American International Group, Inc. AIG is well positioned for growth with a strong general insurance segment, strong private equity returns and favorable underwriting performance. Divestments aimed at increasing the company’s focus on core insurance activities and a strong financial position are other highlights of the title.

Zacks Ranking and Price Performance

AIG currently carries a Zacks Rank # 2 (Buy).

The stock climbed 94.2% in one year, outperforming the rally in the industry and financial sector by 41.4% and 40.5%, respectively. The S&P Index climbed 36.8% over the same period.

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Style note

The company has an impressive growth score of B, which restores a company’s future growth prospects. Back-tested results have shown that stocks with a favorable Growth Score, when combined with a strong Zacks Rank, consistently outperform the market and achieve better returns.

Robust outlook

Zacks’ consensus estimate for company earnings in 2021 shows a 93.3% increase over the figure released the year before.

Revision of positive estimate

Zacks’ consensus estimate for 2021 earnings has moved north 1% in the past 60 days.

Surprise history of impressive earnings

AIG has beaten earnings estimates in three of the past four quarters and missed once, with an average surprise of 15.09%.

Evaluation

Price-to-book (P / B) is one of the multiples used for the valuation of insurance values. Compared to the multi-line industry 12-month P / E ratio of 1.6, AIG has a reading of 0.7. It’s pretty obvious that the title is currently undervalued.

Business tail winds

The company’s revenues, after remaining under pressure for some time, saw an increase in the first half of 2021. Rate increases, new business generation and high retention rates in corporate and business lines of business. individuals continue to drive the general insurance segment. The segment’s combined ratio improved in the second quarter of 2021 thanks to premium growth and a better expense ratio. The improvement marked the 12th consecutive quarter of improvement. Management remains optimistic that the general insurance segment will achieve a combined ratio of less than 90%, excluding catastrophe losses, by the end of 2022.

AIG’s investment portfolio generated strong private equity returns, resulting in 24.8% growth in net investment income in the first half of 2021. The strong performance of the company’s investment portfolio is remarkable because a low interest rate environment prevails in the United States.

AIG intends to use the capital to pursue possible buyouts in international markets with the aim of strengthening the personal business flow of the company. It continues to invest to establish a presence in the national middle market.

The company made divestitures to concentrate on its core insurance activities (general insurance) and eliminate the less performing ones. In July 2021, AIG signed an agreement with Blackstone to sell a 9.9% stake in the former’s life and retirement unit for $ 2.2 billion. With the separation of the Life and Pensions segment and the capital generated by it, the company will focus on paying down debt and investing in growth-related initiatives. In addition, it remains on track to achieve execution rate savings of $ 1 billion by the end of next year. Favorable underwriting actions and cost reduction initiatives keep management optimistic about the expansion of the acquired margin throughout 2021 and 2022 as well.

AIG boasts of a strong liquidity position supported by a strong cash balance and a low level of debt. The company has strong cash-generating capabilities through which it consistently engages in prudent capital deployment through share buybacks and dividend payments. Its leverage ratio is improving. According to its latest earnings call, the company plans to pay off $ 2.5 billion in debt by 2021.

Other actions to consider

Other top-ranked stocks in the same space include CNO Financial Group, Inc. CNO, Horace Mann Society of Educators HMN and International Society of the Former Republic ORI, each wearing a Zacks Rank # 2. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

CNO Financial, Horace Mann and Old Republic have surprise earnings over the last four quarters of 26.12%, 21.12% and 59.51%, on average, respectively.

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