American International Group Inc. AIG reported first-quarter 2015 operating earnings per share of $1.22, which surpassed the Zacks Consensus Estimate $1.18. Earnings improved 3.4% year over year.
The quarter benefitted from better underwriting results in Commercial Insurance. However, lower alternative investment returns and persistent adverse impact of a low interest rate environment on net investment income limited the upside. Moreover, an unfavorable year-over-year impact from changes in the discount on workers’ compensation reserves restricted the upside.
On a GAAP basis, including extraordinary items, AIG reported a quarterly net income $1.78 per share, up 63% year over year.
Behind the Headlines
Pre-tax operating income at Commercial Insurance improved 7.1% year over year to $1.5 billion, driven by better underwriting results from Property Casualty and Mortgage Guaranty. However, lower net investment income from Property Casualty and Institutional Markets limited the upside.
Pre-tax operating income at Consumer Insurance declined 21% year over year to $945 million. The decline stemmed from lower net investment income. However, higher policy fees due to increased assets under management were a partial dampener.
Financial Update
Shareholders’ equity totaled $108 billion at Mar 31, 2015, up from $106.9 billion at the end of 2014.
Cash, short-term investments, and unencumbered fixed maturity securities totaled $11.3 billion compared with $9.8 billion as of 2014 end.
In the quarter, AIG issued $2.35 billion of Notes.
At quarter end, AIG’s reported book value per common share rose 12% year over year to $80.16. Operating return on equity improved to 9.2% from 6.3% in the year-ago quarter.
Capital Deployment Update
AIG bought back about 29 million shares for $1.4 billion during the reported quarter and another $800 million last month.
Additionally, on Apr 30, the board of directors approved a $3.5 billion shares repurchase program and announced a quarterly dividend of 12.5 cents per share.
Zacks Rank
Currently, AIG carries a Zacks Rank #3 (Hold).
Performance of Other Multi-Line Insurers
Bottom line at MGIC Investment Corp. MTG, Radian Group Inc. RDN and Cigna Corp. CI outperformed their respective Zacks Consensus Estimate in the first quarter.
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