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Why Is American International (AIG) Up 2% Since the Last Earnings Report?

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It has been about a month since the last earnings report for American International Group, Inc. (AIG - Free Report) . Shares have added nearly 2% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

American International Beats on Q1 Earnings, Growth Initiatives on Track

 

American International Group Inc. reported first-quarter 2017 operating income of $1.36 per share that surpassed the Zacks Consensus Estimate by a good 22.5%. Earnings were up from $0.64 in the year-ago quarter.
 
The company is getting along well with its expense reduction program as evident by an 18.6% decline in general operating and other expenses (GOE) to $2.4 billion.
 
Quarterly Segment Highlights
 
Commercial Insurance
 
Net premiums written were down 17% year over year to $3.6 billion due to strategic portfolio actions and increased premiums ceded under reinsurance transaction in the Property sub-segment.
 
Combined ratio of 102.2% deteriorated 450 basis points year over year, primarily due to an increase in loss ratio.
 
The segment’s pre-tax operating income of $849 million increased 28% year over year.
 
Consumer Insurance
 
Net operating revenues inched up 1% year over year to $5.9 billion backed by higher revenues from the Life Insurance and Group Retirement sub-segments partly offset by a decline in revenues from the Individual Retirement business. 
 
Pre-tax operating income increased 49% year over year to $213 million, driven by higher returns on alternative investments and expense reductions across all Consumer Insurance businesses.
 
Financial Position
 
At the end of the first quarter, the insurer’s adjusted book value per share (excluding AOCI) was $74.58, up 1.6% from year-end 2016. 
 
Core adjusted return on equity (ROE) was 10.2%, up from 6.8% in the year-ago quarter. The improvement in return came on the back of active capital management and expense efficiencies.
 
Capital Management Plan On Track
 
In the first quarter, AIG spent $3.6 billion on share repurchase. Till May 3, 2017, AIG has repurchased an additional 18.1 million common shares for $1.1 billion. 
 
On the day of the earnings release, the company increased its share buyback authorization. Now the company has $3.8 billion remaining under its share authorization plan.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, American International's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'C'. Following the exact same course, the stock was allocated also a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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