What To Expect From AIG’s Q1 Results

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AIG (NYSE:AIG) is scheduled to report earnings for the first quarter of 2017 on Wednesday, May 3rd. The company has struggled somewhat over the last few quarters, with declining profitability in its Property and Casualty (P&C) business and deteriorating investment income. In Q4 2016, the company’s revenues fell 6% to $13 billion on declines in the Property and Casualty business and Corporate and Other run-off insurance lines. In terms of bottom line, AIG’s net loss crossed $3 billion on a larger than expected pretax charge of $5.6 billion to boost reserves for future claims.

Interest rates have witnessed a gradual increase following the lows they touched after the U.K.’s Brexit vote in June of last year. This is likely to positively impact AIG’s investment income in the first quarter. In the upcoming earnings, we expect AIG’s revenue to see a single digit improvement over the prior year quarter to around $12 billion and earnings to show a double-digit increase to over $1.00 per share.

See our complete analysis of AIG here

How Will The P&C Business Perform?

The P&C division has played a key role in the turnaround of AIG’s fortunes after its bailout by the U.S. government. AIG ranks among the top ten P&C insurers in the U.S., with a market share of over 3.2% in terms of premiums earned.

In 2016, the accident year combined ratio – the ratio of claims and expenses paid to premiums earned – worsened from 114.5% in 2015 to 133.1% in 2016, driven by higher prior year development adjustments and higher catastrophe losses. For the first quarter, we again expect catastrophe losses to have negatively impacted AIG’s results. Per the National Weather Service, there were more than 400 tornadoes in the first quarter in the U.S., more than four times the previous three year average. [1]

 

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Notes:
  1. Tornado, Hail Losses Hurt Travelers in Q1, Insurance Journal, April 20 2017 []