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Why Is American International (AIG) Down 11.6% Since the Last Earnings Report?
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More than a month has gone by since the last earnings report for American International Group, Inc. (AIG - Free Report) . Shares have lost about 11.6% in the past month, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
AIG Q2 Earnings Beat
American International Group Inc. reported second-quarter 2017 operating income of $1.53 per share that surpassed the Zacks Consensus Estimate by a good 27.5%. Earnings were up 33% year over year.
Better-than-expected earnings were driven by strong performance by the company’s consumer business, partially offset by losses incurred by its commercial business. Also, cost-control efforts and shares bought back during the quarter aided the bottom line.
The company is getting along well with its expense reduction program (taken up in Jan 2016 to reduce cost base by $1.4 billion by the end of 2017) as evident by a 15.6% decline in general operating and other expenses (GOE) to $2.2 billion.
Quarterly Segment Highlights
Commercial Insurance
Net premiums written were down 15% (or 9% on a constant dollar basis) year over year to $3.8 billion due to strategic portfolio actions and an unfavorable market.
Combined ratio of 102.7% deteriorated 440 basis points year over year, primarily due to an increase in loss ratio. The segment’s pre-tax operating income of $716 million increased 24% year over year.
Consumer Insurance
Premium and fees of $3.9 billion remained unchanged year over year. Operating revenues declined 2% year over year to 696 million, due to a decline in revenues from Group Retirement and Individual Retirement sub-segments partly offset by growth in the Life Insurance sub-segment. Pre-tax operating income increased 33% year over year to $1.3 billion, primarily driven by a decline in benefits and expenses.
Financial Position
At the end of the second quarter, the insurer’s adjusted book value per share (excluding AOCI) was $76.12, up 0.9% year over year.
Core adjusted return on equity (ROE) was 10.5%, up 90 basis points year over year. The improvement in return came on the back of active capital management and expense efficiencies.
In the second quarter, AIG spent $2.4 billion on share repurchase.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
American International Group, Inc. Price and Consensus
At this time, American International's stock has a poor Growth Score of F, however its Momentum is doing a lot better with an B. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is American International (AIG) Down 11.6% Since the Last Earnings Report?
More than a month has gone by since the last earnings report for American International Group, Inc. (AIG - Free Report) . Shares have lost about 11.6% in the past month, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
AIG Q2 Earnings Beat
American International Group Inc. reported second-quarter 2017 operating income of $1.53 per share that surpassed the Zacks Consensus Estimate by a good 27.5%. Earnings were up 33% year over year.
Better-than-expected earnings were driven by strong performance by the company’s consumer business, partially offset by losses incurred by its commercial business. Also, cost-control efforts and shares bought back during the quarter aided the bottom line.
The company is getting along well with its expense reduction program (taken up in Jan 2016 to reduce cost base by $1.4 billion by the end of 2017) as evident by a 15.6% decline in general operating and other expenses (GOE) to $2.2 billion.
Quarterly Segment Highlights
Commercial Insurance
Net premiums written were down 15% (or 9% on a constant dollar basis) year over year to $3.8 billion due to strategic portfolio actions and an unfavorable market.
Combined ratio of 102.7% deteriorated 440 basis points year over year, primarily due to an increase in loss ratio.
The segment’s pre-tax operating income of $716 million increased 24% year over year.
Consumer Insurance
Premium and fees of $3.9 billion remained unchanged year over year. Operating revenues declined 2% year over year to 696 million, due to a decline in revenues from Group Retirement and Individual Retirement sub-segments partly offset by growth in the Life Insurance sub-segment.
Pre-tax operating income increased 33% year over year to $1.3 billion, primarily driven by a decline in benefits and expenses.
Financial Position
At the end of the second quarter, the insurer’s adjusted book value per share (excluding AOCI) was $76.12, up 0.9% year over year.
Core adjusted return on equity (ROE) was 10.5%, up 90 basis points year over year. The improvement in return came on the back of active capital management and expense efficiencies.
In the second quarter, AIG spent $2.4 billion on share repurchase.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
American International Group, Inc. Price and Consensus
American International Group, Inc. Price and Consensus | American International Group, Inc. Quote
VGM Scores
At this time, American International's stock has a poor Growth Score of F, however its Momentum is doing a lot better with an B. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.