Banking, finance, and taxes

AIG Sinks on Missed Earnings

Chris Lange

Published: May 2, 2016 4:43 pm

Last Updated: January 13, 2020 9:58 am

American International Group, Inc. (NYSE: AIG) reported first-quarter financial results after markets closed on Monday. The company had $0.65 in earnings per share (EPS) and did not immediately disclose its quarterly sales compared to consensus estimates from Thomson Reuters that called for $1.00 in EPS on $13.57 billion in revenues. The same period from last year had $1.22 in EPS on $14.59 billion in revenue.

During the first quarter, AIG repurchased $3.5 billion of shares of its common stock and $173 million of warrants to purchase shares of its common stock, and paid $363 million in shareholder dividends. Also the board of directors declared a quarterly dividend of $0.32 per share.

The company entered into a two-year reinsurance arrangement with the Swiss Re Group, under which a proportional share of its new and renewal U.S. Casualty portfolio is being ceded. This arrangement will reduce the impact of the U.S. Casualty loss ratio on the overall loss ratio, in accordance with AIG’s strategic plan.

At the same time, net premiums written decreased 15%, or 12% excluding the impact of foreign exchange, to a total of $4.31 billion. Additionally, net premiums written in the first quarter of 2015 benefited from a renewal of a multi-year policy in U.S. Financial lines.

Peter D. Hancock, President and CEO of AIG, commented on earnings:

Although our first quarter results were impacted by market volatility on investments, the underlying operating results demonstrate progress on our strategic objectives. We’ve made some ambitious commitments through 2017, and our first quarter operating results show that we’re executing on our plan. We returned $4.0 billion of capital to shareholders during the quarter, and repurchased an additional $870 million of our common stock through May 2, 2016. Expenses declined 5% year-over-year, excluding the impact of foreign exchange, as we continued to drive for efficiency and narrow our focus on the products, geographies and demographics that provide the greatest opportunities for profitability.

Shares of AIG closed Monday up 1.4% at $56.59, with a consensus analyst price target of $63.41 and a 52-week trading range of $50.20 to $64.93. Following the release of the earnings report, the stock was down 3.2% at $54.80 in the after-hours trading session.