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American International (AIG) Q3 Earnings Beat, Improve Y/Y

American International Group, Inc. AIG reported third-quarter 2021 adjusted operating earnings of 97 cents per share, which surpassed the Zacks Consensus Estimate by 4.3%. The bottom line increased 19.8% year over year.

Results were driven by robust revenues and a solid contribution from its General Insurance segment. However, the upside was partially offset by elevated expenses.

Total revenues of $12.8 billion grew 25.6% year over year in the quarter under review, courtesy of the rise in net realized gains.

Total net investment income declined 2% year over year to $3.7 billion due to lower returns from fair value option equity and fixed income securities.

The third quarter witnessed total benefits, losses and expenses of $10.6 billion, which rose 8.2% year over year. This was due to higher policyholder benefits and losses, interest credited to policyholder account balances, amortization of deferred policy acquisition costs, general operating and other expenses and loss on the extinguishment of debt.

Adjusted return on common equity expanded 70 basis points (bps) year over year to 6.5% in the quarter under review.

Segmental Performances

General Insurance

Net premiums written of $6.6 billion rose 11% year over year, attributable to constant rate increases, high retention rates and solid new business volumes resulting in growth of 18% and 15% in North America Commercial Lines and International Commercial Lines, respectively.

The segment reported an underwriting income of $20 million against the prior-year quarter’s underwriting loss of $423 million. In the reported quarter, the underwriting income comprised $628 million worth CATs, comparing with the year-ago quarter’s figure of$790 million.

Combined ratio contracted 750 bps year over year to 99.7%.

Life and Retirement

The segment reported an adjusted pre-tax income of $877 million, which declined 13% year over year. The downside was due to an unfavorable impact from the annual actuarial assumption update, unfavorable mortality, higher general operating expenses and a hike in deferred policy buyout costs amortization and reserves in the Individual Retirement and Group Retirement.

Premiums of $1 billion surged 33% year over year on account of an improved pension risk transfer activity.

Premiums and deposits climbed 3% year over year to $7.2 billion on the back of recovery from the broad industry-wide sales disruption due to COVID-19 and an increased pension risk transfer activity.

Financial Position (as of Sep 30, 2021)

American International exited the third quarter with cash of $2.6 billion, which decreased 4.5% from the figure at 2020 end.

Total assets amounted to $594.8 billion, up 1.4% from the 2020-end level.

Long-term debt of $24.6 billion declined 12.5% from the figure as of Dec 31, 2020.

Total equity dipped 2.3% from the 2020-end level to $65.6 billion.

Adjusted book value per share of $61.80 grew 8.4% from the figure at 2020 end in the quarter under review.

Share Repurchase & Dividend Update

American International bought back shares worth $1.1 billion in the third quarter.

The board of directors approved a quarterly cash dividend of 32 cents per share. The dividend will be paid out on Dec 30, 2021 to the company’s shareholders of record as of Dec 16.

Management also declared a quarterly cash dividend of $365.625 per share on AIG Series A 5.85% Non-Cumulative Perpetual Preferred Stock. The dividend is payable Dec 15, 2021 to the company’s shareholders of record on Nov 30, 2021.

Zacks Rank

American International currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Multiline Insurers

Of the multiline insurance industry players that have reported third-quarter results so far, the bottom-line results of Old Republic International Corporation ORI, Assurant, Inc. AIZ and MetLife, Inc. MET beat the respective Zacks Consensus Estimate.

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American International Group, Inc. (AIG): Free Stock Analysis Report
MetLife, Inc. (MET): Free Stock Analysis Report
Assurant, Inc. (AIZ): Free Stock Analysis Report
Old Republic International Corporation (ORI): Free Stock Analysis Report
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