What To Expect From American International Group Stock In Q2?

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American International Group

American International Group (NYSE: AIG) is scheduled to report its fiscal Q2 2022 results on Monday, August 8, 2022 (after market close). We expect AIG to miss the consensus estimates for revenues and earnings. The insurance giant reported mixed results in the last quarter, with the top-line increasing 9% y-o-y to $15.8 billion. The revenue growth was driven by an increase in total premiums and higher net realized gains, partially offset by lower net investment income (NII). Notably, the premiums benefited from growth in general insurance and life & retirement units. We expect the net investment income and premiums to improve in the second quarter.

Our forecast indicates that  American International Group’s valuation is $69 per share, which is 35% more than the current market price of around $52. Our interactive dashboard analysis on American International Group’s Earnings Preview has more details. 

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(1) Revenues expected to remain marginally below the consensus estimates

American International Group’s revenues increased 19% y-o-y in 2021 to $52.1 billion. It was because of a 10% y-o-y growth in the premiums and a 7% rise in the net investment income (NII).

  • The total premium figure improved 9% y-o-y in the first quarter of 2022, primarily due to growth in general insurance and life & retirement businesses. We expect the same trend to continue in the second quarter.
  • NII is very important for the profitability of any insurance company, and AIG is no different. The revenue stream decreased 11% y-o-y in the first quarter of 2022 due to lower returns on available-for-sale fixed maturity securities. We expect the revenue stream to see some improvement in Q2.
  • Overall, we estimate AIG’s revenues to remain around $50.9 billion for FY2022.

Trefis estimates AIG’s fiscal Q2 2022 revenues to be around $11.18 billion, marginally below the $11.25 billion consensus estimate. 

(2) EPS is likely to miss the consensus estimates

AIG Q2 2022 adjusted earnings per share (EPS) is expected to be $1.04 per Trefis analysis, missing the consensus estimate of $1.10 by 5%. The adjusted net income increased from -$6 billion to $9.4 billion in 2021. It was partly due to higher revenues and partly due to lower total expenses as a % of revenues. Further, the same trend continued in the first quarter of 2022. We expect the expenses as a % of revenues to see some increase in the second quarter. Overall, AIG is likely to report an annual GAAP EPS of $5.60 for FY2022.

(3) Stock price estimate is 35% higher than the current market price

We arrive at  American International Group’s valuation, using a GAAP EPS estimate of around $5.60 and a P/E multiple of just above 12x in fiscal 2022. This translates into a price of $69, which is 35% more than the current market price of approximately $52. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

With inflation rising and the Fed raising interest rates, American International Group has fallen 9% this year. Can it drop more? See how low can American International Group stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 AIG Return 0% -9% -21%
 S&P 500 Return 1% -13% 86%
 Trefis Multi-Strategy Portfolio 4% -10% 253%

[1] Month-to-date and year-to-date as of 8/4/2022
[2] Cumulative total returns since the end of 2016

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