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American International Group (AIG) Down 2.2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for American International Group (AIG - Free Report) . Shares have lost about 2.2% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
American International Q2 Earnings Miss on Lower NII
American International Group reported second-quarter 2022 adjusted operating earnings of $1.19 per share, which missed the Zacks Consensus Estimate by 3.3%. The figure was lower than our estimate of $1.25 per share.
The bottom line of AIG slumped 21.7% year over year in the second quarter due to reduced alternative investment income.
Total revenues of $14.4 billion surged 35.2% year over year and came higher than our estimate of $10.4 billion. The growth can be attributed to higher net realized gains on the Fortitude Refunds withheld embedded derivative and solid underwriting results within the General Insurance segment.
Quarterly Operational Update
Total net investment income (NII) tumbled 29.1% year over year to $2,604 million due to a decline in alternative investment returns and reduced yield enhancements. Nevertheless, the downside was partly offset by increased new money rates stemming from higher interest rates and wider credit spreads. The figure was lower than our estimate of $3,475.7 million.
AIG’s total benefits, losses and expenses of $10.1 billion decreased 3.9% year over year, thanks to lower policyholder benefits and losses incurred and interest expenses. The figure was higher than our estimate of $9,722.8 million.
Adjusted return on common equity came deteriorated 350 basis points (bps) year over year to 7% in the second quarter.
Segmental Performances
General Insurance
The segment reported net premiums written of $6,866 million, which inched up marginally year over year and grew 5% on a constant dollar basis. The improvement came on the back of continuous rate hikes, strong renewal retentions and solid new business production within Property. However, the upside was partly offset by a decline in production in Warranty within Global Personal Insurance. The metric (net premiums written) was lower than our estimate of $7,500 million.
Underwriting income of $799 million soared 73% year over year in the second quarter. The same comprised catastrophe losses (CATs) of $119 million, which compared favorably with CATs of $118 million in the prior-year quarter.
The segment’s combined ratio improved 510 bps year over year to 87.4% in the quarter under review, marking the first time that the metric has been below 90% in the past 15 years. It came lower than the Zacks Consensus Estimate of 92% and our estimate of 92.4%.
Life and Retirement
Premiums of the segment dropped 32% year over year to $1,119 million in the second quarter. The figure was lower than the Zacks Consensus Estimate of $1,680 million and our estimate of $1,596.3 million.
Meanwhile, premiums and deposits of $7,099 million tumbled 21% year over year. Adjusted revenues of the segment amounted to $4,055 million, down nearly 20% year over year due to lower premiums and NII. The figure was lower than the Zacks Consensus Estimate of $4,918 million and our estimate of $4,965.7 million.
The segment’s adjusted pre-tax income of $563 million fell nearly 50% year over year in the second quarter, primarily due to lower NII as well as accelerated deferred policy acquisition cost (DAC) amortization stemming from declining equity markets, improving interest rates and widening credit spreads. Reduced fee income in Individual Retirement and Group Retirement hampered the segment’s results. The metric (adjusted pre-tax income) was lower than the Zacks Consensus Estimate of $832 million and our estimate of $881 million.
Financial Position (as of Jun 30, 2022)
American International exited the second quarter with a cash balance of $2,378 million, which declined 13.8% year over year. Total assets of $538.9 billion decreased nearly 10% year over year.
Long-term debt of $22.2 billion dropped 15.2% year over year.
Total equity slumped 30% year over year to $46.8 billion. Debt to capital deteriorated 390 bps year over year to 30.4% at the second-quarter end.
Adjusted book value per share came in at $72.23, up 20.2% year over year.
Share Repurchase & Dividend Update
American International rewarded $2 billion to shareholders, which included $1.7 billion through share buybacks and dividends worth $256 million.
Concurrent with announcing the second-quarter results, the board of directors approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid on Sep 30, 2022, to shareholders of record as of Sep 16.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, American International Group has a poor Growth Score of F, 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 C. 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 these revisions 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.
Performance of an Industry Player
American International Group belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, Assurant (AIZ - Free Report) , has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Assurant reported revenues of $2.59 billion in the last reported quarter, representing a year-over-year change of +2.1%. EPS of $2.95 for the same period compares with $2.99 a year ago.
For the current quarter, Assurant is expected to post earnings of $2.47 per share, indicating a change of +75.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.8% over the last 30 days.
Assurant has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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American International Group (AIG) Down 2.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for American International Group (AIG - Free Report) . Shares have lost about 2.2% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
American International Q2 Earnings Miss on Lower NII
American International Group reported second-quarter 2022 adjusted operating earnings of $1.19 per share, which missed the Zacks Consensus Estimate by 3.3%. The figure was lower than our estimate of $1.25 per share.
The bottom line of AIG slumped 21.7% year over year in the second quarter due to reduced alternative investment income.
Total revenues of $14.4 billion surged 35.2% year over year and came higher than our estimate of $10.4 billion. The growth can be attributed to higher net realized gains on the Fortitude Refunds withheld embedded derivative and solid underwriting results within the General Insurance segment.
Quarterly Operational Update
Total net investment income (NII) tumbled 29.1% year over year to $2,604 million due to a decline in alternative investment returns and reduced yield enhancements. Nevertheless, the downside was partly offset by increased new money rates stemming from higher interest rates and wider credit spreads. The figure was lower than our estimate of $3,475.7 million.
AIG’s total benefits, losses and expenses of $10.1 billion decreased 3.9% year over year, thanks to lower policyholder benefits and losses incurred and interest expenses. The figure was higher than our estimate of $9,722.8 million.
Adjusted return on common equity came deteriorated 350 basis points (bps) year over year to 7% in the second quarter.
Segmental Performances
General Insurance
The segment reported net premiums written of $6,866 million, which inched up marginally year over year and grew 5% on a constant dollar basis. The improvement came on the back of continuous rate hikes, strong renewal retentions and solid new business production within Property. However, the upside was partly offset by a decline in production in Warranty within Global Personal Insurance. The metric (net premiums written) was lower than our estimate of $7,500 million.
Underwriting income of $799 million soared 73% year over year in the second quarter. The same comprised catastrophe losses (CATs) of $119 million, which compared favorably with CATs of $118 million in the prior-year quarter.
The segment’s combined ratio improved 510 bps year over year to 87.4% in the quarter under review, marking the first time that the metric has been below 90% in the past 15 years. It came lower than the Zacks Consensus Estimate of 92% and our estimate of 92.4%.
Life and Retirement
Premiums of the segment dropped 32% year over year to $1,119 million in the second quarter. The figure was lower than the Zacks Consensus Estimate of $1,680 million and our estimate of $1,596.3 million.
Meanwhile, premiums and deposits of $7,099 million tumbled 21% year over year. Adjusted revenues of the segment amounted to $4,055 million, down nearly 20% year over year due to lower premiums and NII. The figure was lower than the Zacks Consensus Estimate of $4,918 million and our estimate of $4,965.7 million.
The segment’s adjusted pre-tax income of $563 million fell nearly 50% year over year in the second quarter, primarily due to lower NII as well as accelerated deferred policy acquisition cost (DAC) amortization stemming from declining equity markets, improving interest rates and widening credit spreads. Reduced fee income in Individual Retirement and Group Retirement hampered the segment’s results. The metric (adjusted pre-tax income) was lower than the Zacks Consensus Estimate of $832 million and our estimate of $881 million.
Financial Position (as of Jun 30, 2022)
American International exited the second quarter with a cash balance of $2,378 million, which declined 13.8% year over year. Total assets of $538.9 billion decreased nearly 10% year over year.
Long-term debt of $22.2 billion dropped 15.2% year over year.
Total equity slumped 30% year over year to $46.8 billion. Debt to capital deteriorated 390 bps year over year to 30.4% at the second-quarter end.
Adjusted book value per share came in at $72.23, up 20.2% year over year.
Share Repurchase & Dividend Update
American International rewarded $2 billion to shareholders, which included $1.7 billion through share buybacks and dividends worth $256 million.
Concurrent with announcing the second-quarter results, the board of directors approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid on Sep 30, 2022, to shareholders of record as of Sep 16.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, American International Group has a poor Growth Score of F, 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 C. 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 these revisions 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.
Performance of an Industry Player
American International Group belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, Assurant (AIZ - Free Report) , has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Assurant reported revenues of $2.59 billion in the last reported quarter, representing a year-over-year change of +2.1%. EPS of $2.95 for the same period compares with $2.99 a year ago.
For the current quarter, Assurant is expected to post earnings of $2.47 per share, indicating a change of +75.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.8% over the last 30 days.
Assurant has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.