Banking & Finance

AIG Is Finally Firing on All Cylinders

Between mid-December and Wednesday night’s close, shares of insurer American International Group Inc. (NYSE: AIG) have added more than 44%. The company’s general underwriting business rose from a loss of $89 million in the second quarter of last year to a profit of $147 million in the same period this year.

The company’s general underwriting business turned a profit in the first quarter of this year for the first time since 2007, when AIG was nearly incinerated by the financial crisis it played no small role in bringing on. Some $85 billion in bailout funding from the New York Fed kept the company afloat, and ultimately AIG received federal assistance to the tune of $182 billion. The company paid back the final installment of that aid in March of 2013, along with $22.7 billion in interest.

In the second quarter of 2019, the company posted adjusted after-tax income of $1.3 billion ($1.43 per common share), compared with consensus estimates for earnings per share of $1.15.

Brian Duperreault, AIG president and CEO, said:

Our strong second quarter performance demonstrated continued positive momentum throughout the first half of 2019. … Looking ahead, we remain diligently focused on executing against our strategy to reposition AIG as the leading insurance company in the world, and we continue to expect to achieve double-digit ROCE [return on common equity] for consolidated AIG by year-end 2021.

AIG’s life and retirement segment posted a 17.3% adjusted ROCE in the quarter on strong private equity returns, investment gains resulting from lower interest rates and solid in force profitability. Consolidated net investment income rose by just over 19% to $3.7 billion on favorable market performance and noteworthy income within the private equity portfolio. Consolidated adjusted ROCE increased to 10.4% in the quarter, up from 7.6% in the prior-year period.

After Thursday’s opening bell, the stock rose by more than 5%, but that has moderated in the first hour or so of trading to an increase of around 3.7% to $56.44. The stock’s 52-week range is $36.16 to $57.59, and shares rose to within 11 cents of matching that high. The consensus 12-month price target is $57.50.