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AIG Beats on Q1 Earnings on Lower Costs, Approves Dividend Hike
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American International Group, Inc. (AIG - Free Report) reported first-quarter 2024 adjusted earnings per share of $1.77, which beat the Zacks Consensus Estimate by 6.6%. The bottom line improved 8.6% year over year.
Operating revenues amounted to $12.5 billion, which inched up 0.8% year over year. The top line surpassed the consensus mark by 3.6%.
The results were driven by Commercial Lines strength, which, in turn, was aided by favorable underwriting results and a decline in catastrophe losses. Strong contributions from the Life and Retirement unit, and solid investment results, coupled with a falling expense level, also contributed to the upside. However, the upside was partly offset by changes implemented in the insurance structure that inflicted adversities on net premiums written of the General Insurance segment.
American International Group, Inc. Price, Consensus and EPS Surprise
Premiums of $8.2 billion declined 3.7% year over year in the quarter but outpaced the Zacks Consensus Estimate of $7.8 billion and our estimate of $7.9 billion. Total net investment income advanced 11% year over year to $3.9 billion, attributable to increased income from fixed maturity securities and loans resulting from rising reinvestment rates. The metric beat the consensus mark of $3.79 billion and our estimate of $3.88 billion.
Total benefits, losses and expenses fell 6.1% year over year to $10.5 billion, lower than our estimate of $11.1 billion. The year-over-year decline came on the back of lower policyholder benefits and losses incurred, and amortization of deferred policy acquisition costs.
Adjusted return on common equity of AIG was 9.3%, which improved 60 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment recorded net premiums written of $4.5 billion, which plunged 35% year over year due to softness in Financial Lines as a result of continued underwriting discipline and alteration in reinsurance structure coupled with weaker contributions from Global Specialty and Financial Lines. The metric fell short of our estimate of $4.9 billion.
Yet, underwriting income of $596 million rose 19% year over year for the unit on the back of strong contributions from North America Personal Insurance, and International Commercial and Personal Insurance lines. The metric surpassed our estimate of $517.9 million. Catastrophe losses plunged 59.8% year over year to $106 million. The combined ratio of 89.8% improved 210 bps year over year, attributable to an improved loss ratio.
Adjusted pre-tax income grew 9% year over year to $1.36 billion, higher than the Zacks Consensus Estimate of $1.33 billion and our estimate of $1.29 billion. Favorable underwriting results and higher net investment income benefited the metric.
Life & Retirement
Premiums and fees advanced 6% year over year to $3.1 billion in the first quarter. Premiums and deposits of $10.7 billion increased 2% year over year. Premiums in the segment were aided by strength in Fixed Annuities and Institutional Markets businesses.
Adjusted revenues rose 10.2% year over year to $5.9 billion, which beat the Zacks Consensus Estimate of $5.3 billion and our estimate of $5.5 billion.
The unit’s adjusted pre-tax income of $991 million improved 12% year over year on the back of a rise in base portfolio spread income, higher fee income and expense efficiencies. However, the metric missed the Zacks Consensus Estimate of $996 million and our estimate of $1 billion.
Financial Position (As of Mar 31, 2024)
AIG exited the first quarter with a cash balance of $1.8 billion, which dropped 15.7% from the 2023-end level. Total assets of $544.1 billion inched up 0.9% from the figure at 2023 end.
Short and long-term debt amounted to $19.3 billion, which slipped 2.4% from the figure as of Dec 31, 2023.
Total equity of $49.1 billion fell 4.3% from the 2023-end level. Total debt to total capital was 28.1% at the first-quarter end, which improved 400 bps year over year.
Adjusted book value per share grew 3% year over year to $77.79.
Capital Deployment Update
AIG rewarded shareholders to the tune of share repurchase worth $1.7 billion, and distributed common and preferred dividends of $250 million.
Management also authorized an increase of up to $10 billion in AIG’s share buyback authorization, which has been effective from the very beginning of May 2024. It also announced a quarterly dividend hike of 11%. The increased dividend, amounting to 40 cents per common share, indicates the second straight year of declaring 10%-plus dividend hikes.
Of the insurance industry players that have reported first-quarter 2024 results so far, the bottom-line results of Arch Capital Group Ltd. (ACGL - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) beat the Zacks Consensus Estimate.
Arch Capital reported first-quarter 2024 operating income of $2.45 per share, which beat the Zacks Consensus Estimate by 18.9%. The bottom line jumped 41.6% year over year. Gross premiums written improved 24.1% year over year to $5.9 billion. Net premiums written climbed 19.3% year over year to $4.1 billion on higher premiums. Net investment income surged 64.3% year over year to $327 million.
Operating revenues of $3.8 billion rose 21.7% year over year. It missed the Zacks Consensus Estimate by 0.2%. ACGL’s underwriting income climbed 29.1% year over year to $736 million. The combined ratio improved 180 bps to 78.8. Net premiums written in the Insurance climbed 19.1% year over year to $1.4 billion. Underwriting income was $379 million in the Reinsurance unit, which surged 77.9% year over year.
Cincinnati Financial’s first-quarter 2024 operating income of $1.72 per share beat the Zacks Consensus Estimate by 1.7%. The bottom line surged 93.2% year over year. Total operating revenues were $2.3 billion, which missed the consensus estimate by 1.4%. The top line, however, improved 8.8% year over year. Net written premiums climbed 11% year over year to $2.2 billion.
Investment income, net of expenses, increased 17% year over year to $245 million. In its property & casualty insurance business, CINF recorded an underwriting income of $131 million against the year-ago loss of $10 million. The combined ratio improved 710 bps year over year to 93.6%. Total revenues in the Commercial Lines Insurance segment amounted to $1 billion, which increased 2% year over year. The Personal Lines Insurance unit reported an underwriting income of $37 million against the year-ago loss of $57 million.
Kinsale Capital delivered first-quarter 2024 net operating earnings of $3.50 per share, which outpaced the Zacks Consensus Estimate by 5.1%. The bottom line increased 43.4% year over year. Operating revenues jumped 45.1% year over year to about $373 million. Revenues beat the consensus estimate by 3.8%. Gross written premiums of $448.6 million rose 25.5% year over year.
Net written premiums climbed 17.4% year over year to $351.1 million in the quarter. Net investment income increased 59.1% year over year to $32.9 million in the quarter. KNSL’s underwriting income was $65.1 million, which grew 26.2% year over year. The combined ratio deteriorated 70 bps to 79.5. While the expense ratio improved 100 bps to 20.7, the loss ratio deteriorated 170 bps to 58.8.
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AIG Beats on Q1 Earnings on Lower Costs, Approves Dividend Hike
American International Group, Inc. (AIG - Free Report) reported first-quarter 2024 adjusted earnings per share of $1.77, which beat the Zacks Consensus Estimate by 6.6%. The bottom line improved 8.6% year over year.
Operating revenues amounted to $12.5 billion, which inched up 0.8% year over year. The top line surpassed the consensus mark by 3.6%.
The results were driven by Commercial Lines strength, which, in turn, was aided by favorable underwriting results and a decline in catastrophe losses. Strong contributions from the Life and Retirement unit, and solid investment results, coupled with a falling expense level, also contributed to the upside. However, the upside was partly offset by changes implemented in the insurance structure that inflicted adversities on net premiums written of the General Insurance segment.
American International Group, Inc. Price, Consensus and EPS Surprise
American International Group, Inc. price-consensus-eps-surprise-chart | American International Group, Inc. Quote
Quarterly Operational Update
Premiums of $8.2 billion declined 3.7% year over year in the quarter but outpaced the Zacks Consensus Estimate of $7.8 billion and our estimate of $7.9 billion. Total net investment income advanced 11% year over year to $3.9 billion, attributable to increased income from fixed maturity securities and loans resulting from rising reinvestment rates. The metric beat the consensus mark of $3.79 billion and our estimate of $3.88 billion.
Total benefits, losses and expenses fell 6.1% year over year to $10.5 billion, lower than our estimate of $11.1 billion. The year-over-year decline came on the back of lower policyholder benefits and losses incurred, and amortization of deferred policy acquisition costs.
Adjusted return on common equity of AIG was 9.3%, which improved 60 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment recorded net premiums written of $4.5 billion, which plunged 35% year over year due to softness in Financial Lines as a result of continued underwriting discipline and alteration in reinsurance structure coupled with weaker contributions from Global Specialty and Financial Lines. The metric fell short of our estimate of $4.9 billion.
Yet, underwriting income of $596 million rose 19% year over year for the unit on the back of strong contributions from North America Personal Insurance, and International Commercial and Personal Insurance lines. The metric surpassed our estimate of $517.9 million. Catastrophe losses plunged 59.8% year over year to $106 million. The combined ratio of 89.8% improved 210 bps year over year, attributable to an improved loss ratio.
Adjusted pre-tax income grew 9% year over year to $1.36 billion, higher than the Zacks Consensus Estimate of $1.33 billion and our estimate of $1.29 billion. Favorable underwriting results and higher net investment income benefited the metric.
Life & Retirement
Premiums and fees advanced 6% year over year to $3.1 billion in the first quarter. Premiums and deposits of $10.7 billion increased 2% year over year. Premiums in the segment were aided by strength in Fixed Annuities and Institutional Markets businesses.
Adjusted revenues rose 10.2% year over year to $5.9 billion, which beat the Zacks Consensus Estimate of $5.3 billion and our estimate of $5.5 billion.
The unit’s adjusted pre-tax income of $991 million improved 12% year over year on the back of a rise in base portfolio spread income, higher fee income and expense efficiencies. However, the metric missed the Zacks Consensus Estimate of $996 million and our estimate of $1 billion.
Financial Position (As of Mar 31, 2024)
AIG exited the first quarter with a cash balance of $1.8 billion, which dropped 15.7% from the 2023-end level. Total assets of $544.1 billion inched up 0.9% from the figure at 2023 end.
Short and long-term debt amounted to $19.3 billion, which slipped 2.4% from the figure as of Dec 31, 2023.
Total equity of $49.1 billion fell 4.3% from the 2023-end level. Total debt to total capital was 28.1% at the first-quarter end, which improved 400 bps year over year.
Adjusted book value per share grew 3% year over year to $77.79.
Capital Deployment Update
AIG rewarded shareholders to the tune of share repurchase worth $1.7 billion, and distributed common and preferred dividends of $250 million.
Management also authorized an increase of up to $10 billion in AIG’s share buyback authorization, which has been effective from the very beginning of May 2024. It also announced a quarterly dividend hike of 11%. The increased dividend, amounting to 40 cents per common share, indicates the second straight year of declaring 10%-plus dividend hikes.
Zacks Rank
AIG currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Insurers
Of the insurance industry players that have reported first-quarter 2024 results so far, the bottom-line results of Arch Capital Group Ltd. (ACGL - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) beat the Zacks Consensus Estimate.
Arch Capital reported first-quarter 2024 operating income of $2.45 per share, which beat the Zacks Consensus Estimate by 18.9%. The bottom line jumped 41.6% year over year. Gross premiums written improved 24.1% year over year to $5.9 billion. Net premiums written climbed 19.3% year over year to $4.1 billion on higher premiums. Net investment income surged 64.3% year over year to $327 million.
Operating revenues of $3.8 billion rose 21.7% year over year. It missed the Zacks Consensus Estimate by 0.2%. ACGL’s underwriting income climbed 29.1% year over year to $736 million. The combined ratio improved 180 bps to 78.8. Net premiums written in the Insurance climbed 19.1% year over year to $1.4 billion. Underwriting income was $379 million in the Reinsurance unit, which surged 77.9% year over year.
Cincinnati Financial’s first-quarter 2024 operating income of $1.72 per share beat the Zacks Consensus Estimate by 1.7%. The bottom line surged 93.2% year over year. Total operating revenues were $2.3 billion, which missed the consensus estimate by 1.4%. The top line, however, improved 8.8% year over year. Net written premiums climbed 11% year over year to $2.2 billion.
Investment income, net of expenses, increased 17% year over year to $245 million. In its property & casualty insurance business, CINF recorded an underwriting income of $131 million against the year-ago loss of $10 million. The combined ratio improved 710 bps year over year to 93.6%. Total revenues in the Commercial Lines Insurance segment amounted to $1 billion, which increased 2% year over year. The Personal Lines Insurance unit reported an underwriting income of $37 million against the year-ago loss of $57 million.
Kinsale Capital delivered first-quarter 2024 net operating earnings of $3.50 per share, which outpaced the Zacks Consensus Estimate by 5.1%. The bottom line increased 43.4% year over year. Operating revenues jumped 45.1% year over year to about $373 million. Revenues beat the consensus estimate by 3.8%. Gross written premiums of $448.6 million rose 25.5% year over year.
Net written premiums climbed 17.4% year over year to $351.1 million in the quarter. Net investment income increased 59.1% year over year to $32.9 million in the quarter. KNSL’s underwriting income was $65.1 million, which grew 26.2% year over year. The combined ratio deteriorated 70 bps to 79.5. While the expense ratio improved 100 bps to 20.7, the loss ratio deteriorated 170 bps to 58.8.