American International Group Inc (AIG): After The Storm

Besides, AIG has been capitalizing the opportunity to repurchase stock at bargain valuations over the last quarters. Since those repurchases are done at a price to book value ratio below 1, they increase book value per share. The company gets more than $1 in accounting equity value for each dollar it uses to buy its own stock, so as long as the purchase price is so low these kinds of buybacks will be accretive in terms of book value per share.

Positive industry trends

The Allstate Corporation (NYSE:ALL) managed to report better than expected earnings for the last quarter in spite of increased losses from catastrophic events, higher premiums and an improved combined ratio – the tally of losses and costs per $100 of written premiums – were the main reasons for the better than expected results in a challenging environment.

The same goes for Travelers Companies Inc (NYSE:TRV), the company has faced two seriously damaging hurricanes in the last two years, yet increased premiums have produced earnings well above analyst´s expectations for the last quarter.

Chubb did even better than its competitors, since it’s not very exposed to Property Casualty, it managed to report lower catastrophe losses for the last quarter. But that didn´t stop The Chubb Corporation (NYSE:CB) from rising insurance premiums, so earnings were strong both from the point of view of income and losses in the March quarter.

After years of lackluster industry returns due to falling premiums, high catastrophe losses and low returns on fixed income investments due to rock bottom interest rates, it looks like insurers are finally starting to raise their premiums and increase profitability. This improved scenario bodes well for AIG and its turnaround prospects.

Bottom line

American International Group Inc (NYSE:AIG) has come a long way in cleaning its balance sheet and improving its operations, and the company is ready to focus on growth and profitability over the next years. The numbers for the last quarter send an optimistic signal about the evolution of its turnaround and even after a considerable run up, the stock is attractively valued. Besides, improved industry conditions are providing a considerable tailwind, so this insurance powerhouse is in a good position to continue outperforming the markets in the long term.

The article This Insurance Powerhouse Will Continue Outperforming originally appeared on Fool.com and is written by Andrés Cardenal.

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