American International Group Inc.
) reported operating earnings per share (EPS) of $1.25, which
surpassed the Zacks Consensus Estimate of $1.05 by 19% and was
higher than the year-ago quarter EPS of $1.12 by 11.6% on lower
share count. With this result, the company kept its earnings streak
alive and marked four straight quarters of earnings beat averaging
13.5% in 2014.
Subsequently, operating net income jumped 10.8% year over year
to $1.83 billion, primarily on lower claims expenses, partially
offset by lower net realized gains and weak investment income.
American International Group, Inc - Quarterly
EPS (BNRI) | FindTheBest
On a GAAP basis, including extraordinary items, AIG reported a
quarterly net income of $3.07 billion or $2.10 per share, compared
with $2.73 billion or $1.84 per share in the year-ago quarter.
Notably, in May 2014, the company divested International Lease
Finance Corp. (ILFC) to AerCap Holdings NV (AER) for about $7.6
billion, while post-tax gain on sale of $1.4 billion or 96 cents
per share was recorded in the reported quarter.
However, total revenue decreased 12.6% year over year to $16.11
billion. Modest growth from premiums, fees and investment income
were more than offset by revenues from net realized gains, aircraft
leasing and others.
Meanwhile, total benefits, claims and expenses plunged 23.8% to
$11.63 billion, primarily due to lower claims and benefits as well
as reduced interest and aircraft leasing expenses.
AIG Property Casualty
(P&C) - conducted through Chartis and its sub-segments:
Commercial & Consumer Insurance - reported pre-tax income of
$1.49 billion, escalating 23.7% over the year-ago quarter. The
upside resulted from a fall in lower claims and acquisition
expenses and higher net realized gains, partially offset by lower
investment income. Underwriting income stood at $101 million
against a loss of $223 million in the year-ago quarter.
Meanwhile, investment income sank 4.2% year over year to $1.25
billion. Net premiums written also dipped 0.5% to $9.21 billion,
although net premiums earned improved 2.2% to $8.53 billion.
Marginally improved premiums were recorded across the commercial
insurance and consumer segments, while pre-tax catastrophe losses
reduced to $139 million from $316 million in the year-ago quarter.
Subsequently, combined ratio improved to 98.8% from 102.6% in the
Reported pre-tax income at
AIG Life and Retirement
(conducted through SunAmerica) plummeted 27.3% year over year to
$1.25 billion owing to reduced investment income, higher benefit
and expenses as well as significantly lower net realized gains.
However, premiums and policy fees witnessed improvement.
Additionally, assets under management (AUM) rose 13% year over year
to $332.8 billion as of Jun 30, 2014 driven by positive net flows
and price appreciation of invested assets.
Additionally, premiums, deposits and other considerations grew
9% year over year to $7.4 billion. Increases in individual variable
and fixed annuities as well as income on alternative investments
were witnessed due to effective spread management. Alongside,
run-off of older businesses with higher crediting rates supported
results. However, net investment income dipped 2.9% owing to lower
reported operating income of $1.69 billion versus $251 million in
the year-ago period. The growth in income was primarily due to
higher gains on divested operations (ILFC), partially offset by net
Within this segment, Mortgage Guaranty - conducted through
United Guaranty Corporation (UGC) - recorded an operating income of
$210 million, up from $73 million in the year-ago quarter, driven
by higher underwriting income. Net premiums written declined 9% to
$249 million due to persistent deterioration of the first-lien
In addition, AIG's Direct Investment book (DIB), comprising the
Matched Investment Program (MIP) and non-derivative assets and
liabilities of the previous AIG Financial Products Corp. (AIGFP)
portfolios, recorded operating income of $313 million versus $591
million in the year-ago period.
Global Capital Markets, consisting of AIG Markets Inc. and the
remaining AIGFP derivatives portfolio, recorded an operating income
of $245 million, which marked a steep rise from $175 million in the
Meanwhile, the Aircraft Leasing business recorded nil operating
income against $18 million in the year-ago quarter. Total aircraft
leasing revenue plunged to $489 million from $1.11 billion in the
year-ago quarter. The company also recorded equity in pre-tax
operating earnings from AerCap of $53 million.
At the end of Jun 2014, total investments came in at $370
billion, up from $356.4 billion at 2013-end. Total cash decreased
to $1.83 billion from $2.24 billion at 2013-end. Shareholder equity
totaled $108.2 billion, up from $100.5 billion at the end of 2013,
while total assets decreased to $529.1 billion from $541.3 billion
at 2013-end. Operating cash flow dipped to $1.64 billion at Jun
2014-end from $1.67 billion in the year-ago period.
Meanwhile, long-term debt declined to $29.6 billion from $41.7
billion at 2013-end based on effective liability management. This
also improved the total debt-to-capital ratio to 16.4% from 17.3%
at 2013-end and 17.7% at Jun 2013-end.
In May 2014, AIG reduced DIB debt by redemption of $750 million
worth of 3.0% notes due 2015, using cash allocated to it.
In Jul 2014, the company bought back senior and hybrid notes
worth $2.5 billion, while also issuing 5-year notes (due 2019)
worth $1.0 billion at 2.3% and another 30-year notes (due 2044)
worth $1.5 billion at 4.5%.
Concurrently, AIG agreed to settle consolidated class-action
lawsuits with its shareholders with a payment of $960 million,
subject to court approval.
At the end of Jun 2014, AIG's reported book value per common
share, including accumulated other comprehensive income, rose 14.5%
year over year to $75.71. Moreover, operating return on equity
(ROE) improved to 7.7% during the reported quarter from 7.4% in the
Capital Deployment Update
AIG bought back about 18.1 million shares for $1.1 billion
during the reported quarter, overall repurchasing shares about $2.0
billion in the first half of 2014.
In Jun 2014, the company's board sanctioned another $2.0 billion
of stock repurchases, to be implemented gradually, after
successfully completing the buyback of $1.0 billion stock
authorized in Feb 2014. AIG had $1.5 billion stock available for
repurchases at Jun 2014-end.
On Aug 4, 2014, the board declared its regular quarterly
dividend of 12.5 cents per share, payable on Sep 25, 2014 to
shareholders of record on Sep 11.
On Jun 25, 2014, AIG paid its regular quarterly dividend of 12.5
cents per share to shareholders of record as on Jun 10.
In Feb 2014, the company had hiked its quarterly dividend by 25%
from the prior payout of 10 cents a share. The company had
re-initiated dividend payouts in Aug 2013.
Stocks to Consider
Currently, AIG carries a Zacks Rank #3 (Hold). Investors
interested in the sector may consider better-ranked insurers like
AmTrust Financial Services Inc. (
), Endurance Specialty Holdings Ltd. (
) and White Mountains Insurance Group Ltd. (
), all of which sport a Zacks Rank #1 (Strong Buy).
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