American International Group (AIG) will announce its fourth-quarter results on Feb. 13. Analysts on average expect earnings of $1.402 billion, or 95 cents a share, compared to 96 cents in the third quarter and 20 cents a share during the fourth quarter of 20120, when the company recorded a $4.4 billion write-down on the planned sale of its International Lease Finance Corp. (ILFC) subsidiary. Please see AIG Is 'Top Long Pick' Among P&C Insurers for a discussion of the company's property and casualty insurance business.

"We continue to expect AIG to have adverse development of $300mm to $400mm (1-1.5 points on the [life insurance] Combined Ratio) per year going forward, but think an improvement of this trend represents a catalyst as the benefits of more conservatively reserving on recent accident years works its way through," Gallagher wrote. The combined ratio is an insurer's claims and expenses divided by its earned premiums. A ratio below 100% indicates an underwriting profit.

Gallagher rates AIG "outperform," with a price target of $59, estimating the company will earn $4.67 a share during 2014. AIG's shares closed at $48.46 Tuesday and traded for 9.7 times the consensus 2015 EPS estimate of $5.02.

The following chart shows the outperformance the Dow Jones U.S. Life Insurers Index against the S&P 500 since the end of 2011:

^DJUSIL Chart> data by YCharts

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AIG Is 'Top Long Pick' Among P&C Insurers  
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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