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American International (AIG) Q1 Earnings Top, Revenues Down Y/Y

Zacks.com logo Zacks.com 5/7/2021

American International Group Inc. AIG reported first-quarter 2021 adjusted operating earnings of $1.05 per share, which outpaced the Zacks Consensus Estimate by 6.1%. Further, the bottom line increased to nearly nine-fold on a year-over-year basis.

The company’s results indicate improved net investment income in each of its segments, strong underwriting income across General Insurance segment, reduced Variable Annuity DAC and SIA amortization net of fee income and alterations in reserves in Life and Retirement stemming from sound performance across equity market. However, the upside was partially negated by elevated COVID-19-related mortality claims.

However, total revenues declined 5.7% year over year to $10.6 billion in the quarter primarily due to lower premiums. The figure also missed the Zacks Consensus Estimate by 2.9%. Nevertheless, the top line partly benefited from uptick in policy fees and net investment income.

Total net investment income surged 46% year over year to $3.7 billion attributable to improved income arising from alternative investments and FVO equity securities.

In the first quarter, total benefit, losses and expenses slumped 18.2% year over year to $9.7 billion driven by reduced policyholder benefits and losses incurred, interest credited to policyholder account balances, amortization of deferred policy acquisition costs, general operating and other expenses and, interest expense.

Adjusted return on common equity came in at 7.4% reflecting an improvement of 660 basis points (bps) year over year.

As of Mar 31, 2021, the company’s adjusted book value per share was $58.69, which declined 3.1% year over year.

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

chart, line chart: American International Group, Inc. Price, Consensus and EPS Surprise © Provided by Zacks.com American International Group, Inc. Price, Consensus and EPS Surprise

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

Segmental Update

General Insurance

Net premium written climbed 9% year over year to $6.5 billion in the quarter under review. The upside can be attributed to continuous rate increases in most lines, high retention rates and growing new business volumes resulting in 29% and 20% growth across North America Commercial Lines and International Commercial Lines, respectively.

The segment reported an underwriting income of $73 million, against the prior-year quarter’s underwriting loss of $87 million. The underwriting income encompassed CATs of $422 million arising mainly from winter storms.

Combined ratio at the segment came in at 98.8%, which improved 270 bps year over year.

Life and Retirement

Adjusted pre-tax income of the segment surged 57% year over year to $941 million, courtesy of Individual and Group Retirement, and Institutional Markets benefiting from improved net investment income.

Premiums plunged 53% year over year to $600 million in the quarter. Also, premiums and deposits of $607 million slipped 9% year over year on account of the fact that the first quarter of 2020 witnessed increased Pension Risk Transfer and Guaranteed Investment Contract activity. Nevertheless, the metric partly benefited from higher Variable Annuity sales.

On Oct 26, 2020, American International announced its intention to separate its Life and Retirement business regarding which no decision has been finalized yet.

Capital Position (as of Mar 31, 2021)

The company exited the first quarter with cash of $2.8 billion, which dipped 1.1% from 2020-end level.

Long-term debt totaled $26.4 billion, which slumped 5.9% from the level at 2020 end.

Total equity of $63.6 billion declined 5.4% from the figure as on Dec 31, 2020.

Total assets inched down 0.4% from 2020-end level to $584.4 billion during the quarter.

Share Repurchase & Dividend Update

During the reported quarter, American International bought back shares worth around $362 million.

Concurrent with first-quarter results, the company’s board of directors approved a quarterly cash dividend of 32 cents per share. The dividend will be paid on Jun 29, 2021 to shareholders of record as on Jun 15.

Zacks Rank

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

Performance of Other Multiline Insurers

Of the multiline insurance industry players that have reported first-quarter results so far, the bottom line of Old Republic International Corporation ORI, Prudential Financial, Inc. PRU and MetLife, Inc. MET beat the Zacks Consensus Estimate.

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