American International Group had a solid second quarter, where profits rose by 12.5%. Earnings per share came in at $1.25 ahead of the $1.05 estimate, and net income adjusted was $1.83 billion which easily exceeded the $1.54 billion expected.
AIG is in the middle of getting its affairs in order since it received assistance from the US government during the financial crisis. Asset stripping has been common practice among financial companies in the post crisis era. AIG sold International Lease Finance Corp — the insurer received $1.4 billion after tax, and the spin-off was marked the end of non-core asset disposals.
The New York headquartered company is still haunted by the of ghosts of the credit crisis. In the previous quarter the company paid $960 million in litigation for misleading shareholders about its own financial health between 2008-2009.
In September, Robert Benmosche stepped down as CEO after five years for health reasons. Mr Benmosche took over at the helm during the height of the credit crunch and he oversaw the firm return the $180 billion it received during the government bailout. Under Mr Benmosche’s leadership the insurer also returned to paying a dividend and is now expanding its share buyback scheme. AIG has proven that there is light at the end of the tunnel and should be used a benchmark for other previously bailed out institutions.
Year-to-date, AIG’s share price is up 5%. American Financial Group, who are also in the insurance and investments industry, marginally outperformed with a 5.7% increase over the same period.
There was a ramp in traders taking short positions on AIG at the end of September which mirrored the fear in the wider financial sector due to the spike in Greek bond yields but the level of short-selling has declined since.
Equity analysts are very bullish on AIG. Out of the 29 ratings, 17 are buys, 11 are holds and one is a sell, with the average target price being $61.10.
The consensus is for third-quarter revenue of $14.54 billion and EPS of $1.09. This compares with 2013’s third-quarter revenue of $14.85 billion and EPS of $0.96.
AIG will announce its full-year figures in February 2015. Analysts are expecting EPS of $4.65 and net income adjusted to be $7.01 billion, which represents a 2% and 3.7% increase of last year’s EPS and net income adjusted. The 200-day moving average at $52.43 is providing support, and the next support level down is $50. However a robust quarterly figure could put the September high of $56.81 in sight.