AIG (AIG) deploys its capital on new initiatives, technology upgrades, expansion of product lines, and services for increasing its presence globally. It also uses cash flows to reward shareholders through dividends and stock repurchases.
The company declared an increase of 124% in its quarterly dividend to $0.28 per share, translating into an annualized dividend yield of 1.80%. Its dividend yield has remained at par when compared with other players in the insurance business that form 22.7% of the Financial Select Sector SPDR ETF (XLF).
In the second quarter of 2015, AIG repurchased approximately 40 million shares for an aggregate purchase price of $2.3 billion. The company made additional repurchases of approximately $965 million through the end of July 2015. AIG authorized the repurchase of additional shares with an aggregate purchase price of up to $5.0 billion, bringing the company’s remaining share repurchase authorization to approximately $6.3 billion.
AIG management highlighted the possibility of returning $6 billion–$7 billion of capital to shareholders in 2015 in the form of share repurchases and dividends. The company appears to be optimistic about the capital flows in the life insurance business, as well as the improved risk profile of the property and casualty business.
Other insurers are also repurchasing their shares and returning capital to shareholders. For example, ACE (ACE) repurchased $430 million in shares, Chubb (CB) repurchased $346 million in shares, and Allstate (ALL) undertook a share repurchase of ~$250 million.