Recently, we reiterated our recommendation on
American International Group Inc.
) at Neutral based on its steady operating growth and financial
sturdiness. However, intense competition and regulatory
challenges simultaneously raise caution.
Why the Retention?
Estimates for AIG have remained steady since the company
reported its second-quarter 2013 results on Aug 1. The company's
earnings per share of $1.12 and revenues of $17.32 billion
exceeded the Zacks Consensus Estimate by 31.8% and 38.4%,
Moreover, both the top- and bottom line surpassed the year-ago
results by 16.7% and 6.7%, respectively, based on improved
underwriting results, premiums and deposits. Lower-than-expected
claims, acquisitions and operating expenses also improved the
combined ratio, cash flow book value and ROE.
Following the release of the second-quarter results, the Zacks
Consensus Estimate for 2013 climbed 9.9% to $4.20 per share in
the last 60 days. Additionally, the Zacks Consensus Estimate for
2014 rose 3.4% to $4.21 a share. With the Zacks Consensus
Estimate for both 2013 and 2014 reflecting slight upward pressure
on the stock in the near term, AIG now has a Zacks Rank #2
Moreover, the Most Accurate Estimate for AIG's 2013 earnings
stands at $4.28 a share, resulting in an
AIG's core operations are benefiting from high value business
mix as well as enhanced risk selection and pricing initiatives. A
significant surge in individual variable annuities and retail
mutual funds has also been witnessed on the back of effective
Although intense competition as well as volatility in interest
rates and currency pose near-term financial and operating risks,
AIG's consistent focus on debt reduction, business de-risking and
improved capital position score well with the ratings agencies.
Moreover, the resumption of dividends and a new share buyback
program reflect stable liquidity and a risk-free balance sheet,
overall boosting investor confidence.
Other Financial Stocks That Warrant a Look
Along with AIG, other stocks in the insurance sector that are
Prudential Financial Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AMER INTL GRP (AIG): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
LOEWS CORP (L): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis
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