AIG UP on Q1 2017 earnings beat, additional share buyback

May 9, 2017
AIG UP on Q1 2017 earnings beat, additional share buyback August 17, 2018 Clive Nelson

The stock of multi-national insurance company American International Group Inc. (NYSE: AIG) had appreciated by nearly 8% to about $63 in the past ten days.

Expectations of good performance in the March quarter had pushed the price upwards and the insurer did not disappoint when it announced the results last Thursday.

AIG reported a swing to profit in the fiscal 2017 first-quarter, from a net loss in the similar period last year. Additionally, there are a few more reasons, which are described below, to forecast further rise in the share price.

Total revenues increased 7% y-o-y to $12.6 billion in the recent quarter. Higher net investment income aided an increase in revenue during the quarter ended March 2017. But for lower premiums written in the commercial Property & Casualty business, the revenue growth would have been much higher.


The New York-based company reported fiscal 2017 first-quarter net income of $1.12 billion, or $1.18 per share, compared with a net loss of $183 million or $0.16 per share in the similar quarter last year. The earnings estimates of analysts were $1.08 per share.

The Q1 2017 after-tax operating income nearly doubled to $1.37 billion or $1.36 per share, from $765 million or $0.64 per share in 1Q16.

Net premiums written in the commercial insurance segment were down 17% y-o- y to $3.6 billion in the first-quarter. The decline was mainly due to reinsurance and remediation in the US casualty and property business. However, pre-tax operating income increased $187 million to $849 million.

During the recent quarter, net premiums written in the consumer insurance segment increased $13 million y-o-y to $3.785 billion. Net investment income increased 20% to $1.94 billion in the consumer insurance segment. This resulted in a 49% increase in pre-tax operating income to $1.05 billion.

During Q1 2017, AIG’s core adjusted return on equity (ROE) jumped to 10.2%, from 6.8% in the prior year’s similar quarter. Disciplined capital management and expense efficiencies contributed to an increase in ROE.

The company is having tremendous success in its cost cutting program. This is evident from the 18.6% y-o- y decline in the operating expenses to $2.4 billion.

AIG also announced that its Board has allocated $2.5 billion, in addition to the $1.3 billion available under the current share repurchase program. During the quarter ended March 31st , 2017, AIG had repurchased approximately $3.6 billion worth common stock. Additionally, shares worth $1.1 billion were purchased from April through May 3, 2017.

The Board of AIG also declared a quarterly dividend of $0.32 per share, payable on June 28, 2017.

The stock has broken the resistance at 61.80 with a bullish gap. The stochastic oscillator is in the bullish zone and the MACD indicator is rising. Thus, further appreciation in the share price of AIG can be expected.

American International Group Stock Price: May 9th 2017

American International Group Stock Price: May 9th 2017

A trader can speculate on an uptrend in the share price by investing in a high or above option offered by a suitable binary broker. The option should remain active for at least one week and should be taken when the stock trades near $62 in the equity market.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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