American International Group (NYSE: AIG) is set to publish its fiscal Q4 2023 results on Tuesday, February 13, 2024 (after market close). The insurance giant is poised to outperform the consensus estimates. Following mixed results in the last quarter, with revenues missing expectations but earnings surpassing, AIG reported total revenues of $12.78 billion, a 9% decrease from the year-ago figure. This drop was primarily due to lower premiums and a decline in total net realized gains. However, we anticipate a year-on-year growth in revenues for Q4. For a more detailed analysis of American International Group’s Earnings Preview, refer to our interactive dashboard.
In view of the current financial landscape, AIG stock has seen robust gains of 75% from levels of $40 in early January 2021 to approximately $70 now, compared to a 35% increase for the S&P 500, over this period. AIG is among a select few stocks that have escalated in value each of the last 3 years, although it still failed to consistently outperform the market. The stock exhibited returns of 50% in 2021, 11% in 2022, and 7% in 2023. In contrast, the S&P 500 yielded returns of 27% in 2021, -19% in 2022, and 24% in 2023, underscoring AIG’s underperformance. Beating the S&P 500 continually, whether in good times or bad, has proven to be arduous in recent years for individual stocks, even for heavyweights in the Financials sector. In contrast, the Trefis High Quality (HQ) Portfolio, comprising 30 stocks, has eclipsed the S&P 500’s performance every year over the same period. What accounts for this stark contrast? As a cohort, HQ Portfolio stocks have offered superior returns with reduced risk compared to the benchmark index, evidenced by HQ Portfolio performance metrics. Against the backdrop of the current uncertain macroeconomic environment, characterized by high oil prices and elevated interest rates, could AIG encounter a situation akin to 2023 and underperform the S&P over the next 12 months – or will it witness a notable upswing?
Our forecast indicates that American International Group’s valuation is $78 per share, marking a 12% premium over the current market price.
(1) Revenues expected to edge past the consensus estimates
American International Group’s revenues decreased 13% y-o-y to $36.98 billion in the first nine months of 2023.
· The total premium figure improved 10% y-o-y in the first three quarters of 2023. We expect it to see some growth in Q4.
· Net investment income (NII) increased 25% y-o-y over the same period. We expect the Q4 results to be on similar lines.
· Total net realized gains decreased from $8.8 billion to -$1.1 billion. The same trend is likely to continue in Q4.
· Overall, we forecast AIG’s GAAP revenues to remain around $49.89 billion in FY2023.
Trefis estimates AIG’s fiscal Q4 2023 revenues to be around $12.91 billion, 3% above the $12.51 billion consensus estimate.
(2) EPS is likely to beat the consensus
AIG Q4 2023 adjusted earnings per share (EPS) is expected to be $1.72 per Trefis analysis, 5% above the consensus estimate of $1.64. The adjusted net income decreased 63% y-o-y to $3.5 billion in the first three quarters of 2023, primarily due to lower revenues and a 9% rise in expense figures. We expect the net income margin to see some improvement in Q4. In sum, AIG is likely to report an annual GAAP EPS of $6.68 for the full year FY2023.
(3) The stock price estimate is 15% more than the current market price
We arrive at American International Group’s valuation using a GAAP EPS estimate of around $6.68 and a P/E multiple of just below 12x in fiscal 2023. This translates into a price of $78, which is 12% more than the current market price. Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
| Returns | Feb 2024 MTD [1] |
Since start of 2023 [1] |
2017-24 Total [2] |
| AIG Return | 0% | 10% | 7% |
| S&P 500 Return | 4% | 31% | 124% |
| Trefis Reinforced Value Portfolio | 4% | 43% | 633% |
[1] Returns as of 2/13/2024
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
