AIG’s Earnings Lower than Estimates on Lower Investment Income
Alternative Investments Impact AIG Earnings, Core Getting Stable
Missed estimates
American International Group (AIG) reported its 1Q16 earnings results on May 3, 2016. With an operating income per share of $0.65, the company missed Wall Street analysts’ income per share estimates of $1.00.
AIG reported an operating income of $773 million as compared to an operating profit of $1.7 billion in 1Q15. The decline was primarily due to the negative impact of market volatility on investments totaling $0.48 per diluted share. The company is planning to exit its hedge fund positions and boost the buyback of its own stock.
In a press release on May 3, 2016, AIG president and CEO, Peter D. Hancock, stated, “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
“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.”
Insurance giant
AIG is one of the largest insurers in the United States. AIG’s annual revenue is around $65 billion, and the company operates across the globe in multiple product lines.
The Americas region remains the major contributor toward AIG’s top line, providing ~50% of property and casualty premiums and 97% of life insurance revenues. In the United States, AIG’s competitors include Allstate (ALL), Metlife (MET), and Chubb (CB). Together these companies form 1.0% of the Vanguard Dividend Appreciation ETF (VIG).
AIG’s new leadership team, led by Hancock, took charge in September 2014 to integrate and position the company for improved and sustainable performance. Hancock has a strong track record in the financial services industry, and he served as CEO of AIG’s Property and Casualty Division before his filling his current role as the company CEO.
In the following parts of this series, we will discuss AIG’s strategy for expansion, operating divisions, leverage, dividends, and valuations.
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