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Why You Should Retain American International (AIG) Stock Now
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American International Group, Inc. (AIG - Free Report) is well-poised to grow due to strong Global Commercial business, rising net investment income and new business growth.
AIG continues to benefit from strong performance in its General Insurance business and the strengthening of insurance rates. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG, a leading global insurance organization, provides 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 gained 24.6% compared with the industry’s 15.9% growth.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for AIG’s 2024 earnings per share is pegged at $7.11, indicating a 4.7% increase from the year-ago reported figure of $6.79. The consensus estimate for AIG’s 2024 revenues is pegged at $49.2 billion.
The company beat earnings estimates in each of the last four quarters, the average surprise being 11%.
Key Drivers
A significant portion of AIG’s total revenues comes from premiums, which are expected to grow further due to strong performance in commercial lines and rate increases contributing to higher pricing. Our estimate for 2024 total revenues suggests 9.9% year-over-year growth.
The General Insurance segment accounted for 56.2% of adjusted revenues in 2023. This segment delivered strong results in the fourth quarter due to the improved performance of the Lexington and Global Commercial businesses. North America Commercial is expected to aid the results of this business segment due to strong growth in net premiums thanks to Lexington and Retail Property. Strong retention, rate increases and new businesses have been the key drivers for the Lexington business.
Total net investment income increased 24% year over year in 2023. A high-interest rate environment should provide an impetus to growth in net investment income. 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 2024. We expect net investment income in 2024 to grow 8% year over year.
The company is progressing well on its objective to deliver 10% plus adjusted return on capital employed. It achieved a 2023 adjusted ROCE of 9% compared with 7.1% in 2022. Separation and deconsolidation of Corebridge, underwriting excellence, debt reduction, dividend increases and the AIG Next program should further help the company realize its objectives.
The company rewarded its shareholders with $3 billion in repurchases and dividends worth $1 billion in 2023, reflecting its balanced capital management strategy. This implies that the company’s shares are a good buy for investors looking for returns in the form of dividends.
However, AIG’s high leverage is a concern. The company exited the fourth quarter with short-term and long-term debt of $19.8 billion, while the cash balance was $2.2 billion. We expect interest expenses to rise 11% in 2024. American International’s long-term debt-to-capital of 30.4% at the end of the fourth quarter was higher than the industry’s average of 26.8%. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
CNO Financial’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed the mark twice, the average beat being 3.62%. The consensus estimate for CNO’s 2024 earnings suggests an improvement of 2.6% from the year-ago reported figure.
The consensus mark for CNO’s 2024 earnings has moved 4.3% north in the past 60 days.
Erie Indemnity’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 11.24%. The Zacks Consensus Estimate for ERIE’s 2024 earnings indicates an 18.3% rise, while the same for revenues suggests an improvement of 11.4% from the respective prior-year reported figures.
The consensus mark for ERIE’s 2024 earnings has moved 2.4% north in the past 30 days.
Assurant’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 42.15%. The Zacks Consensus Estimate for AIZ’s 2024 earnings indicates a 3.4% rise, while the same for revenues suggests an improvement of 4.1% from the respective prior-year reported figures.
The consensus mark for AIZ’s 2024 earnings has moved up 1.4% in the past 30 days.
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Why You Should Retain American International (AIG) Stock Now
American International Group, Inc. (AIG - Free Report) is well-poised to grow due to strong Global Commercial business, rising net investment income and new business growth.
AIG continues to benefit from strong performance in its General Insurance business and the strengthening of insurance rates. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG, a leading global insurance organization, provides 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 gained 24.6% compared with the industry’s 15.9% growth.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for AIG’s 2024 earnings per share is pegged at $7.11, indicating a 4.7% increase from the year-ago reported figure of $6.79. The consensus estimate for AIG’s 2024 revenues is pegged at $49.2 billion.
The company beat earnings estimates in each of the last four quarters, the average surprise being 11%.
Key Drivers
A significant portion of AIG’s total revenues comes from premiums, which are expected to grow further due to strong performance in commercial lines and rate increases contributing to higher pricing. Our estimate for 2024 total revenues suggests 9.9% year-over-year growth.
The General Insurance segment accounted for 56.2% of adjusted revenues in 2023. This segment delivered strong results in the fourth quarter due to the improved performance of the Lexington and Global Commercial businesses. North America Commercial is expected to aid the results of this business segment due to strong growth in net premiums thanks to Lexington and Retail Property. Strong retention, rate increases and new businesses have been the key drivers for the Lexington business.
Total net investment income increased 24% year over year in 2023. A high-interest rate environment should provide an impetus to growth in net investment income. 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 2024. We expect net investment income in 2024 to grow 8% year over year.
The company is progressing well on its objective to deliver 10% plus adjusted return on capital employed. It achieved a 2023 adjusted ROCE of 9% compared with 7.1% in 2022. Separation and deconsolidation of Corebridge, underwriting excellence, debt reduction, dividend increases and the AIG Next program should further help the company realize its objectives.
The company rewarded its shareholders with $3 billion in repurchases and dividends worth $1 billion in 2023, reflecting its balanced capital management strategy. This implies that the company’s shares are a good buy for investors looking for returns in the form of dividends.
However, AIG’s high leverage is a concern. The company exited the fourth quarter with short-term and long-term debt of $19.8 billion, while the cash balance was $2.2 billion. We expect interest expenses to rise 11% in 2024. American International’s long-term debt-to-capital of 30.4% at the end of the fourth quarter was higher than the industry’s average of 26.8%. 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 in the insurance space are CNO Financial Group, Inc. (CNO - Free Report) , Erie Indemnity Company (ERIE - Free Report) and Assurant, Inc. (AIZ - Free Report) . CNO Financial sports a Zacks Rank #1 (Strong Buy), and Erie Indemnity and Assurant carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNO Financial’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed the mark twice, the average beat being 3.62%. The consensus estimate for CNO’s 2024 earnings suggests an improvement of 2.6% from the year-ago reported figure.
The consensus mark for CNO’s 2024 earnings has moved 4.3% north in the past 60 days.
Erie Indemnity’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 11.24%. The Zacks Consensus Estimate for ERIE’s 2024 earnings indicates an 18.3% rise, while the same for revenues suggests an improvement of 11.4% from the respective prior-year reported figures.
The consensus mark for ERIE’s 2024 earnings has moved 2.4% north in the past 30 days.
Assurant’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 42.15%. The Zacks Consensus Estimate for AIZ’s 2024 earnings indicates a 3.4% rise, while the same for revenues suggests an improvement of 4.1% from the respective prior-year reported figures.
The consensus mark for AIZ’s 2024 earnings has moved up 1.4% in the past 30 days.