Why Is American International Group (AIG) Down 44% Since Last Earnings Report?

A month has gone by since the last earnings report for American International Group (NYSE:AIG). Shares have lost about 44% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is American International Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

American International Group Beats Q4 Earning Estimates

American International Group posted fourth-quarter 2019 operating income of $1.03 per share, beating the Zacks Consensus Estimate by a penny. In the year-ago quarter, the company reported loss of 63 cents per share.

Total revenues of $11.8 billion were down 6.3% year over year and also missed the Zacks Consensus Estimate by 4.2%, due to lower premiums.

Total net investment income of $3.6 billion was up 28.6% year over year

Total benefit expenses of $10.8 were down 18.8% year over year, due to lower policy holder benefit and losses.

The company incurred catastrophe loss of $413 million, down 48.3% year over year.

Adjusted return on equity was 7.3%, compared with negative return on equity of 4.6% in the year-ago quarter.

As of Dec 31, 2019, the insurer’s adjusted book value per share (excluding AOCI) was $58.89, up 7% year over year.

Strong Segment Results

General Insurance

Net premium written of $5.8 billion was down 9% year over year, due to a decline in premium in North America and international business.

The segment reported underwriting gain of $12 million compared with underwriting loss of $1.1 billion in the prior-year quarter. Combined ratio of 99.8% improved 1520 basis points, due to lower catastrophe losses, continued underwriting actions, reinsurance and expense discipline.

Life and Retirement

The segment reported adjusted pre-tax income of $646 million, down 9.4% year over year, due to lower contribution from Group, Life and Individual

Retirement subsegments.

Total revenues of $4 billion were down 2% year over year, primarily due to decline in contribution from Institutional Markets, partly offset by revenue growth in Individual retirement, Group retirement and Life Insurance businesses.

Financial Position (as of Dec 31, 2019)

The company had long-term debt of $25.5 billion, down 2.5% year over year. Total assets of $525.1 billion were up 6.7% year over year.
Shareholder equity was $51.2 billion, up 7.6% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -9.68% due to these changes.

VGM Scores

At this time, American International Group has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American International Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.