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Why Is American International Group (AIG) Up 1.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for American International Group (AIG - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American International Group due for a pullback? 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.
AIG Q2 Earnings Miss Estimates on High Catastrophe Losses
American International Group reported second-quarter 2024 adjusted earnings per share of $1.16, which missed the Zacks Consensus Estimate by 16.6%. However, the bottom line improved 9.4% year over year.
Operating revenues amounted to $6.6 billion, which declined 11.8% year over year. Also, the top line significantly missed the consensus mark.
The weaker-than-expected results were caused by an increase in catastrophe losses and higher general operating and other expenses. This was partially offset by Global Commercial’s strength and improved net investment income.
Quarterly Operational Update
Premiums of $5.7 billion declined 13.1% year over year in the quarter and missed the Zacks Consensus Estimate of $5.8 billion. Total net investment income increased 18.3% year over year to $990 million, attributable to increased income from fixed maturity securities and dividends received from Corebridge Financial. The metric beat the consensus mark of $9.8 million.
Total benefits, losses and expenses fell 9.3% year over year to $5.9 billion. The year-over-year decline came on the back of lower policyholder benefits and losses incurred, and amortization of deferred policy acquisition costs. This was partially offset by higher general operating and other expenses.
Adjusted return on common equity of AIG was 6.2%, which improved 70 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment recorded net premiums written of $6.9 billion, which declined 8% year over year on a reported basis and rose 7% on a comparable basis. The metric benefited from Global Commercial Lines growth in the second quarter. North America Commercial Lines benefited from new business production and new business offerings, whereas International Commercial Lines benefited from improved renewal retention and strong new business.
Underwriting income of $430 million declined 28% on a reported basis and rose 2% on a comparable basis. The metric benefited from strong contributions of International Commercial and Personal Insurance lines. Catastrophe losses rose 29.5% year over year to $325 million. The combined ratio of 92.5% deteriorated 160 bps year over year or 10 bps on a comparable basis, attributable to an increase in catastrophe loss ratio.
Adjusted pre-tax income declined 10.8% year over year to $1.2 billion, lower than the Zacks Consensus Estimate of $1.3 billion.
Other Operations
Net investment income rose a whopping 171% year over year in the second quarter due to a dividend income from Corebridge and improved income from the parent’s short-term investments.
Interest expenses declined 17% due to a debt reduction. Adjusted pre-tax loss narrowed from $278 million to $158 million.
Financial Position (As of Jun 30, 2024)
AIG exited the second quarter with a cash balance of $1.4 billion, which dropped from $1.5 billion at 2023-end. Total assets of $167.9 billion declined from $539.3 billion at 2023-end.
Long-term debt amounted to $9.9 billion, which declined from $10.4 billion at 2023-end.
Total equity of $44 billion fell from $45.4 billion at 2023-end. Total debt to total capital was 18.1% at the second-quarter end, which deteriorated 130 bps year over year.
Adjusted book value per share declined 7.3% year over year to $72.78.
Capital Deployment Update
AIG rewarded shareholders to the tune of share repurchase worth $1.7 billion and distributed common and preferred dividends of $261 million.
Deconsolidation Update
AIG completed the deconsolidation of Corebridge in the second quarter. AIG, now retains an ownership of 48.4% in Corebridge.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -20.97% due to these changes.
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 B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.
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Why Is American International Group (AIG) Up 1.6% Since Last Earnings Report?
A month has gone by since the last earnings report for American International Group (AIG - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is American International Group due for a pullback? 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.
AIG Q2 Earnings Miss Estimates on High Catastrophe Losses
American International Group reported second-quarter 2024 adjusted earnings per share of $1.16, which missed the Zacks Consensus Estimate by 16.6%. However, the bottom line improved 9.4% year over year.
Operating revenues amounted to $6.6 billion, which declined 11.8% year over year. Also, the top line significantly missed the consensus mark.
The weaker-than-expected results were caused by an increase in catastrophe losses and higher general operating and other expenses. This was partially offset by Global Commercial’s strength and improved net investment income.
Quarterly Operational Update
Premiums of $5.7 billion declined 13.1% year over year in the quarter and missed the Zacks Consensus Estimate of $5.8 billion. Total net investment income increased 18.3% year over year to $990 million, attributable to increased income from fixed maturity securities and dividends received from Corebridge Financial. The metric beat the consensus mark of $9.8 million.
Total benefits, losses and expenses fell 9.3% year over year to $5.9 billion. The year-over-year decline came on the back of lower policyholder benefits and losses incurred, and amortization of deferred policy acquisition costs. This was partially offset by higher general operating and other expenses.
Adjusted return on common equity of AIG was 6.2%, which improved 70 basis points (bps) year over year.
Segmental Performances
General Insurance
The segment recorded net premiums written of $6.9 billion, which declined 8% year over year on a reported basis and rose 7% on a comparable basis. The metric benefited from Global Commercial Lines growth in the second quarter. North America Commercial Lines benefited from new business production and new business offerings, whereas International Commercial Lines benefited from improved renewal retention and strong new business.
Underwriting income of $430 million declined 28% on a reported basis and rose 2% on a comparable basis. The metric benefited from strong contributions of International Commercial and Personal Insurance lines. Catastrophe losses rose 29.5% year over year to $325 million. The combined ratio of 92.5% deteriorated 160 bps year over year or 10 bps on a comparable basis, attributable to an increase in catastrophe loss ratio.
Adjusted pre-tax income declined 10.8% year over year to $1.2 billion, lower than the Zacks Consensus Estimate of $1.3 billion.
Other Operations
Net investment income rose a whopping 171% year over year in the second quarter due to a dividend income from Corebridge and improved income from the parent’s short-term investments.
Interest expenses declined 17% due to a debt reduction. Adjusted pre-tax loss narrowed from $278 million to $158 million.
Financial Position (As of Jun 30, 2024)
AIG exited the second quarter with a cash balance of $1.4 billion, which dropped from $1.5 billion at 2023-end. Total assets of $167.9 billion declined from $539.3 billion at 2023-end.
Long-term debt amounted to $9.9 billion, which declined from $10.4 billion at 2023-end.
Total equity of $44 billion fell from $45.4 billion at 2023-end. Total debt to total capital was 18.1% at the second-quarter end, which deteriorated 130 bps year over year.
Adjusted book value per share declined 7.3% year over year to $72.78.
Capital Deployment Update
AIG rewarded shareholders to the tune of share repurchase worth $1.7 billion and distributed common and preferred dividends of $261 million.
Deconsolidation Update
AIG completed the deconsolidation of Corebridge in the second quarter. AIG, now retains an ownership of 48.4% in Corebridge.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -20.97% due to these changes.
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 B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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.