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Why You Should Hold American International (AIG) Stock Now
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American International Group, Inc. (AIG - Free Report) is well-poised to grow due to strong Global Commercial business, rising net investment income, and new business growth.
AIG continues to benefit from strong performance in its General Insurance business, the strengthening of insurance rates, and AIG Next. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG, a leading global insurance organization, provides a wide range of property casualty insurance, life insurance, retirement solutions, and other financial services.
Zacks Rank & Price Performance
American International currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 30.2% compared with the industry’s 24% growth.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for AIG’s 2024 earnings per share is pegged at $7.02, indicating a 3.4% increase from the year-ago reported figure of $6.79. The consensus estimate for AIG’s 2024 revenues is pegged at $49.5 billion.
The company beat earnings estimates in each of the last four quarters, the average surprise being 9.2%.
Business Tailwinds
A significant portion of AIG’s total revenues comes from premiums, which are expected to grow further due to strong performance in commercial lines and rate increases contributing to higher pricing.
The General Insurance segment accounted for 52.1% of adjusted revenues in the first quarter of 2024. This segment delivered strong results in the first quarter due to the improved performance of the Lexington and Global Commercial businesses. The company expects the Global Commercial Insurance business’ net premiums written to witness high single-digit growth in 2024. North America Commercial is expected to aid the results of this business segment due to strong growth in net premiums thanks to Lexington and Retail Property. Strong retention, rate increases and new businesses have been the key drivers for the Lexington business.
Total net investment income increased 24% year over year in 2023. A high-interest rate environment should provide an impetus to growth in net investment income. To take advantage of higher interest rates, AIG has repositioned its General Insurance portfolio to gain higher yields but remains careful about maintaining credit quality and duration. This is likely to result in higher net investment income in 2024.
The company is progressing well on its objective to deliver 10% plus adjusted return on capital employed. It achieved a first-quarter adjusted return on capital employed of 9.3% compared with 9% in 2023. Separation and deconsolidation of Corebridge, underwriting excellence, debt reduction, dividend increases, and the AIG Next program should further help the company realize its objectives. The company sold its Travel Insurance business in June 2024 to optimize its portfolio. AIG expects to achieve $500 million in run rate savings through AIG Next by 2025.
The company rewarded its shareholders with $1.7 billion in repurchases and dividends worth $243 million in the first quarter of 2024, indicating its balanced capital management strategy. Management approved an 11% hike to common dividends in the first quarter. The company also increased its share repurchase authorization by $10 billion.This implies that the company’s shares are a good buy for investors looking for returns in the form of dividends.
However, AIG’s high leverage is a concern. The company exited the first quarter with short-term and long-term debt of $19.3 billion, while the cash balance was $1.8 billion. American International’s net debt-to-capital of 38.9% at the end of the first quarter was significantly higher than the industry’s average negative figure. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Palomar’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.10%. The Zacks Consensus Estimate for PLMR’s 2024 earnings indicates an improvement of 26%, while the consensus estimate for revenues implies growth of 34.2% from the corresponding year-ago reported figures. The consensus mark for PLMR’s earnings has moved 0.2% north in the past 30 days.
The bottom line of RLI beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 132.4%. The Zacks Consensus Estimate for RLI’s 2024 earnings indicates an improvement of 18.4%, while the consensus estimate for revenues implies growth of 15.6% from the corresponding year-ago reported figures. The consensus mark for RLI’s earnings has moved 0.2% north in the past 30 days.
NMI’s earnings outpaced estimates in each of the last four quarters, the average surprise being 8.60%. The Zacks Consensus Estimate for NMIH’s 2024 earnings indicates an improvement of 10.7%, while the consensus estimate for revenues implies growth of 11.1% from the corresponding year-ago reported figures. The consensus mark for NMIH's earnings has moved 0.2% north in the past 30 days.
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Why You Should Hold American International (AIG) Stock Now
American International Group, Inc. (AIG - Free Report) is well-poised to grow due to strong Global Commercial business, rising net investment income, and new business growth.
AIG continues to benefit from strong performance in its General Insurance business, the strengthening of insurance rates, and AIG Next. Moreover, divestitures are helping the company to streamline its business and enhance capital allocation.
AIG, a leading global insurance organization, provides a wide range of property casualty insurance, life insurance, retirement solutions, and other financial services.
Zacks Rank & Price Performance
American International currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 30.2% compared with the industry’s 24% growth.
Image Source: Zacks Investment Research
Rising Estimates
The Zacks Consensus Estimate for AIG’s 2024 earnings per share is pegged at $7.02, indicating a 3.4% increase from the year-ago reported figure of $6.79. The consensus estimate for AIG’s 2024 revenues is pegged at $49.5 billion.
The company beat earnings estimates in each of the last four quarters, the average surprise being 9.2%.
Business Tailwinds
A significant portion of AIG’s total revenues comes from premiums, which are expected to grow further due to strong performance in commercial lines and rate increases contributing to higher pricing.
The General Insurance segment accounted for 52.1% of adjusted revenues in the first quarter of 2024. This segment delivered strong results in the first quarter due to the improved performance of the Lexington and Global Commercial businesses. The company expects the Global Commercial Insurance business’ net premiums written to witness high single-digit growth in 2024. North America Commercial is expected to aid the results of this business segment due to strong growth in net premiums thanks to Lexington and Retail Property. Strong retention, rate increases and new businesses have been the key drivers for the Lexington business.
Total net investment income increased 24% year over year in 2023. A high-interest rate environment should provide an impetus to growth in net investment income. To take advantage of higher interest rates, AIG has repositioned its General Insurance portfolio to gain higher yields but remains careful about maintaining credit quality and duration. This is likely to result in higher net investment income in 2024.
The company is progressing well on its objective to deliver 10% plus adjusted return on capital employed. It achieved a first-quarter adjusted return on capital employed of 9.3% compared with 9% in 2023. Separation and deconsolidation of Corebridge, underwriting excellence, debt reduction, dividend increases, and the AIG Next program should further help the company realize its objectives. The company sold its Travel Insurance business in June 2024 to optimize its portfolio. AIG expects to achieve $500 million in run rate savings through AIG Next by 2025.
The company rewarded its shareholders with $1.7 billion in repurchases and dividends worth $243 million in the first quarter of 2024, indicating its balanced capital management strategy. Management approved an 11% hike to common dividends in the first quarter. The company also increased its share repurchase authorization by $10 billion.This implies that the company’s shares are a good buy for investors looking for returns in the form of dividends.
However, AIG’s high leverage is a concern. The company exited the first quarter with short-term and long-term debt of $19.3 billion, while the cash balance was $1.8 billion. American International’s net debt-to-capital of 38.9% at the end of the first quarter was significantly higher than the industry’s average negative figure. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks in the broader Finance space are Palomar Holdings, Inc. (PLMR - Free Report) , RLI Corp. (RLI - Free Report) , and NMI Holdings, Inc. (NMIH - Free Report) . While Palomar sports a Zacks Rank #1 (Strong Buy), RLI and NMI carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Palomar’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.10%. The Zacks Consensus Estimate for PLMR’s 2024 earnings indicates an improvement of 26%, while the consensus estimate for revenues implies growth of 34.2% from the corresponding year-ago reported figures. The consensus mark for PLMR’s earnings has moved 0.2% north in the past 30 days.
The bottom line of RLI beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 132.4%. The Zacks Consensus Estimate for RLI’s 2024 earnings indicates an improvement of 18.4%, while the consensus estimate for revenues implies growth of 15.6% from the corresponding year-ago reported figures. The consensus mark for RLI’s earnings has moved 0.2% north in the past 30 days.
NMI’s earnings outpaced estimates in each of the last four quarters, the average surprise being 8.60%. The Zacks Consensus Estimate for NMIH’s 2024 earnings indicates an improvement of 10.7%, while the consensus estimate for revenues implies growth of 11.1% from the corresponding year-ago reported figures. The consensus mark for NMIH's earnings has moved 0.2% north in the past 30 days.