net of reinsurance (CATs). However, the upside was partially offset by elevated expenses.

Total revenues of $12 billion grew 2.3% year over year in the quarter under review, courtesy of rise in premiums, policy fees and net investment income. The top line beat the Zacks Consensus Estimate by 3.7%.

Total net investment income improved 9% year over year to $3.7 billion on account of solid private equity returns, partly offset by reduced gains on fair value option bonds.

The second quarter witnessed total benefits, losses and expenses of $10.5 billion, which plunged 44.7% year over year. The decline was due to lower policyholder benefits and losses incurred, interest credited to policyholder account balances and interest expense.

Adjusted return on common equity improved 600 basis points (bps) year over year to 10.5% in the quarter under review.

Segmental Performances

General Insurance

Net premiums written of $6.9 billion advanced 24% year over year attributable to constant rate increases, high retention rates and solid new business volumes resulting in North America Commercial Lines and International Commercial Lines growth of 15% and 17%, respectively.

The segment reported underwriting income of $463 million, against the prior-year quarter’s underwriting loss of $343 million. In the reported quarter, the underwriting income comprised $118 million of CATs, comparing favorably with CATs of $674 million in the prior-year quarter.

Combined ratio improved 1,350 bps year over year to 92.5%.

Life and Retirement

The segment reported adjusted pre-tax income of $1.1 billion, which rose 26% year over year. The upside can be attributed to improved fee income and strong equity market performance resulting in increased alternative investment returns. However, it has been partly offset by escalating deferred policy acquisition costs.

Premiums of $1.6 billion remained flat year over year on account of premium increases across International Life and Pension Risk Transfer, partially offset by reduced premiums from Structured Settlement.

Premiums and deposits climbed 58% year over year to $9 billion on the back of growing deposits amid Institutional Markets and revival from the industry-wide COVID-19 induced sales disruption.

On Jul 14 of this year, American International inked a deal with Blackstone as a result of which the latter is entitled to purchase 9.9% equity stake in SAFG Retirement Services (SAFG) — the holding company for the Life and Retirement Unit. The all-cash transaction valued at $2.2 billion is an important step undertaken by American International for separating its Life and Retirement business, plans of which had been disclosed in October 2020. Subject to customary approval, the deal is anticipated to complete in the third-quarter 2021.

Financial Position (as of Jun 30, 2021)

American International exited the second quarter with cash of $2.8 billion, which decreased 2.4% from the figure at 2020 end.

Total assets amounted to $598.3 billion, up 2% from 2020-end level.

Long-term debt of $26.2 billion declined 6.9% from the figure as of Dec 31, 2020.

Total equity dipped 0.4% from 2020-end level to $66.9 billion.

Adjusted book value per share of $60.07 grew 5.4% from the figure at 2020 end in the quarter under review.

Share Repurchase & Dividend Update

American International bought back shares worth around $230 million in the second quarter.

On Aug 3, 2021, the board of directors enhanced the company’s share buyback authorization to $6 billion. The total amount includes the leftover balance of around $900 million under the company’s previous authorization.

The board of directors approved a quarterly cash dividend of 32 cents per share. The dividend will be paid on Sep 30, 2021 to shareholders of record as on Sep 16.

Zacks Rank

American International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Multiline Insurers

Of the multiline insurance industry players that have reported second-quarter results so far, the bottom line of Old Republic International Corporation (ORI - Free Report) , Assurant, Inc. (AIZ - Free Report) and MetLife, Inc. (MET - Free Report) beat the Zacks Consensus Estimate.