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Key Takeaways From American International Group Inc (AIG)’s Conference Call


American International Group Inc (NYSE:AIG)’s President and CEO, Peter Hancock, said during the conference call that its scale and focus will lead to the continued success in all its businesses. He said that the second quarter results indicated its commitment for balanced growth, as well as, profitability. As far as the risk reduction target, he said that the company needs to do more work.

Additional Share Buyback

American International Group Inc (NYSE:AIG)’s CEO said that after its capital plan update, the company revealed an additional $5 billion authorization for the share buyback program. Till the first half of the current year, the company has already bought back $3.7 billion worth of shares. That apart, the insurance firm repurchased about $965 million shares in July. The company currently has $6.3 billion for share buyback program\.

He pointed out that its book value per share, excluding AOCI and DTA, was more than $62. That indicated 3% Q-o-Q and 10% YOY growth. He expressed his confidence that its book value will grow as its business delivers enhanced profitability besides deploying its excess capital. In respect of the dividend, the insurance firm boosted its quarterly dividend by 124% to 28 cents a share from 12.5 cents a share paid earlier. This will be paid in September.

Control Over Expenses

The insurance company indicated that it is continuously simplifying its businesses, as well as, processes. At the same time, it is also investing in infrastructure and technology. As a result, American International Group Inc (NYSE:AIG) could save 3 – 5% in net expenses enabling it to focus on offering the higher value to its shareholders.

While admitting that shifting of dynamisms of commercial insurance market impacted its return on equity in the second quarter, the CEO removed any fears of impacting the outlook. He said that the company expects to achieve 50-basis points target in the current year after providing adjustments. Hancock said that continued underwriting enhancements apart from the cost control are the drivers for reaching the targeted level.

Cash Flow

The insurance company indicated that its cash flow remains strong as the holding firm got a total distribution of approximately $2.1 billion in the second quarter. That included more than $700 million in tax-sharing payments. The company expects dividends, as well as, distributions of $3 – $4 billion in the remaining period of the year.

The insurance firm said that the loss ratio in respect of accident was 66.6% in the second quarter. That was a modest increase from the year-ago quarter due to increased severe losses in Specialty. Casualty offset the losses partly but not enough to remove it completely. American International Group Inc (NYSE:AIG) said its combined ratio grew 2.3 points to 98.8 in the June quarter. Catastrophe losses also surged to $209 million from $121 million in the year-ago quarter.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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