Three Things to Watch for in the American International Group Inc (AIG) Earnings Report

American International Group Inc (AIG)This week is a big one for financial information releases. And not to be overshadowed, American International Group Inc (NYSE:AIG) will release its second-quarter earnings report on Thursday after the bell, with a conference call to follow on Friday morning. The insurance giant has been steadily building itself back up after the financial crisis, and with consecutive quarters of success under its belt, investors are sure to be watching this earnings report closely. Here are five things to watch for from American International Group Inc (NYSE:AIG).

1: Skewed results
American International Group Inc (NYSE:AIG) has beaten analyst estimates for the past four consecutive quarters, but the first quarter’s results were slightly off-putting to investors and analysts at first glance. Because the company was reporting a year-over-year decline, most initial reactions were that the company wasn’t going in the right direction, but the opposite was true. In its quest to realign operations with its traditional insurance pedigree, the company had sold many of its non-core businesses in 2012, thus skewing the organic earnings growth.

Investors shouldn’t be surprised to see a similar occurrence in the forthcoming second-quarter results. But be assured that AIG has focused on creating a leaner, meaner, earnings-generating machine.

2: Specific focus on three key areas
Changes in the market over the past several months will put pressure on AIG to address how it’s been handling those complications in order to assuage any investor concerns. First, the speculation over Fed stimulus changes has affected interest rates, the bond market, and of course the equities market. Because investment income is such a huge part of an insurance business’s revenue stream, pressure on all three aspects of investing may have affected the valuation of American International Group Inc (NYSE:AIG)‘s investment portfolio.

Keep an eye out for any sign that the company has changed its strategy. For example, in its first-quarter earnings report, rival The Allstate Corporation (NYSE:ALL) noted that it would be focusing on more cash-generating investment options to align itself more with the low interest rate environment. American International Group Inc (NYSE:AIG) hasn’t noted any such changes, but investors should be aware that doing so may forfeit future investment income.

Second, progress in Asian markets will be another important area of focus for AIG investors. With the company essentially doubling down on its investment in the PICC Group in China, its exposure may become a liability if growth continues to slow in the People’s Republic. Also, the insurer just announced recently that it would be restructuring its operations in Japan — another country that has been struggling financially as of late.

And finally, the traditional measure of an insurer’s progress with cost management — the combined ratio — will be scrutinized as usual. As a tally of the company’s costs and losses to its premiums, the combined ratio will give you the dollar amount of the money the company spends per $100 of premiums. American International Group Inc (NYSE:AIG) had the largest decrease in its combined ratio when compared to rivals, but it still had the highest ratio of the group. Travelers Companies Inc (NYSE:TRV), which reported earnings last week, reported a 6.3 point decline for its combined ratio, so AIG investors should be looking for a similar result.