On Aug 22, Zacks Investment Research upgraded
American International Group Inc.
) by a notch to a Zacks Rank #2 (Buy).
Why the Upgrade?
AIGhas been witnessing rising earnings estimates on the back of
consistent improvement in core operations, also reflected in its
second-quarter 2014 earnings results.
Upward estimate revisions on AIG stock reflect optimism. The
Zacks Consensus Estimate for 2014 and 2015 moved north by 4.3% and
0.8% to $4.57 and $4.98 per share, respectively, in the last 30
days. Notably, on year-over-year basis, earnings are expected to
improve by 0.1% in 2014 and 9.1% in 2015.
Moreover, the Most Accurate estimate for AIG's 2015 earnings
currently stand at $4.99 a share, resulting in an
of +0.2%. This indicates a likely earnings beat for the next year
Lower catastrophe losses in the past months have also helped
control expenses. Additionally, the divestment of all major
non-core assets, the last being International Lease Finance Corp.
(ILFC), has strengthened AIG's capital position and liquidity as
well as aided streamlining of businesses. This is also evident from
the fact that the company is now contemplating acquisitions to
enhance core insurance operations.
Additionally, this multi-line insurer delivered positive
earnings surprises in all of the last four quarters with an average
beat of 13.5%. On Aug 4, AIG reported second-quarter 2014 operating
earnings per share (EPS) of $1.25, which surpassed the Zacks
Consensus Estimate of $1.05 by 19% and the year-ago quarter EPS of
$1.12 by 11.6%.
Notably, the company earned a post-tax gain of $1.4 billion or
96 cents per share from the ILFC salein the reported quarter.
Although top line fell 12.6% year over year, modest growth was
witnessed in premiums, fees and investment income. Alongside, total
benefits, claims and expenses plunged 23.8%, overall aiding
accretion in earnings, book value per share and return on equity
Going ahead, sturdy fundamentals, debt reduction, improved
investment portfolio, efficient capital deployment and profitable
writing of businesses are expected to mitigate market risks and
drive growth in the upcoming quarters, thereby instilling a
positive sentiment among investors.
Other Worthy Insurers
Apart from AIG, one could consider insurers like National
General Holdings Corp. (
), Mercury General Corp. (
) and Endurance Specialty Holdings Ltd. (
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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