American International (AIG) to Post Q2 Earnings: What???s Up?

American International Group Inc. AIG is scheduled to report its second-quarter 2019 results on Aug 7.

While the company faced many issues and challenges in its business in 2018, it has taken steps to reduce risk and volatility, as well as implement strategies, which will accelerate its progress in 2019. We expect second-quarter results to reflect gain from the company’s strategic initiatives.

In the company’s General Insurance segment, we expect an underwriting profit driven by underwriting and expense discipline, improved business mix and reinsurance actions.

The company’s General Insurance business in North America should benefit from increase in premium written from the acquisitions of Validus and Glatfelter, and lower ceded premiums due to changes in 2018 reinsurance programs. Commercial Lines business in North America is expected to witness reduction in business due to ongoing underwriting actions to improve performance. General Insurance business in International segment should see an increase in premium written due to inclusion of the Talbot acquisition and increased accident and health business in Asia Pacific.

The company’s earnings in Life and Retirement segment should benefit from diversification of product and distribution channels.

Another revenue driver is the company’s net investment income, which declined in 2018. Given that the interest rates are still at low level, we expect net investment income to remain under pressure in the second quarter of 2019.

Shares bought back by the company will accrue to its bottom line in the second quarter.

Earnings Surprise History

The company has a dismal earnings surprise history with estimate misses in three of the last four reported quarters, the average negative surprise being 195.96%. This is depicted in the chart below:

American International Group, Inc. Price and EPS Surprise


American International Group, Inc. Price and EPS Surprise

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


What Our Model Says

Our proven model conclusively shows that American International is likely to beat estimates this earnings season. This is because it has the right combination of a positive Earnings ESP and a top Zacks Rank.

Earnings ESP: American International has an Earnings ESP of +0.09%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: American International carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. Further, a positive ESP in the stock’s combination makes us confident about its earnings beat this reporting cycle.

Other Stocks That Warrant a Look

Here are some other companies that you may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

CACI International, Inc. CACI has an Earnings ESP of +4.02% and a Zacks Rank #2.

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

TOL Brothers, Inc. TOL has an Earnings ESP of +8.77% and a Zacks Rank #3 (Hold).

Canopy Growth Corporation CGC has an Earnings ESP of +24.56% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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