American International Group Inc (NYSE:AIG) has been in “turnaround” mode since the U.S. Treasury orchestrated a $700 billion bailout of the insurer back in 2008. But in December 2012, the U.S. Treasury sold its remaining stake in AIG, so what’s the future catalyst to drive the stock higher? It appears the company has refocused on insurance and is now, once again, one of the top players in the industry.
Despite having outperformed the S&P 500 by over 100% year-to-date, I believe the rebound in American International Group Inc (NYSE:AIG) still has room to run.
AIG is one of the top sellers of workers compensation, professional liability and property coverage products. Part of the insurer’s realigning is based in the sell-off of non-core assets. Back in late 2012, AIG also solid off its minority stake in the Asian life insurer, AIA, for a cool $6.5 billion. American International Group Inc (NYSE:AIG) also recently extended its deadline for the sale of 90% of its ILFC airline-leasing business for $4.8 billion to July 31.
Just over 50% of its net premiums were written in the Americas, with 19% in Europe, the Middle East and Africa, and 30% in Asia — leaving plenty of room for international expansion. The commercial-to-consumer premiums are also well balanced at 60% to 40%.
In addition to the ILFC and AIA asset disposals, American International Group Inc (NYSE:AIG) has gotten rid of over 40 assets for some $65 billion over the past few quarters, which includes ALICO and Nan Shan (Asia), AIG Star and Edison.
Credit: American International Group Inc (NYSE:AIG)
XL Group plc (NYSE:XL) also offers insurance, reinsurance and other financial services. Gross premiums for XL stacks up as follows, with insurance accounting for 69%, reinsurance 27% and life operations 4%. Its insurance business includes general liability and other liability coverage. The company’s net investment income continues to be strained due to low interest rates. Net investment income was down 11% in 2012, down 4% in 2011, down 9% in 2010 and down 21% in 2009.
The Chubb Corporation (NYSE:CB) is one of the largest U.S. property-casualty insurers, operating in the high-end personal lines (primarily homeowners insurance) and specialty liability lines coverage.
Chubb’s property-casualty operations include personal lines (35% of net written insurance premiums), commercial insurance (44%) and specialty insurance (21%).
Unlike American International Group Inc (NYSE:AIG)’s exposure to the international markets (50% of premiums), Chubb only derived 25% of its premiums from outside of the U.S. This is a negative given the recent catastrophe experiences in the U.S., including Superstorm Sandy. But the positive for The Chubb Corporation (NYSE:CB) is the expansion of its personal auto business into the Western part of the U.S.
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The Allstate Corporation (NYSE:ALL) is the second-largest U.S. personal-lines property-casualty insurer. Allstate reported 1Q EPS of $1.35 versus $1.42 for the same period last year but beating consensus by $0.06. Operating return on equity was up to 11.3% at the end of the 1Q, versus the 5.4% from a year ago.