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What Awaits American International (AIG) in Q3 Earnings?

Zacks Equity Research

American International Group, Inc. AIG is scheduled to report its third-quarter 2019 results on Nov 1.

The Zacks Consensus Estimate for the company’s earnings per share is pegged at 99 cents, indicating an increase of 392% from the year-ago quarter reported figure

In the last-reported quarter, AIG’s earnings of $1.43 per share beat the Zacks Consensus Estimate by 22% and increased 36% year over year, led by gains in its General Insurance and Life and Retirement segments.

Factors at Play

AIG’s General Insurance segment is likely to have gained from an increase in insurance pricing in its different business lines, disciplined underwriting and innovative reinsurance strategies. Per the Zacks Consensus Estimate, net premium for the segment is pegged at $6.95 billion, indicating an increase of 1.6% from the year-ago quarter reported figure.

Loss ratio at the General Insurance segment is likely to have declined due to the change in business mix and continued reduction in lines, which are less profitable, and reduced volatility stemming from the company’s underwriting actions. Improved property reinsurance program, and better loss experience in certain areas such as Japan Personal Auto and Commercial Properties are also likely to have aided loss ratio.

Life and Retirement segment is likely to have benefited from continued discipline and execution of its growth strategy as well as strong private equity returns and favorable market performance. This segment is expected to have seen decline in Life sales in the United States as the company is de-emphasizing guaranteed universal life sales in the current interest rate environment and indexed universal life sales remain under pressure.

The company is likely to have witnessed a decline in the sale of Fixed Annuities products in the to-be-reported quarter, due to low interest rates.  

The company’s debt levels are likely to have declined in the quarter under review given that it is prioritizing on reducing its leverage and reinvesting in business. There is likely to have been no share buyback in the third quarter with the company remaining focused on the above-mentioned goals.

Earnings Surprise History

AIG has an unimpressive earnings surprise history. The company has surpassed the Zacks Consensus Estimate in only two of the last four quarters with an average miss of 187.47%. This is depicted in the chart below:

American International Group, Inc. Price and EPS Surprise

American International Group, Inc. Price and EPS Surprise
American International Group, Inc. Price and EPS Surprise

American International Group, Inc. price-eps-surprise | American International Group, Inc. Quote

ADVERTISEMENT

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an earnings beat for AIG this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -4.78%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, the company carries a Zacks Rank #3.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Manulife Financial Corp. MFC has an Earnings ESP of +1.07% and a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank stocks here.


Brighthouse Financial Inc. BHF has an Earnings ESP of +0.56% and a Zacks Rank #3.

Voya Financial Inc. VOYA has an Earnings ESP of +0.05% and a Zacks Rank #3.

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