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American International (AIG) Q3 Earnings: What's in Store?

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American International Group, Inc. (AIG - Free Report) is scheduled to report third-quarter results after the market close on Nov 2.

Last quarter, this multiline insurer surpassed the estimates by 7.7%. The company doesn’t have a respectable earnings surprise track record. It missed the consensus estimate in three out of the past four reported quarters, with the average miss being 24.6%. Will American International Group miss estimates this quarter as well?

3Q16 Flashback

In the third quarter, we expect net premium written to be down in Commercial insurance due to the increasing use of reinsurance, the targeted exits communicated in the first quarter and market headwinds from lower rates.

We, however, expect the bottom line to get a boost from lower operating expenses as a result of the company’s initiatives taken to control expenses. For the first six months of the year, operating expenses declined 11%. The company disclosed that expenses will continue to decline, although at a more modest pace, in the second half of the year.

In the retirement segment, we expect to see a decline in sales of variable annuity given the uncertainty surrounding the Department of Labor rules and market volatility.

We also expect higher earnings within its Personal Insurance from strategic actions undertaken to reduce expenses including direct marketing costs as well as early emergence of operating benefits from investments in Japan and other select markets.

Also, its annuity businesses is expected to show a decline in volumes as the company is frequently reevaluating its products to meet its return targets.

The company’s commitment to return capital to its shareholders via share buyback will further boost earnings per share.

Earnings Whispers

Our proven model does not conclusively show that American International Group will likely beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: American International Group's Most Accurate estimate is pegged at $1.21 per share, which is the same as the Zacks Consensus Estimate.  Earnings ESP is thus 0.00%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

Zacks Rank: American International Group has a Zacks Rank #3. Though this increases the predictive power of the ESP, the company's ESP of 0.00% makes surprise prediction difficult.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Hercules Capital, Inc. (HTGC - Free Report) is scheduled to release third-quarter earnings results on Nov 3. The company has an Earnings ESP of +3.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allstate Corp. (ALL - Free Report) has an Earnings ESP of +1.61% and carries a Zacks Rank #3. The company is slated to report third-quarter earnings results on Nov 2.

Cigna Corp. (CI - Free Report) has an Earnings ESP of +2.62% and carries a Zacks Rank #3. The company is slated to report third-quarter earnings results on Nov 3.

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