Monthly Archives: April 2016

How to make earnings beat so great

images-28AIG (AIG)  beat Wall Street’s profit estimates as CEO Peter Hancock continued executing his plan to simplify the insurance behemoth and return more capital to shareholders amid pressure from activists.

AIG’s after-tax operating profit of 98 cents a share in the three months through June compared with an average estimate of 92 cents from analysts in a Bloombergsurvey. On a net basis, including tax adjustments, discontinued operations and capital losses, the New York-based company posted net income of $1.9 billion, or $1.68 a share, compared with profit a year earlier of $1.8 billion, or $1.32 a share.

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“AIG’s second-quarter results show strong improvement towards all the goals the board and I announced in January,” Hancock, said in a statement. “We have executed more quickly and smoothly than expected and our confidence in reaching our 2017 financial targets is high as our earnings become more sustainable.”

The insurer jumped 2.84% to $55.68 after the bell Wednesday, paring its year-to-date decline to about 10%.

AIG, which missed analysts’ projections last quarter, saw its return on equity jump to 8.6% from 6.8% last year and touted a 7% cost reduction due to “lower employee-related expenses” as Hancock works to reduce overhead by $1.6 billion within two years.

The company also returned $3.2 billion of capital to investors through buybacks and dividends, for a total of $7.9 billion so far this year, driving toward its plan to return $25 billion to investors. On Tuesday, AIG’s board authorized repurchases of $3 billion — taking its total buyback authorization to $4 billion — and declared a quarterly dividend of 32 cents a share.

Tips to Improve Your Credit Score

Looking to improve your credit score? Checking those numbers frequently could influence your score’s direction.

Whether you are buying a home, applying for a credit card, or securing a job, the importance of your credit score is not a new phenomenon, and according to a recent survey conducted by Discover (DFS) , consumers who keep track of their credit scores see positive benefits.

Seventy-six percent of those surveyed, who checked their credit scores seven or more times in the past 12 month, said their credit scores improved, while 73% said they handled their credit better based on this one action.

“The greater the awareness of your score and the greater the awareness of what impacts your score, the more a consumer can stay on top of their credit and the more they can take those positive actions that will help them in all these aspects,” Laks Vasudevan, Discover vice president of products & innovation said in a phone interview.

The Riverwoods, Ill.-based banking holding company provides credit cards and personal and student loans to consumers and was the first major credit card issuer to offer its card members free FICO scores on its monthly statements, the company said.

Making timely payments, monitoring your amount of debt and keeping track of your number of accounts and inquires is essential to your credit score.

That’s because, if you want to rent an apartment or get a loan, what’s the first thing that is checked? Your credit.

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But the survey found that many underestimate the impact of their credit standing on different aspects of their lives.

Nearly 64% said their credit had “little or no impact” on landing a job, 47% said it didn’t largely impact their insurance rate or ability to rent an apartment, while 32% said it barely affected their ability to get a personal or student loan.

But that’s not the case.

The Fair Credit Reporting Act, or FCRA, a law that allows for the accuracy and privacy of information from the credit reporting agencies, says insurers, employers, creditors and other businesses have a “legal right to access your report.”

However, you do have to give your employer permission to review your credit report, although it may not look good to tell your employer to “back off” if you want that new job title.

Millennials, consumers between the age of 18 and 34, aren’t taking their credit scores for granted. The Discover survey found that 46% of Millennials associate credit with their “self worth,” while 64% associate their credit standing with “their sense of freedom.” Older generations were less inclined to feel freedom from a good credit score: 56% of Generation X, ages 35 to 54, and 40% for Baby Boomers, ages 55 to 69.

To help consumers better manage their credit, Discover now offers a free online report, called the Credit Scorecard, which shows your FICO score and other aspects of your credit, like missed payments, total accounts, length of credit, recent inquires, and revolving credit utilization. This report is a snapshot of your credit behaviors and not the full report.

How to Pace Perpetually Low Interest Rates

The Federal Reserve’s decision not to raise interest rates last month added insult to injury for insurers from AIG  (AIG)   to MetLife (MET) and Prudential (PRU) .

Not only were their revenue streams curbed in the three months through June, the period for which several major insurers start reporting results today, they won’t get a rate-hike boost during most of the third quarter either. The central bank’s monetary policy committee doesn’t meet again until Sept. 20.

“These companies have all had to operate in this unprecedented and really protracted low interest-rate environment,” S&P Capital analyst Cathy Seifert said in a phone interview. “Low interest rates are going to impact them both on the investment and on the underwriting perspective.”

Near-zero rates have been hindering financial performance at U.S. insurance providers , which use the return on invested premiums to fund policy payouts and buoy profit, for more than seven years. The prolonged period heightens the odds that some companies will have to boost capital reserves, which would hurt earnings and might spur credit-rating firms to downgrade them, RBC Capital Markets analyst Eric Berg wrote in a note.

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In addition to assessing second-quarter performance for fluctuations in that risk, investors and analysts will be evaluating the fallout from market volatility after Great Britain’s decision to leave the European Union and the ongoing effects of slow economic growth, with GDP expansion of 1.2% below expectations.

Still, “we do see the possibility of upward movement in the group if, as we expect, company managements affirm during the reporting season that the downward move in rates is once again a profit-and-loss issue, not one that could lead to reserve hike-driven reductions in equity capital,” Berg wrote.

Whether companies adjust their business mixes or sell some units to deal with “the trend of seemingly forever low interest rates” will be an important consideration, said S&P Global’s Seifert.

New York-based AIG, for instance, announced in January that it was shedding about a fifth of its mortgage-insurance business through a spinoff, selling the broker-dealer business for an undisclosed amount and overhauling its portfolio to create nine modular businesses, which could be sold individually if warranted. The sale of its advisory unit was completed in May.

The changes were made amid pressure from activist investors John Paulson and Carl Icahn, who wanted the company to restructure itself enough to shed the systematically important financial institution — or SIFI — label, a government designation that imposes higher capital requirements and heightened regulatory scrutiny on companies large enough to threaten the broader economy if they collapse.