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American International Group (AIG) Down 9.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for American International Group (AIG - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American International Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AIG Q1 Earnings Beat on Premiums, Solid General Insurance Unit
American International Group reported first-quarter 2022 adjusted operating earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 4.8%.
AIG’s bottom line climbed 23.8% year over year, aided by solid underwriting results within the General Insurance segment. However, the upside was partly offset by reduced net investment income across its portfolio.
Total operating revenues of American International amounted to $11 billion, which improved 3.5% year over year in the first quarter on the back of higher premiums. However, the top line missed the consensus mark by 1.6%.
Quarterly Operational Update
Total net investment income of $3.2 billion declined 11% year over year in the quarter under review due to reduced call and tender income, fair value option equity and fixed maturity securities fetching lower returns coupled with a fall in income from hedge funds. Nevertheless, the downside was partly offset by improved returns stemming from other alternative investments.
AIG’s total benefits, losses and expenses increased 2.5% year over year to $10 billion primarily due to higher policyholder benefits and losses incurred, amortization of deferred policy acquisition costs, and general operating and other expenses.
Adjusted return on common equity came in at 7.6% during the first quarter, which improved 20 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment’s net premiums written of $6.6 billion grew 2% year over year, driven by 6% and 5% growth in North America Commercial Lines and International Commercial Lines, respectively, resulting from continuous rate increases, solid retention rates and strong new business production.
Underwriting income of the segment amounted to $446 million in the quarter under review, which increased more than six-fold year over year. The same comprised of $274 million worth catastrophe losses (CATs), comparing favorably with CATs of $422 million in the prior-year quarter. The segment’s combined ratio improved 590 bps year over year to 92.9% in the first quarter.
Life and Retirement
Premiums of the segment came amounted to $840 million, which advanced 40% year over year in the quarter under review. Meanwhile, premiums and deposits of $7.3 billion rose 13% year over year on the back of higher fixed annuity sales. Segmental adjusted revenues for the first quarter dipped 0.4% year over year to $4 billion due to reduced policy fees and net investment income.
The segment’s adjusted pre-tax income plunged 23% year over year to $724 million, primarily due to a decline in yield enhancements within all segments coupled with the affordable housing portfolio sale.
Financial Position (as of Mar 31, 2022)
Cash balance of American International stood at $2.5 billion, down 9.3% year over year. Total assets of $573.5 billion decreased nearly 2% year over year.
Long-term debt amounted to $23.6 billion, which fell 10.8% year over year.
Total equity of $58.1 billion slipped 8.6% year over year. Debt to capitalization came in at 27.2% at the end of the first quarter, which improved 60 bps year over year.
Adjusted book value per share climbed 20% year over year to $70.72.
Share Repurchase & Dividend Update
In the first quarter, American International rewarded $1.7 billion to shareholders, which included $1.4 billion through share buybacks and dividends worth $265 million.
Concurrently, the board of directors approved an increase in the share buyback authorization to $6.5 billion. The increased authorization includes any leftover amounts under the previous authorization.
The board of directors approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid on Jun 30, 2022, to shareholders of record as of Jun 16.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -5.84% due to these changes.
VGM Scores
Currently, American International Group has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, American International Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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American International Group (AIG) Down 9.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for American International Group (AIG - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American International Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AIG Q1 Earnings Beat on Premiums, Solid General Insurance Unit
American International Group reported first-quarter 2022 adjusted operating earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 4.8%.
AIG’s bottom line climbed 23.8% year over year, aided by solid underwriting results within the General Insurance segment. However, the upside was partly offset by reduced net investment income across its portfolio.
Total operating revenues of American International amounted to $11 billion, which improved 3.5% year over year in the first quarter on the back of higher premiums. However, the top line missed the consensus mark by 1.6%.
Quarterly Operational Update
Total net investment income of $3.2 billion declined 11% year over year in the quarter under review due to reduced call and tender income, fair value option equity and fixed maturity securities fetching lower returns coupled with a fall in income from hedge funds. Nevertheless, the downside was partly offset by improved returns stemming from other alternative investments.
AIG’s total benefits, losses and expenses increased 2.5% year over year to $10 billion primarily due to higher policyholder benefits and losses incurred, amortization of deferred policy acquisition costs, and general operating and other expenses.
Adjusted return on common equity came in at 7.6% during the first quarter, which improved 20 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment’s net premiums written of $6.6 billion grew 2% year over year, driven by 6% and 5% growth in North America Commercial Lines and International Commercial Lines, respectively, resulting from continuous rate increases, solid retention rates and strong new business production.
Underwriting income of the segment amounted to $446 million in the quarter under review, which increased more than six-fold year over year. The same comprised of $274 million worth catastrophe losses (CATs), comparing favorably with CATs of $422 million in the prior-year quarter. The segment’s combined ratio improved 590 bps year over year to 92.9% in the first quarter.
Life and Retirement
Premiums of the segment came amounted to $840 million, which advanced 40% year over year in the quarter under review. Meanwhile, premiums and deposits of $7.3 billion rose 13% year over year on the back of higher fixed annuity sales. Segmental adjusted revenues for the first quarter dipped 0.4% year over year to $4 billion due to reduced policy fees and net investment income.
The segment’s adjusted pre-tax income plunged 23% year over year to $724 million, primarily due to a decline in yield enhancements within all segments coupled with the affordable housing portfolio sale.
Financial Position (as of Mar 31, 2022)
Cash balance of American International stood at $2.5 billion, down 9.3% year over year. Total assets of $573.5 billion decreased nearly 2% year over year.
Long-term debt amounted to $23.6 billion, which fell 10.8% year over year.
Total equity of $58.1 billion slipped 8.6% year over year. Debt to capitalization came in at 27.2% at the end of the first quarter, which improved 60 bps year over year.
Adjusted book value per share climbed 20% year over year to $70.72.
Share Repurchase & Dividend Update
In the first quarter, American International rewarded $1.7 billion to shareholders, which included $1.4 billion through share buybacks and dividends worth $265 million.
Concurrently, the board of directors approved an increase in the share buyback authorization to $6.5 billion. The increased authorization includes any leftover amounts under the previous authorization.
The board of directors approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid on Jun 30, 2022, to shareholders of record as of Jun 16.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -5.84% due to these changes.
VGM Scores
Currently, American International Group has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, American International Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.