3 Things to Watch for in AIG's Earnings Releasehttp://www.fool.com/investing/general/2013/02/20/3-things-to-watch-for-in-aigs-earnings-release.aspx Jessica Alling
February 20, 2013
One of the companies bringing up the rear of earnings season, AIG (NYSE: AIG) is set to release its fourth-quarter and full-year financial results tomorrow after the closing bell, followed by a conference call Friday morning. As most investors know, the insurance giant has been struggling to regain investor confidence and continues to trade below book value, despite being a favorite among top money managers. For investors on the fence about AIG, this earnings release will be an important one to follow, so here are the three top things to look out for.
1. The effects of Hurricane Sandy
So far this earnings season, we've seen many other insurance companies reporting lower income based on the claims payouts related to Sandy:
One other insurer was affected by Sandy, but it did not feel the sting as badly -- Markel (NYSE: MKL). Since Markel specializes in high-risk policies, its higher rates plus other specialized business operations allowed it to swallow the costs of Sandy-related claims while still posting a 77% increase in profits.
AIG also specializes in certain policies, but it may not be able to perform like Markel. Since the insurance giant operates within niche markets, including a dedicated coastal condominium, hotel, and motel segment, it may report higher costs from Sandy claims. Analyst are expecting AIG to report a loss, and Sandy may have been the deciding factor that proves them right.
2. Balance sheet strength
Since the company has already reduced its legacy derivatives operations by 92% through September, investors need to watch where AIG begins to invest its capital. And like the company, investors should monitor AIG's debt coverage, whic