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AIG Misses Earnings Estimates in 4Q17 after Catastrophe Losses

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EPS estimates

On February 9, 2018, American International Group (AIG) posted earnings per share (or EPS) of $0.57 in 4Q17, which missed the analysts’ estimate by $0.18. The company witnessed a net loss of $6.7 billion in 4Q17, which was higher than its 4Q16 net loss of $3.0 billion.

However, AIG generated adjusted post-tax income of $526.0 million in 4Q17. In 4Q16, the company reported an adjusted post-tax loss of $2.8 billion.

According to AIG’s CEO, Brian Duperreault, the company has analyzed various underwriting actions, hired new employees, and framed a new operating structure. He added that in 2018, he expects to see the execution of profitable initiatives.

In January 2018, AIG made an announcement relating to the Validus acquisition, which reflects the company’s move toward diversification and growth.

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Catastrophe losses

Catastrophe losses were the major headwinds in AIG’s annual and quarterly results. The company witnessed $4.2 billion of catastrophe losses in 2017. During the same period, the company’s adjusted pretax operating income stood at $3.2 billion. The wildfires in California drove the company’s catastrophe losses in 4Q17.

On February 13, 2018, the market capitalization of AIG was $53.5 billion. On that date, its peers (XLF) Hartford Financial Services (HIG), Aspen Insurance Holdings (AHL), and RenaissanceRe Holdings Limited (RNR) had respective market cap figures of $19.0 billion, ~$2.2 billion, and ~$5.2 billion, respectively.

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