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Why American International (AIG) is Set to Beat on Q4 Earnings?

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American International Group, Inc. (AIG - Free Report) is set to beat earnings when it reports fourth-quarter 2021 earnings on Feb 16, after the closing bell.

In the last reported quarter, the leading global insurance organization’s adjusted earnings per share of 97 cents beat the Zacks Consensus Estimate of 93 cents, primarily due to solid contribution from the General Insurance segment, thanks to constant rate increases and high retention rates. Yet, the upside was partially offset by elevated expenses.

Let’s see how things have shaped up prior to the fourth-quarter earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings per share of $1.14 has been stable over the past week. This estimate is indicative of a 21.3% increase from the year-ago reported figure of 94 cents per share. Yet, the Zacks Consensus Estimate for revenues is pegged at $11.6 billion, suggesting a decrease of 3.5% from the year-ago reported figure.

American International beat earnings estimates thrice in the trailing four quarters and missed once, delivering an average surprise of 8.5%. This is depicted in the graph below.

What the Quantitative Model Suggests

Our proven model predicts an earnings beat for American International this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Earnings ESP for the company is currently +1.32%. This is because the Most Accurate Estimate is pegged at $1.15 per share, higher than the Zacks Consensus Estimate of $1.14. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  

Zacks Rank: American International currently holds a Zacks Rank #3.

Supporting Factors

In General Insurance, net premiums written are likely to have increased on the back of improved retention, new business and a continued improvement in insurance premium rate. With improving consumer spending, net written premiums are expected to have risen in the fourth quarter. The Zacks Consensus Estimate for net premiums written in General Insurance is pegged at $5,785 million, indicating an increase from $5,565 million in the year-ago period.

Profits from General Insurance are expected to have increased significantly due to high retention rates and robust new business volumes. The Zacks Consensus Estimate for adjusted pre-tax income of $874 million for the fourth quarter indicates a rise from $809 million in the year-ago period, positioning the company for year-over-year bottom-line growth and earnings beat.

Total Premiums from Life and Retirement might have increased due to improved pension risk transfer activities. The Zacks Consensus Estimate for Premiums from Life and Retirement is pegged at $1,475 million, indicating an increase from $950 million in the prior-year period.

Its transformative program named AIG 200 is expected to have enabled the company to curb costs and expenses in the fourth quarter. This is likely to have provided the bottom line an additional boost in the quarter under review.

Yet, the consensus mark for adjusted pre-tax income from the Life and Retirement business is pegged at $953 million, signaling a decrease from $1,027 million in the prior-year quarter. This can partially offset the positives from the above-mentioned factors.

Other Stocks That Warrant a Look

Here are some other companies from the Finance space that you may also want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around:

Jones Lang LaSalle Incorporated (JLL - Free Report) has an Earnings ESP of +9.23% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Jones Lang LaSalle’s earnings per share for the to-be-reported quarter indicates a 26.3% year-over-year jump.

Kingstone Companies, Inc. (KINS - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank of 3. In the past 30 days, Kingstone Companies’ bottom-line estimates for the to-be-reported quarter have witnessed one upward revision and no movement in the opposite direction.

Barclays PLC (BCS - Free Report) has an Earnings ESP of +44.83% and a Zacks Rank #3. The Zacks Consensus Estimate for Barclays’ bottom line for the to-be-reported quarter indicates a 262.5% year-over-year increase.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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