AIG's Earnings Miss Estimates in Q2, Revenues Plunge Y/Y

American International Group Inc.'s AIG second-quarter 2020 operating earnings of 66 cents per share missed the Zacks Consensus Estimate by 1.5%. The bottom line also declined 53.8% year over year, primarily due to higher catastrophe losses incurred on account of the COVID-19 pandemic, lower revenues and elevated costs.

Total revenues of $11.7 billion declined 3.5% year over year. The top line also missed the Zacks Consensus Estimate by 1.4% owing to reduced premiums and softer net investment income.

Total net investment income of $3.4 billion plunged 10.1% year over year.

Total benefit, losses and expenses of $19.1 billion escalated 77.7% year over year due to higher policyholder benefits and losses incurred, and interest expense.

The company incurred catastrophe losses, net of reinsurance of $674 million, which soared 287.4% year over year. The reported quarter’s catastrophe losses include $458 million of estimated COVID-19 losses, $126 million due to civil unrest and the balance $90 million was related to weather-related loss.

Adjusted return on equity was 4.6% compared with 10.4% in the year-ago quarter.

As of Jun 30, 2020, the insurer’s adjusted book value per share (excluding AOCI) was $55.90, down 5.1% from the level as of Dec 31, 2019.

American International Group, Inc. Price, Consensus and EPS Surprise

American International Group, Inc. Price, Consensus and EPS Surprise

American International Group, Inc. price-consensus-eps-surprise-chart | American International Group, Inc. Quote

Strong Segmental Results

General Insurance

Net premiums written of $5.5 billion were down 16% year over year due to lower premiums in the company’s North American and International business.

The segment reported an underwriting loss of $343 million against an underwriting income of $147 million in the prior-year quarter. Combined ratio of 106 deteriorated 820 basis points (bps) due to intensified catastrophe losses.

Life and Retirement

Premium and fees surged 72% year over year to $2.3 billion, led by solid contribution from Individual Retirement, Life Insurance and Institutional Markets, partly offset by lower contribution from Group Retirement.

The segment reported adjusted pre-tax income of $881 million, down 16% year over year due to sluggish contribution from Individual Retirement, Group Retirement and Life Insurance sub-segments.

Financial Position

AIG exited the second quarter with cash of $3.4 billion, up 19.3% from 2019 end. As of Jun 30, 2020, the company had long-term debt of $29.2 billion, up 14.8% year from 2019-end level.

Total assets of $569.4 billion increased 8.4% from the level at 2019 end. Shareholder equity was $62.2 billion, down 5.2% from 2019-end level.

Dividend Update

Concurrent with second-quarter earnings release, AIG’s board of directors announced its quarterly cash dividend of 32 cents per share. The dividend will be paid on Sep 30, 2020 to shareholders of record as on Sep 17.

Zacks Rank & Performance of Other Insurers

AIG carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other insurance industry players, which have reported second-quarter earnings so far, the bottom lines of Selective Insurance Group, Inc. SIGI, Kinsale Capital Group, Inc. KNSL and AXIS Capital Holdings Limited AXS beat the Zacks Consensus Estimate.

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