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AIG Stock Ahead of Q3 Earnings: A Smart Buy or Overpriced?
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Global insurer American International Group, Inc. (AIG - Free Report) is set to report third-quarter 2024 results on Nov. 4, 2024, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.13 per shareon revenues of $6.62 billion.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. The bottom-line projection indicates a year-over-year decline of 29.8%, while the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year fall of 41.7%.
Image Source: Zacks Investment Research
For the current year, the Zacks Consensus Estimate for AIG’s revenues is pegged at $26.93 billion, implying a fall of 45.7% year over year. Also, the consensus mark for current-year EPS is pegged at $4.99, indicating a decrease of 26.5%.
AIG beat the consensus estimate in three of the last four quarters and missed once, with the average surprise being 1.6%. This is depicted in the figure below.
American International Group, Inc. Price and EPS Surprise
Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s not the case here.
AIG has an Earnings ESP of 0.00% and a Zacks Rank #3.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for total premiums indicates a 21% decrease from the year-ago period. The consensus mark for net investment income predicts a 75.4% year-over-year plunge. These factors, along with its deconsolidation of Corebridge Financial, Inc. (CRBG - Free Report) , are expected to have impacted AIG’s top line in the third quarter, leading to a year-over-year decline.
Further, higher general operating and other expenses are likely to have trimmed its margins, affecting profit levels. The consensus estimate for the combined ratio for international commercial lines currently stands at 86.48%, up from 83.40% a year ago.
The Zacks Consensus Estimate for the combined ratio for total General Insurance is pegged at 93.9%, up from 90.5% in the year-ago period. The expense ratio is pegged at 31.64%, up from 30.9% a year ago. The Zacks Consensus Estimate for the segment’s adjusted pre-tax income for the third quarter indicates a decrease of 16.5% from the year-ago period.
These are likely to have affected the bottom line, making an earnings beat uncertain. Nevertheless, the consensus mark for adjusted revenues from total other operations signals a jump of 172% from the prior-year quarter. This is likely to have partially offset the negatives.
AIG’s Price Performance & Valuation
AIG's stock has gained 12% year to date but underperformed the industry’s growth of 20%. Some of its peers, like The Hartford Financial Services Group, Inc. (HIG - Free Report) and The Allstate Corporation (ALL - Free Report) , have surged 34.7% and 33.3%, respectively, during this time. Meanwhile, the S&P 500 Index has jumped 22.3% during the same period.
AIG’s YTD Price Performance
Image Source: Zacks Investment Research
Now, let’s look at the value American International offers investors at current levels.
Currently, AIG is trading at 11.7X forward 12 months earnings, above its five-year median of 9.69X and the industry’s average of 9.27X.
Image Source: Zacks Investment Research
What Should Investors Do Now?
Given its focus on streamlining its operations by shedding non-core businesses to focus on core insurance, the company’s figures are expected to improve in the coming days. AIG completed the deconsolidation of Corebridgein the second quarter. These moves will likely reduce portfolio volatility, increase cash liquidity and accelerate capital deployment.
The company has also implemented leadership changes to better align its operations and drive efficiencies across core functions. Its expense ratio, on a comparable basis, is likely to improve courtesy of alteration in business mix and ongoing expense discipline. This will boost its operating margins in the coming days. As such, current investors may consider holding the stock for its long-term growth potential.
Nonetheless, its net debt-to-capital is significantly higher than the industry average. Its return on equity (ROE) of 9.52% is lower than the industry average of 16.09%, indicating less efficiency in generating profits. Given the company’s higher valuation, leverage and low ROE, new investors might prefer waiting for a more favorable entry point while watching upcoming earnings for more insight.
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AIG Stock Ahead of Q3 Earnings: A Smart Buy or Overpriced?
Global insurer American International Group, Inc. (AIG - Free Report) is set to report third-quarter 2024 results on Nov. 4, 2024, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.13 per shareon revenues of $6.62 billion.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. The bottom-line projection indicates a year-over-year decline of 29.8%, while the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year fall of 41.7%.
For the current year, the Zacks Consensus Estimate for AIG’s revenues is pegged at $26.93 billion, implying a fall of 45.7% year over year. Also, the consensus mark for current-year EPS is pegged at $4.99, indicating a decrease of 26.5%.
AIG beat the consensus estimate in three of the last four quarters and missed once, with the average surprise being 1.6%. This is depicted in the figure below.
American International Group, Inc. Price and EPS Surprise
American International Group, Inc. price-eps-surprise | American International Group, Inc. Quote
Q3 Earnings Whispers for AIG
Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s not the case here.
AIG has an Earnings ESP of 0.00% and a Zacks Rank #3.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Shaping AIG’s Q3 Results?
The Zacks Consensus Estimate for total premiums indicates a 21% decrease from the year-ago period. The consensus mark for net investment income predicts a 75.4% year-over-year plunge. These factors, along with its deconsolidation of Corebridge Financial, Inc. (CRBG - Free Report) , are expected to have impacted AIG’s top line in the third quarter, leading to a year-over-year decline.
Further, higher general operating and other expenses are likely to have trimmed its margins, affecting profit levels. The consensus estimate for the combined ratio for international commercial lines currently stands at 86.48%, up from 83.40% a year ago.
The Zacks Consensus Estimate for the combined ratio for total General Insurance is pegged at 93.9%, up from 90.5% in the year-ago period. The expense ratio is pegged at 31.64%, up from 30.9% a year ago. The Zacks Consensus Estimate for the segment’s adjusted pre-tax income for the third quarter indicates a decrease of 16.5% from the year-ago period.
These are likely to have affected the bottom line, making an earnings beat uncertain. Nevertheless, the consensus mark for adjusted revenues from total other operations signals a jump of 172% from the prior-year quarter. This is likely to have partially offset the negatives.
AIG’s Price Performance & Valuation
AIG's stock has gained 12% year to date but underperformed the industry’s growth of 20%. Some of its peers, like The Hartford Financial Services Group, Inc. (HIG - Free Report) and The Allstate Corporation (ALL - Free Report) , have surged 34.7% and 33.3%, respectively, during this time. Meanwhile, the S&P 500 Index has jumped 22.3% during the same period.
AIG’s YTD Price Performance
Now, let’s look at the value American International offers investors at current levels.
Currently, AIG is trading at 11.7X forward 12 months earnings, above its five-year median of 9.69X and the industry’s average of 9.27X.
What Should Investors Do Now?
Given its focus on streamlining its operations by shedding non-core businesses to focus on core insurance, the company’s figures are expected to improve in the coming days. AIG completed the deconsolidation of Corebridgein the second quarter. These moves will likely reduce portfolio volatility, increase cash liquidity and accelerate capital deployment.
The company has also implemented leadership changes to better align its operations and drive efficiencies across core functions. Its expense ratio, on a comparable basis, is likely to improve courtesy of alteration in business mix and ongoing expense discipline. This will boost its operating margins in the coming days. As such, current investors may consider holding the stock for its long-term growth potential.
Nonetheless, its net debt-to-capital is significantly higher than the industry average. Its return on equity (ROE) of 9.52% is lower than the industry average of 16.09%, indicating less efficiency in generating profits. Given the company’s higher valuation, leverage and low ROE, new investors might prefer waiting for a more favorable entry point while watching upcoming earnings for more insight.