On Dec 3, Zacks Investment Research downgraded
American International Group Inc.
) to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy).
Why the Downgrade?
Earnings estimates for AIG have not witnessed any momentum
owing to mixed third-quarter 2013 results. Additionally, this
life and property-casualty (P&C) insurer underperformed the
3-month S&P 500 index, which posted growth of 8.4% against
1.4% clocked by AIG.
On Oct 31, AIG reported third-quarter operating earnings per
share of 96 cents. Results deteriorated from the year-ago quarter
earnings of 99 cents, although it breezed past the Zacks
Consensus Estimate of 93 cents.
Lower premiums and net investment income in the P&C
segment pulled down the top line, which plunged 11.3% from the
prior-year quarter. Although benefits, claims and expenses
declined, loss of income from AIA, and Maiden III led to
underwriting loss as well as lower bottom line, book value per
share and ROE. However, higher assets under management (AUM) and
improved financial leverage were other positives.
Following the earnings release, the Zacks Consensus Estimate
for 2013 edged up 1.6% to $4.33 per share in the last 60
days.However, the estimate for 2014 remained intact at $4.22 a
share during the same period.
Meanwhile, the Most Accurate Estimate for AIG's 2014 earnings
stands at $4.12 a share, resulting in a negative
AIG's growth appears to be stagnating due to the absence of
any fundamental growth catalyst, thereby inducing the rank
downgrade. Moreover, consistent increase in adverse reserve
development poses additional risk on the company's underwriting
Other Insurers Worth a Look
We prefer to remain on the sidelines for AIG for the time
being. However, investors interested in the insurance industry
may consider stocks like
Old Republic International Corp.
Hallmark Financial Services Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AMER INTL GRP (AIG): Free Stock Analysis
HALLMARK FINL (HALL): Free Stock Analysis
KEMPER CORP (KMPR): Free Stock Analysis
OLD REP INTL (ORI): Free Stock Analysis
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