Market Overview

AIG Lands Another Solid Quarter

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American International Group (NYSE: AIG) reported Q2 EPS of $1.25 versus the estimated $1.06, beating by $0.19. EPS were Up 12 percent from the same quarter last year.

EPS growth was primarily driven by better loss coverage ratios (basically of the premiums that were earned, the portion that went out to pay for claims reduced marginally).

AIG reported an increase in pre-tax operating income from $2.31 billion to $2.745 billion, as a result of falling loss ratios. It's almost impossible to anticipate falling loss ratios, ahead of an insurance company's reported earnings, so the two percent upwards move in the after-hours may have been justified.

Property Casualty results were driven by falling loss ratios, whereas AIG Life & Retirement results were driven by an increase in asset under management:

“AIG Property Casualty's pre-tax operating income increased to $1.4 billion as improved underwriting results was partially offset by a decline in net investment income driven by lower returns on alternative investments and lower income on investments accounted for under the fair value option. AIG Life and Retirement reported quarterly pre-tax operating income of $1.2 billion in the second quarter of 2014, reflecting consistent, strong performance across AIG Life and Retirement's diversified businesses, with higher pre-tax operating income in both the Retail and Institutional operating segments compared to the same period in the prior year. These results reflected higher fee income from growth in assets under management, partially offset by lower investment income, primarily due to strong returns on alternative investments in the prior-year period.”

 

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