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AIG Q4 Earnings Beat on Solid General Insurance Performance

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American International Group, Inc. (AIG - Free Report) reported fourth-quarter 2021 adjusted operating earnings of $1.58 per share, which surpassed the Zacks Consensus Estimate of $1.14. The bottom line also increased from 94 cents per share a year ago.

Total revenues of $14,087 million grew from $9,676 million a year ago. The top line beat the consensus mark of $11,555 million.

The strong fourth-quarter results were driven by a solid underwriting performance and lower catastrophe losses (CATs) from its General Insurance business. Further, lower total benefits, losses and expenses aided the results.

Full-Year 2021

Adjusted operating earnings for 2021 were $5.12 per share, up from $2.52 in 2020. Total revenues of $52,057 million jumped from the 2020 level of $43,736 million. Total benefits, losses and expenses declined to $39,958 million from $51,029 million in 2020.

Q4 Operating Highlights

Total net investment income declined to $3,565 million for the quarter from $3,957 million in the year-ago period due to lower returns from fair value option equity and fixed-income securities. This was partially offset by higher income from alternative investments from private equity.

AIG witnessed total benefits, losses and expenses of $9,039 million, which declined from $10,234 million a year ago, primarily due to lower interest expense and higher net gain on divestitures. Benefits from the AIG 200 program aided the metric.

Adjusted return on common equity expanded 320 basis points (bps) year over year to 9.9% for the quarter under review.

Q4 Segmental Performances

General Insurance

Net premiums written of $5,961 million rose from $5,565 million in fourth-quarter 2020, attributable to constant rate increases, high retention rates and solid new business volumes, resulting in growth of 11% and 15% in North America Commercial Lines and International Commercial Lines, respectively. A rebound in travel activity and lower reinsurance cessions boosted North America Personal Insurance performance.

The segment reported an underwriting income of $499 million against the prior-year quarter’s underwriting loss of $171 million. In the reported quarter, underwriting income comprised $189 million worth CATs compared with the year-ago figure of $545 million. Fourth-quarter CATs stemmed from tornadoes in the southern United States and wildfires. The combined ratio contracted 1,040 bps year over year to 92.4%.

Life and Retirement

Premiums of $2.7 billion surged from $1 billion a year ago on account of an improved pension risk transfer activity. Premiums and deposits climbed 19% year over year to $8.6 billion. Total adjusted revenues for the fourth quarter were $6,124 million, up from $4,338 million a year ago, primarily on higher premiums and policy fees.

The segment reported an adjusted pre-tax income of $969 million, which declined from $1,027 million a year ago. The downside was due to unfavorable mortality in Life Insurance, higher expenses, and a hike in deferred policy buyout cost amortization and reserves in the Individual Retirement and Group Retirement.

AIG intends to separate its Life and Retirement unit from the business. Last November, the company closed the sale of a 9.9% equity stake in the unit to Blackstone Inc. (BX - Free Report) for $2.2 billion. AIG might opt for an initial public offering in the future to separate the Life and Retirement business. Cash proceeds received from Blackstone helped in boosting AIG’s liquidity.

Financial Position (as of Dec 31, 2021)

American International exited the fourth quarter with cash of $2,198 million, which decreased 22.2% from the figure at 2020-end. Total assets amounted to $596.1 billion, up from the 2020-end level of $586.5 billion.

Long-term debt of $23,741 million declined 15.5% from the figure as of Dec 31, 2020. Total equity increased 2.5% from the 2020-end level to $68,912 million. Long-term debt to capitalization at fourth quarter-end was at 25.6%.

Adjusted book value per share of $68.83 grew 20.7% from the figure at 2020-end.

Share Repurchase & Dividend Update

American International bought back shares worth $2.6 billion in 2021 and paid $1.1 billion in dividends. The board of directors approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid out on Mar 31, 2022 to the company’s shareholders of record as of Mar 17.

Zacks Rank & Key Picks

American International currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the Finance space include Atlas Corp. (ATCO - Free Report) and Veritex Holdings, Inc. (VBTX - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in London, Atlas Corp. is a global asset management company. The Zacks Consensus Estimate for ATCO’s bottom line for 2021 indicates a 77.3% increase from the year-ago level. Atlas Corp. beat earnings estimates thrice in the past four quarters and missed once, with the average surprise being 25.7%.

Based in Dallas, TX, Veritex provides multiple commercial banking products and services to different businesses. The Zacks Consensus Estimate for VBTX’s bottom line for 2022 indicates an 11.9% increase from the year-ago level. Veritex beat earnings estimates thrice in the past four quarters and met once, with the average surprise being 10.3%.