Will Cat Loss Mar American International (AIG) Q2 Earnings?
Zacks Investment Research | Jul 31, 2016 09:04PM ET
American International Group, Inc. (NYSE:AIG) is scheduled to report second-quarter earnings results after the market close on Aug 2.
Last quarter, this multiline insurer missed the earnings estimate by 34.34%. The company doesn’t have a flattering earnings surprise record. It missed the consensus estimate in three out of the past four quarters, with the average miss being 23.04%. Will American International Group miss estimates this quarter as well?
2Q16 Flashback
Earnings will suffer from catastrophe losses (from the Japanese/Ecuador earthquakes and Texas floods) of $200–$300 million across its commercial and consumer businesses.
Net premium written are expected to be down due to an increase in use of reinsurance along with exits from unprofitable lines.
The quarter’s earnings might also see a shortfall due to lower returns from its alternative investments. Its corporate segment which houses the Direct Investment Book and Global Capital Markets (GCM) investments may also incur losses.
We, however, expect bottom line to be cushioned from lower operating expenses by the company’s initiatives taken to control expenses. Operating expenses declined by $140 million in the first quarter and we expect further reduction on this front.
We also expect higher earnings within the commercial lines business which should see improvement from initiatives such as reinsurance and business mix shift.
Good growth in U.S. life sales reflecting the evolution of the company’s distribution strategy and further development of the company’s independent distribution channel should also lead to an earnings upside.
Share buyback will further boost earnings per share. It will be interesting to watch whether all these positives translate into an earnings beat.
Earnings Whispers
Our proven model does not conclusively show that American International Group will likely beat the Zacks Consensus Estimate this time around. This is because a stock needs to have both a positive Zacks Investment Research
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