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Will High Benefits and Expenses Affect AIG's Q4 Earnings?
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American International Group, Inc. (AIG - Free Report) is set to report its fourth-quarter 2023 results on Feb 13, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $1.59 has remained stable over the past week. The estimate is indicative of a 16.9% increase from the year-ago quarter’s reported earnings of $1.36 per share. However, the Zacks Consensus Estimate for revenues is pegged at $11.6 billion, suggesting a decline of 4.6% from the year-ago quarter’s reported figure.
AIG’s earnings beat estimates in all the trailing four quarters, with an average surprise of 11.5%. This is depicted in the graph below.
American International Group, Inc. Price and EPS Surprise
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AIG’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global insurance organization’s adjusted operating earnings of $1.61 per share beat the Zacks Consensus Estimate by 3.9% due to strong underwriting results in the Commercial Lines business of the General Insurance unit, a declining expense level and higher net investment income. However, the upside was partly offset by the continued incidence of catastrophe losses, as well as reduced sales of Variable Annuities and pension risk transfer deals in the Life and Retirement unit.
In the fourth quarter, improved retention, new business and continued growth in the premium rate are expected to have boosted the performance of the General Insurance business. Profits from the segment are expected to have increased due to improving underwriting income and higher net investment income.
The Zacks Consensus Estimate for General Insurance adjusted pre-tax income of $1.3 billion for the fourth quarter indicates an increase of 9% from the year-ago period, whereas our model estimate predicts nearly 8% growth.
AIG still remains the majority shareholder in Corebridge (its Life and Retirement business) following the secondary offerings last year and combines its results of operations in its Condensed Consolidated Financial Statements. The consensus mark for adjusted pre-tax income for the overall Life and Retirement business is pegged at $946.8 billion, signaling a jump of nearly 11% from the prior-year quarter.
The Zacks Consensus Estimate for net investment income indicates an 8.1% increase from the year-ago period, while our model suggests 10.8% growth, thanks to improved reinvestment rates and higher alternative investment income.
The factors stated above are expected to have positioned AIG for year-over-year growth in profit levels. However, The Zacks Consensus Estimate for net premiums earned in General Insurance indicates a nearly 2% decrease from the year-ago period. Also, the consensus mark for overall premium revenues indicates a 5.7% year-over-year decline.
Looking into expenses, our model estimate for total benefits and expenses indicates around 17% year-over-year growth due to higher policyholder benefits and losses incurred, affecting profit growth levels and making an earnings beat uncertain. We also expect general operating and other expenses to have increased nearly 2% in the fourth quarter.
The Zacks Consensus Estimate for the combined ratio for total General Insurance is pegged at 90.7%, up from 89.9% in the year-ago period. Nevertheless, the effects of its transformative program, named AIG 200, are expected to have provided the company’s bottom line some breathing room in the quarter under review.
Earnings Whispers
Our proven model does not conclusively predict 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 chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -0.56%. This is because the Most Accurate Estimate currently stands at $1.58 per share, lower than the Zacks Consensus Estimate of $1.59.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: AIG currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for AIG, here are some companies from the broader Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for Primerica’s bottom line for the to-be-reported quarter suggests a 22.1% year-over-year jump to $4.26 per share. The estimate remained stable over the past week. The consensus mark for PRI’s revenues is pegged at $719.5 million, indicating 5.1% year-over-year growth.
Trupanion, Inc. (TRUP - Free Report) has an Earnings ESP of +25.82% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Trupanion’s bottom line for the to-be-reported quarter indicates a 21.7% year-over-year improvement. The estimate improved by a penny over the past week. Furthermore, TRUP beat earnings estimates in three of the past four quarters and missed once.
Arch Capital Group Ltd. (ACGL - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Arch Capital’s bottom line for the to-be-reported quarter is pegged at $1.94 per share, which increased by 4 cents in the past month. ACGL beat earnings estimates in all the past four quarters, with an average surprise of 35.2%.
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Will High Benefits and Expenses Affect AIG's Q4 Earnings?
American International Group, Inc. (AIG - Free Report) is set to report its fourth-quarter 2023 results on Feb 13, after the closing bell.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $1.59 has remained stable over the past week. The estimate is indicative of a 16.9% increase from the year-ago quarter’s reported earnings of $1.36 per share. However, the Zacks Consensus Estimate for revenues is pegged at $11.6 billion, suggesting a decline of 4.6% from the year-ago quarter’s reported figure.
AIG’s earnings beat estimates in all the trailing four quarters, with an average surprise of 11.5%. This is depicted in the graph below.
American International Group, Inc. Price and EPS Surprise
American International Group, Inc. price-eps-surprise | American International Group, Inc. Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AIG’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global insurance organization’s adjusted operating earnings of $1.61 per share beat the Zacks Consensus Estimate by 3.9% due to strong underwriting results in the Commercial Lines business of the General Insurance unit, a declining expense level and higher net investment income. However, the upside was partly offset by the continued incidence of catastrophe losses, as well as reduced sales of Variable Annuities and pension risk transfer deals in the Life and Retirement unit.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
In the fourth quarter, improved retention, new business and continued growth in the premium rate are expected to have boosted the performance of the General Insurance business. Profits from the segment are expected to have increased due to improving underwriting income and higher net investment income.
The Zacks Consensus Estimate for General Insurance adjusted pre-tax income of $1.3 billion for the fourth quarter indicates an increase of 9% from the year-ago period, whereas our model estimate predicts nearly 8% growth.
AIG still remains the majority shareholder in Corebridge (its Life and Retirement business) following the secondary offerings last year and combines its results of operations in its Condensed Consolidated Financial Statements. The consensus mark for adjusted pre-tax income for the overall Life and Retirement business is pegged at $946.8 billion, signaling a jump of nearly 11% from the prior-year quarter.
The Zacks Consensus Estimate for net investment income indicates an 8.1% increase from the year-ago period, while our model suggests 10.8% growth, thanks to improved reinvestment rates and higher alternative investment income.
The factors stated above are expected to have positioned AIG for year-over-year growth in profit levels. However, The Zacks Consensus Estimate for net premiums earned in General Insurance indicates a nearly 2% decrease from the year-ago period. Also, the consensus mark for overall premium revenues indicates a 5.7% year-over-year decline.
Looking into expenses, our model estimate for total benefits and expenses indicates around 17% year-over-year growth due to higher policyholder benefits and losses incurred, affecting profit growth levels and making an earnings beat uncertain. We also expect general operating and other expenses to have increased nearly 2% in the fourth quarter.
The Zacks Consensus Estimate for the combined ratio for total General Insurance is pegged at 90.7%, up from 89.9% in the year-ago period. Nevertheless, the effects of its transformative program, named AIG 200, are expected to have provided the company’s bottom line some breathing room in the quarter under review.
Earnings Whispers
Our proven model does not conclusively predict 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 chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is -0.56%. This is because the Most Accurate Estimate currently stands at $1.58 per share, lower than the Zacks Consensus Estimate of $1.59.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: AIG currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for AIG, here are some companies from the broader Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Primerica, Inc. (PRI - Free Report) has an Earnings ESP of +0.28% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Primerica’s bottom line for the to-be-reported quarter suggests a 22.1% year-over-year jump to $4.26 per share. The estimate remained stable over the past week. The consensus mark for PRI’s revenues is pegged at $719.5 million, indicating 5.1% year-over-year growth.
Trupanion, Inc. (TRUP - Free Report) has an Earnings ESP of +25.82% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Trupanion’s bottom line for the to-be-reported quarter indicates a 21.7% year-over-year improvement. The estimate improved by a penny over the past week. Furthermore, TRUP beat earnings estimates in three of the past four quarters and missed once.
Arch Capital Group Ltd. (ACGL - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Arch Capital’s bottom line for the to-be-reported quarter is pegged at $1.94 per share, which increased by 4 cents in the past month. ACGL beat earnings estimates in all the past four quarters, with an average surprise of 35.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.