How AIG Became an Insurance Leader Again
On Thursday, AIG will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, kneejerk reaction to news that turns out to be exactly the wrong move.
AIG was the poster child for the financial crisis, requiring a huge amount of assistance to keep it from creating a systemic shock that would have shook the entire global financial system. Since then, though, the company has slimmed down and refocused on its core areas, and it's reasserting its former role as a leader in the industry. Let's take an early look at what's been happening with AIG over the past quarter and what we're likely to see in its quarterly report.
Stats on AIG
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Will AIG top analysts' guesses again this quarter?
Analysts have had slightly mixed views about AIG's earnings lately, having raised their estimates for the just-ended quarter by $0.02 per share but cut a penny off their full-year 2013 EPS estimates. The stock, though, has moved solidly higher, rising 13% since late January.
AIG is aiming to bounce back from a fourth-quarter loss brought on largely by one-time events. Hurricane Sandy cost the company $1.3 billion in after-tax losses, and the company's ongoing sales of assets also weighed on its results, with the sale of its aircraft leasing unit creating a $4.4 billion charge to earnings.
But the big losses in recent years in the property and casualty insurance area have allowed the survivors to boost their premiums. Already this earnings season, Travelers has posted greatly improved earnings, with the company having put its Sandy-related losses behind it and hiked its own rates. Even though low investment returns continue to plague the industry, a stronger pricing environment will help AIG and its P&C peers get their profits higher.
AIG also managed to dodge a bullet from regulators during the quarter, as the company's mortgage-insurance unit was one of four insurers that settled with the Consumer Financial Protection Bureau over allegations of paying kickbacks to mortgage-lenders who pushed borrowers to use their insurance policies. AIG and Genworth Financial will have to pay the largest fines of the four, but at just $4.5 million, the liability is a pittance compared to what lenders themselves may face if the CFPB chooses to pursue them.
In AIG's quarterly report, watch for what the company says about eventually returning capital to shareholders, either in the form of a dividend or with share buybacks. Perhaps the biggest news of the quarter was that AIG bought back warrants from the U.S. Treasury back in March, taking away the last piece of federal ownership in the company and freeing the company to take more independent action. Given AIG's work to reduce debt and improve its credit rating, investors are hopeful that the time is coming when they'll earn their reward for sticking with AIG through the hard times.
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The article How AIG Became an Insurance Leader Again originally appeared on Fool.com.Fool contributor Dan Caplinger owns warrants on AIG. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends AIG. The Motley Fool owns shares of AIG and has the following options: Long Jan 2014 $25 Calls on AIG. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.