On Apr 8, 2013, shares of
American International Group Inc.
) hit a 52-week high of $40.09. The company reported
fourth-quarter results with a positive earnings surprise of
322.2%. AIG delivered positive earnings surprise in all 4
quarters of 2012 with an average beat of 119.6%.
On Feb 21, 2013, AIG reported its fourth-quarter operating
earnings of 20 cents per share, which exceeded the Zacks
Consensus Estimate of a loss of 9 cents. However, earnings fell
from the year-ago quarter's 77 cents per share.
Results reflected operating growth in the life insurance
business and higher investment income along with stronger
underwriting margins and higher profitability in Direct
Investment Book (DIB). However, higher interest expenses, lower
premiums and higher catastrophe losses offset most of the
Post the full repayment of its $182.3 billion government
bailout loan last year, AIG is steadily focusing on attaining
capital flexibility. Last month, the company also repurchased the
final warrants from the US Treasury for $25 million and redeemed
$1.1 billion of additional debt before maturity.
Over the last several quarters, AIG divested more than 40
assets worth over $65 billion. In Dec 2012, the company further
divested 90% stake in ILFC along with a runoff unit - American
Fuji Fire and Marine Insurance Co., thereby further consolidating
its core operations. AIG also aims to reduce exposure to
businesses with inadequate pricing and increasing loss
Going ahead, the simultaneous improvement in the company's
credit curve, disciplined claims management and earnings
potential from its primary subsidiaries - Chartis and SunAmerica
- are expected to shore up the core growth and help mitigate
operational and financial risks.
Meanwhile, valuation looks reasonable for AIG. The shares are
trading at a 35.8% premium to the peer group average on a forward
price-to-earnings basis and 16.7% discount to the peer group
average on a price-to-book basis. The return on assets is 50%
above the peer group average. Nevertheless, the 1-year return
from the stock is 21.9%, much above S&P 500's return of
11.8%. The overall long-term expected earnings growth rate for
this stock is 12.3%, which is in line with the peer group.
AIG currently carries a Zacks Rank #3 (Hold). Among others in
CNO Financial Group Inc.
XL Group Plc
Everest Re Ltd.
) carry a favorable Zacks Rank #1 (Strong Buy) and warrant
AMER INTL GRP (AIG): Free Stock Analysis
CNO FINL GRP (CNO): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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