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Reasons to Hold American International (AIG) Stock for Now
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American International Group, Inc. (AIG - Free Report) is well-poised to grow on the back of strong General Insurance business, improving renewal retention and new business growth. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG is a leading global insurance organization providing a wide range of property casualty insurance, life insurance, retirement solutions and other financial services.
Zacks Rank & Price Performance
American International currently carries a Zacks Rank #3 (Hold). In the past six months, the stock has shed less value than its industry. The company’s shares have declined 2.6% in the past six months compared with the industry’s decline of 5.2%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for AIG’s 2023 earnings is pegged at $6.22 per share, indicating a 36.7% increase from the year-ago reported figure. The consensus mark for 2023 revenues is pegged at $48.6 billion, indicating a 7% increase from the year-ago reported figure.
Decent Surprise History
The company beat earnings estimates in three of the past four quarters, while it missed on the other occasion, the average surprise being 6.9%.
Business Tailwinds
In 2022, a significant portion of AIG’s total revenues came from premiums, which improved 2% from 2021. The figure is expected to grow further in the future due to rate increases.
AIG experienced strong rate increases in the last quarter of 2022, which contributed to the upside. Lexington’s property portfolio also saw a similar increase in rates, which will aid margin expansion in the future.
The General Insurance segment accounted for 60.6% of total revenues in 2022. This segment delivered strong results in 2022 owing to Lexington and Glatfelter’s improving performance. Lexington, AIG’s market-leading excess and surplus lines business, grew 18% in net premiums written and increased underwriting profitability. This resulted from the transition into the wholesale market, which is expected to drive revenues in the future. Global Specialty also performed well, driven by better client retention, rate increases and business growth.
AIG experienced a softer net investment income in 2022 due to lower alternative investment income on private equity investments, mortgage prepayment fees, bond calls and tender premiums. However, the current rising interest rate environment should provide an impetus to growth in net investment income.
In order to take advantage of higher interest rates, AIG has repositioned its General Insurance portfolio to gain higher yields but remains careful about maintaining credit quality and duration. This is likely to result in higher net investment income in 2023.
AIG’s underwriting income increased more than $1 billion in 2022 owing to its underwriting excellence. The General Insurance accident year combined ratio improved 230 basis points (bps), highlighting improved underwriting profitability. The Global Commercial business also contributed with an improvement of 460 bps year over year.
American International delivered well on its AIG 200 savings objective. It was supposed to achieve $1 billion in exit run-rate savings by 2022-end. Notably, the target was met six months ahead of schedule. This has helped the company streamline and upgrade its technology infrastructure and operations. Moreover, with Corebridge’s deconsolidation, AIG plans to reduce its expenses by $300 million.
AIG has always been on the lookout to improve the performance of its investments. Keeping this in mind, the company has partnered with BlackRock and Blackstone, revamping its investment management strategies and structures. The company has also benefited from BlackRock and Blackstone’s investment expertise and technology platforms, which is expected to reap benefits in the form of improved performance in the future.
The company returned $6.1 billion to its shareholders through dividends and share buybacks in 2022, reflecting its balanced capital management strategy.
Key Concern
AIG has a high leverage ratio which is a concern. Its net debt-to-capital of 11.9% at 2022-end was significantly higher than the industry’s average of 6.2%. Also, American International’s return on equity of 7.7% is lower than the industry average of 8.8%. This reflects AIG’s relative inefficiency in utilizing its shareholders’ funds to generate profits. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the multi line insurance space are Goosehead Insurance, Inc (GSHD - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Oscar Health (OSCR - Free Report) . Goosehead and CNO Financial Group currently sport a Zacks Rank #1 (Strong Buy), while Oscar Health presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Goosehead Insurance’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average of earnings surprises is 79.8%.
The Zacks Consensus Estimate for GSHD’s 2023 earnings indicates a 67.3% rise, while the same for revenues suggests 26.6% growth from the prior-year reported figures.
The bottom line of CNO Financial Group outpaced the Zacks Consensus Estimate intwo of the last four quarters, met once and missed on the other occasion, the average surprise being 14.2%. The consensus mark for CNO’s 2023 earnings has moved 4.3% north in the past 30 days.
Oscar Health’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average of earnings surprises is 3.4%.
The Zacks Consensus Estimate for OSCR’s 2023 revenues indicates a 35.2% rise from the prior-year reported figures.
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Reasons to Hold American International (AIG) Stock for Now
American International Group, Inc. (AIG - Free Report) is well-poised to grow on the back of strong General Insurance business, improving renewal retention and new business growth. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG is a leading global insurance organization providing a wide range of property casualty insurance, life insurance, retirement solutions and other financial services.
Zacks Rank & Price Performance
American International currently carries a Zacks Rank #3 (Hold). In the past six months, the stock has shed less value than its industry. The company’s shares have declined 2.6% in the past six months compared with the industry’s decline of 5.2%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for AIG’s 2023 earnings is pegged at $6.22 per share, indicating a 36.7% increase from the year-ago reported figure. The consensus mark for 2023 revenues is pegged at $48.6 billion, indicating a 7% increase from the year-ago reported figure.
Decent Surprise History
The company beat earnings estimates in three of the past four quarters, while it missed on the other occasion, the average surprise being 6.9%.
Business Tailwinds
In 2022, a significant portion of AIG’s total revenues came from premiums, which improved 2% from 2021. The figure is expected to grow further in the future due to rate increases.
AIG experienced strong rate increases in the last quarter of 2022, which contributed to the upside. Lexington’s property portfolio also saw a similar increase in rates, which will aid margin expansion in the future.
The General Insurance segment accounted for 60.6% of total revenues in 2022. This segment delivered strong results in 2022 owing to Lexington and Glatfelter’s improving performance. Lexington, AIG’s market-leading excess and surplus lines business, grew 18% in net premiums written and increased underwriting profitability. This resulted from the transition into the wholesale market, which is expected to drive revenues in the future. Global Specialty also performed well, driven by better client retention, rate increases and business growth.
AIG experienced a softer net investment income in 2022 due to lower alternative investment income on private equity investments, mortgage prepayment fees, bond calls and tender premiums. However, the current rising interest rate environment should provide an impetus to growth in net investment income.
In order to take advantage of higher interest rates, AIG has repositioned its General Insurance portfolio to gain higher yields but remains careful about maintaining credit quality and duration. This is likely to result in higher net investment income in 2023.
AIG’s underwriting income increased more than $1 billion in 2022 owing to its underwriting excellence. The General Insurance accident year combined ratio improved 230 basis points (bps), highlighting improved underwriting profitability. The Global Commercial business also contributed with an improvement of 460 bps year over year.
American International delivered well on its AIG 200 savings objective. It was supposed to achieve $1 billion in exit run-rate savings by 2022-end. Notably, the target was met six months ahead of schedule. This has helped the company streamline and upgrade its technology infrastructure and operations. Moreover, with Corebridge’s deconsolidation, AIG plans to reduce its expenses by $300 million.
AIG has always been on the lookout to improve the performance of its investments. Keeping this in mind, the company has partnered with BlackRock and Blackstone, revamping its investment management strategies and structures. The company has also benefited from BlackRock and Blackstone’s investment expertise and technology platforms, which is expected to reap benefits in the form of improved performance in the future.
The company returned $6.1 billion to its shareholders through dividends and share buybacks in 2022, reflecting its balanced capital management strategy.
Key Concern
AIG has a high leverage ratio which is a concern. Its net debt-to-capital of 11.9% at 2022-end was significantly higher than the industry’s average of 6.2%. Also, American International’s return on equity of 7.7% is lower than the industry average of 8.8%. This reflects AIG’s relative inefficiency in utilizing its shareholders’ funds to generate profits. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the multi line insurance space are Goosehead Insurance, Inc (GSHD - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Oscar Health (OSCR - Free Report) . Goosehead and CNO Financial Group currently sport a Zacks Rank #1 (Strong Buy), while Oscar Health presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Goosehead Insurance’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average of earnings surprises is 79.8%.
The Zacks Consensus Estimate for GSHD’s 2023 earnings indicates a 67.3% rise, while the same for revenues suggests 26.6% growth from the prior-year reported figures.
The bottom line of CNO Financial Group outpaced the Zacks Consensus Estimate intwo of the last four quarters, met once and missed on the other occasion, the average surprise being 14.2%. The consensus mark for CNO’s 2023 earnings has moved 4.3% north in the past 30 days.
Oscar Health’s bottom line outpaced estimates in two of the trailing four quarters and missed the other two. The average of earnings surprises is 3.4%.
The Zacks Consensus Estimate for OSCR’s 2023 revenues indicates a 35.2% rise from the prior-year reported figures.