American International Group (AIG) Sees Minor Decline Since Last Earnings Report: Can It Rebound?

It has been a month since American International Group (AIG) released its latest earnings report. In that time, the stock has fallen about 0.4%, which is a slight underperformance compared to the S&P 500 index.

The question now is whether AIG will continue this downward trend as it approaches its next earnings report, or if the company is on the verge of a recovery. To gain valuable insights, let’s first review the details of its most recent earnings report and see how investors and analysts are responding.

Performance Overview

In its third-quarter 2024 earnings report, American International Group announced an adjusted earnings per share (EPS) of $1.23, surpassing the Zacks Consensus Estimate by 8.9%. This figure also represents an 18.3% increase compared to the same quarter last year.

Adjusted operating revenues came in at $6.84 billion, which reflects a 5.9% decline year-over-year. Despite this drop, the revenue figure still exceeded analysts' expectations by 3.3%. The improved earnings can largely be attributed to increased investment returns and reduced operational costs, even though they faced some challenges from falling premiums.

Quarterly Details

During the quarter, AIG reported total premiums of $5.9 billion, a decrease of 9.1% from the previous year; however, this amount slightly outperformed the Zacks Consensus Estimate by 3.9%. Net investment income rose by 13.7% year-over-year, reaching $973 million, largely due to increased returns from fixed income securities, alternative investments, and dividends from Corebridge Financial, in which AIG holds a 48.6% stake.

The company reported total benefits and expenses of $6.1 billion, which is a slight decline of 1.1% year-over-year, thanks to lower policyholder benefits and costs related to acquisition. However, some of these savings were offset by higher general operational expenses.

AIG’s adjusted return on equity improved to 6.8%, an increase of 150 basis points from the previous year.

Segment Performances

General Insurance

In the General Insurance segment, AIG recorded net written premiums of $6.38 billion, a decline of 1% annually on a reported basis, although there was a 6% rise on a comparable basis. The segment benefited from growth in Global Commercial Lines and Global Personal Insurance, which was slightly mitigated by the divestiture of Validus Re.

The underwriting income for this segment saw a reduction of 28% on a reported basis, and 21% on a comparable basis, mainly due to increased catastrophe charges and reduced prior-year development. Catastrophe charges were reported at $417 million, marking a 9.7% year-over-year decrease. The combined ratio ended at 92.6%, representing a deterioration of 240 basis points year-over-year.

Adjusted pre-tax income for General Insurance declined by 11% compared to the prior year, sitting at $1.21 billion, which still exceeded the Zacks Consensus Estimate by 6%.

Future Outlook and Estimate Trends

Looking ahead, fresh estimates for American International Group have shifted downward over the past month, with the consensus estimate declining by 6.12%. This pattern of downward revisions suggests a cautious outlook among investors and analysts.

Currently, AIG holds a Zacks Rank of #3 (Hold), indicating analysts expect the stock to perform in line with the market over the coming months. This sentiment reflects the uncertainty surrounding its future performance given the recent trends.

Comparison with Industry Peers

American International Group operates within the Zacks Insurance - Multi-line industry. In comparison, a key competitor, The Hartford (HIG), saw an increase of 8.3% over the last month. The Hartford reported revenues of $4.67 billion in its recent quarterly results, representing a year-over-year growth of 10.9%. Its EPS for the same period rose to $2.53, up from $2.29 a year prior.

The Hartford is projected to report earnings of $2.69 per share for the upcoming quarter, indicating a decrease of 12.1% compared to the same quarter last year. Notably, there has been little change in the Zacks Consensus Estimate for The Hartford in the last 30 days, leading to a similar Zacks Rank of #3 (Hold) for that company as well.

In summary, while AIG has seen some positive elements in its recent quarter, the overall trends suggest caution amidst a broader decline. The investment community is watching closely as the company prepares for its next earnings release.

AIG, Earnings, Investments