What To Expect From AIG’s Q4

by Trefis Team
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AIG (NYSE: AIG) is scheduled to announce fourth-quarter and full-year earnings on Thursday, February 8. In the previous quarter, the company reported negative earnings, primarily due to catastrophic losses from hurricanes. This quarter, AIG expects to incur a loss of $500 million from the California wildfires. Additionally, we expect the Commercial Insurance Segment’s top line to continue its downward trend. However, this negative effect on earnings will be partially offset by reduced expenses due to efficient cost management. We currently forecast the EPS for this quarter to be $0.74. To illustrate our expectations for the company’s fourth quarter, we have created an interactive dashboard. You can modify Revenues and Expenses from the business segments to see how the company’s results would be affected.

Top Line To Be Under Pressure

AIG’s revenue has been declining over the past few years. While the performance of Consumer Insurance Segment has remained fairly consistent, the Commercial Insurance Segment has seen declines because of divestitures and the underperformance of the Property & Casualty business. We expect that strategic decisions to sell some non-core units of this segment will lead to further revenue declines.

Efficient Cost Management To Drive Bottom Line

In 2016, the company aimed to achieve operating improvements through substantial expense reductions, as mentioned in its strategy presentation. Reduction in staff, moving employees to lower-labor cost- geographical areas, and increased use of shared services and outsourcing have helped the company make progress in achieving this goal. Total Benefits, Losses and Expenses declined 4.7% in 2016. The first nine months of 2017 have shown further improvement in this area and we expect the trend to continue in Q4. Additionally, the removal of SIFI label could save up to $150 million in annual compliance costs.

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