AIG Q1 Earnings Exceed Premiums, Strong General Insurance Unit

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American International Group, Inc. AIG reported adjusted operating income of $1.30 per share in the first quarter of 2022, which beat Zacks’ consensus estimate by 4.8%.

AIG’s net income increased 23.8% year-over-year, helped by strong underwriting results in the general insurance segment. However, the increase was partially offset by lower net investment income across its portfolio.

American International’s total operating revenue was $11 billion, up 3.5% year-over-year in the first quarter on higher premiums. However, the top line missed the consensus mark by 1.6%.

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

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

Quarterly operational update

Total net investment income of $3.2 billion was down 11% year-over-year in the quarter under review due to lower tender and tender revenue, fair value option stocks and fixed-maturity securities generating lower yields, associated with lower hedge fund income. However, the decline was partly offset by improved returns from other alternative investments.

AIG’s total benefits, losses and expenses increased 2.5% year-over-year to $10 billion, primarily due to higher benefits and losses incurred by policyholders, amortization of deferred policy acquisition costs and general operating and other expenses.

Adjusted return on common equity was 7.6% in the first quarter, improving 20 basis points (bps) year over year.

Sector performance

General insurance

The segment’s net premiums written of $6.6 billion increased 2% year-over-year, driven by growth of 6% and 5%, respectively, in North American Commercial Lines and Life Insurance. international businesses, resulting from continued rate increases, strong retention rates and strong new business generation.

Underwriting revenue for the segment was $446 million in the quarter under review, up more than sixfold year-over-year. The same included $274 million in catastrophe-related losses (CAT), comparing favorably to CATs of $422 million in the year-ago quarter. The industry’s combined ratio improved 590 basis points year over year to 92.9% in the first quarter.

Life and retirement

Segment premiums were $840 million, up 40% year-over-year in the quarter under review. Meanwhile, premiums and deposits of $7.3 billion were up 13% year over year on higher fixed annuity sales. Segment-adjusted revenue for the first quarter fell 0.4% year-over-year to $4 billion due to lower policy fees and net investment income.

Segment adjusted pre-tax income fell 23% year-over-year to $724 million, primarily due to lower yield improvements across all segments, associated with the sale of the portfolio of affordable housing.

AIG has continued its efforts to separate its Life and Pensions unit since announcing its intentions in 2020. After completing the sale of a 9.9% stake in the unit to Blackstone Inc. BX for $2.2 billion last November, AIG finally stepped in to complete its willingness to go for an initial public offering (IPO) regarding its unit split. In March 2022, American International filed for an IPO for the life and retirement business with the goal of making it a stand-alone company. AIG intends to rename the holding company of its life and retirement business, SAFG Retirement Services, Inc., to Corebridge Financial, Inc. After the IPO, AIG intends to own more than 50% of the capital of Corebridge Financial.

Financial position (as of March 31, 2022)

American International’s cash balance was $2.5 billion, down 9.3% year-over-year. Total assets of $573.5 billion were down almost 2% year over year.

Long-term debt was $23.6 billion, down 10.8% year over year.

Total equity of $58.1 billion was down 8.6% year-over-year. The debt-to-capitalization ratio stood at 27.2% at the end of the first quarter, which improved by 60 basis points year-on-year.

Adjusted book value per share climbed 20% year over year to $70.72.

Update on share buyback and dividends

In the first quarter, American International paid out $1.7 billion to shareholders, including $1.4 billion in share buybacks and dividends worth $265 million.

At the same time, the board of directors approved an increase in the share repurchase authorization to $6.5 billion. The increased authorization includes any amount remaining under the previous authorization.

The Board of Directors has approved a quarterly cash dividend of 32 cents per common share. The dividend will be paid on June 30, 2022 to shareholders of record on June 16.

Zacks Rank

American International currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of certain other multi-line insurers

Among the players in the multi-line insurance sector that have published their first quarter results so far, the net result of Hartford Financial Services Group, Inc. HIG and Prudential Financial, Inc. The PRU beat the Zacks consensus estimate.

Hartford Financial reported adjusted operating earnings of $1.66 per share in the first quarter of 2022, which beat Zacks’ consensus estimate by 6.4%. Net income nearly tripled year-on-year. HIG’s operating revenue was $3.6 billion, up 7.2% year-over-year in the first quarter. However, the top line missed the consensus mark by 1.6%. Hartford Financial’s total benefits and expenses fell nearly 3% year over year to $4.9 billion in the quarter under review.

Prudential Financial’s first-quarter 2022 net operating income of $3.17 per share beat Zacks’ consensus estimate by 18.7%. Net income decreased 22.9% year-on-year. Total PRU revenue of $13.6 billion was down 3.9% year over year. The top line missed the Zacks consensus estimate by about 3.7%. Prudential Financial’s total benefits and expenses were $12.1 billion, up 3.2% year-over-year for the quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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