AIG’s Stock Shows Modest Rise On Strong Q1 Earnings, New Share Buyback Plan

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AIG: American International Group logo
AIG
American International Group

AIG (NYSE:AIG) reported strong first quarter earnings, with its net income crossing $1.18 billion on higher investment income and lower general and administrative expenses. The company’s revenues increased 7% to $12.6 billion on higher net investment income partially offset by lower premiums written in the commercial Property & Casualty (P&C) business. AIG’s stock price rose about 2% following the earnings release.

AIG reported a pre-tax operating income of over $2 billion, driven by a 48% rise in operating income in the Life and Retirement segment and a 28% rise in the P&C business. The company reported net income of $1.18 billion, or $1.18 per share, in Q1 2017 versus a loss of $183 million or 16 cents per share in the prior year quarter.

AIG repurchased 56 million shares for about $3.6 billion in Q1 2017 and another 18.1 million shares for $1.1 billion through May 3rd. AIG’s board also authorized a new plan to repurchase $2.5 billion worth of shares, resulting in an aggregate remaining authorization of approximately $3.8 billion, and bringing the company closer to its goal of returning $25 billion of capital to investors by the end of 2017.

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Property And Casualty Insurance

AIG ranks among the top ten Property & Casualty (P&C) insurers in the U.S., with a market share of 3.23% in terms of premiums earned. In Q1 2017, the P&C division’s net premiums declined 17% year-over-year (y-o-y) to $3.6 billion but net investment income increased 68% to $931 million. This helped pre-tax operating income to increase by 28%, partially offset by an underwriting loss of $82 million.

The accident year combined ratio – the ratio of claims and expenses paid to premiums earned – worsened by 4.5 percentage points to 102.2% in Q1 2017, owing to a higher loss ratio.

Life and Retirement Insurance

The Life and Retirement division’s revenue increased 1% to $5.94 billion, but pre-tax operating income increased by 49% owing to lower advisory fee expenses.

The Personal Insurance accident year combined ratio worsened by 200 basis points y-o-y to 96.6% in Q1 2017, owing to a lower operating expense ratio which declined from 16.1% in Q1 2016 to 14.8% in Q1 2017.

Please refer to our complete analysis for AIG

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