Updated Research Report on AIG - Analyst Blog

On March 26, 2014, we issued an updated research report on American International Group, Inc. AIG. The company reported strong earnings results in the last quarter.

AIG delivered positive earnings surprises in each of the last four quarters, with an average beat of nearly 26.8%. Moreover, this property and casualty insurer delivered robust fourth-quarter 2013earnings which outpaced the Zacks Consensus Estimate by 19.8% and also the year-ago quarter figure.

AIG enjoys a leading insurer position, given its diversified and unique franchise in both domestic and international markets. Notably, after suffering a series of losses in 2008, 2009 and 2010, AIG finally rebounded by generating operating earnings in 2011, 2012 and 2013. In addition, AIG's P&C segment has been posting robust numbers for over a year now.

AIG's strategic operational focus and management discipline, even amid a challenging economic and intensely competitive environment, has helped its businesses to get back on track sooner than expected. Moreover, the positive pricing trends, active spread management, expense control and sustained improvement in momentum at AIG Life and Retirement also aided the results.

Consistent payoffs along with strategically divested assets led to an improvement in operating and financial leverage along with a reduction in interest expenses. These efforts have also resulted in increased operating cash flow. In the upcoming quarters, we expect the company to benefit from its scale of operations, pricing improvements and disciplined expense management from the ongoing operational restructuring, thereby creating a more streamlined organization.

The company's slow but steady growth has helped it achieve the confidence of the rating agencies. The strong ratings affirmed on it are based on improved core operations and competitive leverage along with prudent capital and investment management.

However, the continued assets disposal by AIG to reduce debt is hampering the company's global market share and increasing competitive risks which will likely weigh on earnings. Also, modest unfavorable reserve development in 2012 and 2013 continue to impede underwriting results at AIG.

AIG has not witnessed any earnings estimate revision in the last 30 days. The Zacks Consensus Estimate for 2014 and 2015 are currently pegged at $4.24 per share and $4.94 per share, respectively.

Zacks Rank

AIG presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the multi line insurance industry that are worth mentioning are ING U.S. Inc. VOYA, Kemper Corporation KMPR and FBL Financial Group Inc. FFG. All these stocks carry a Zacks Rank #2 (Buy).