American International Group, Inc. AIG is set to report first-quarter 2015 results on Apr 30. Last quarter, it posted a negative earnings surprise of 9.35%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Past Quarter
AIG has been consistently adopting the inorganic route to expand its business and global footprint. The recent acquisitions of NSM Insurance Group, Laya Healthcare and Ageas Protect Limited reflect its endeavors in this respect. These buyouts expanded AIG’s product portfolio, thereby enabling it to reach out to more customers and hence boosted the top line.
Additionally, AIG has been strategically divesting assets, which has helped in strengthening its focus on core operations that include property and casualty (P&C), life and retirement insurance business lines. Toward this end, the company vended its 46% stake in the airplane lessor – AerCap Holdings NV. These efforts to strategically boost its portfolio are likely to help the company generate improved bottom-line results.
However, exposure to catastrophe losses, higher expenses as well as unfavorable reserve development are likely to affect the company’s financials adversely.
Earnings Whispers
Our proven model does not conclusively show that AIG is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: AIG has an ESP of 0.00%. That is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.18 per share.
Zacks Rank: AIG has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the insurance sector which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
AXIS Capital Holdings Limited AXS has an Earnings ESP of +7.63% and a Zacks Rank #1 (Strong Buy).
RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +4.10% and a Zacks Rank #2 (Buy).
The Allstate Corporation ALL has an Earnings ESP of +3.60% and a Zacks Rank #3.
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