By Leslie Scism 

American International Group Inc. said its first-quarter profit jumped 53%, buoyed by the sale of investment holdings, while the one-time government ward continued a strong share-buyback program.

Net income rose to $2.47 billion, or $1.78 a share, including $874 million in net realized capital gains from investment sales that included a stake in a Chinese insurer. In the prior-year period, the New York insurance conglomerate logged $1.61 billion, or $1.09 a share, in net income.

AIG's operating income, which excludes realized capital gains and losses and is closely watched by investors, slipped 2.9% to $1.69 billion, from $1.74 billion, but on a per-share basis rose to $1.22 from $1.18 a share.

The operating results exceeded Wall Street expectations of $1.19 a share as compiled by Thomson Reuters. AIG shares edged up fractionally in after-hours trading.

The results reflect the second full quarter of management of the company by Peter Hancock, who took over last September as chief executive. Mr. Hancock succeeded Robert Benmosche, who restored the company to profitability and helped it fully repay a financial-crisis bailout package that had topped $180 million at its peak.

Mr. Benmosche, who died in February, slimmed down the once-sprawling financial-services behemoth. He sold many businesses to raise money to pay back the government and narrowed the company's focus primarily to a world-wide property-casualty insurance business and a U.S. life-insurance and retirement-services business.

AIG said it bought back about $1.4 billion in shares during the first quarter and repurchased about an additional $800 million through the end of April. It said the board had authorized buying back more shares worth up to $3.5 billion.

As previously announced, AIG in March sold shares of PICC Property & Casualty Co., receiving gross proceeds of about $500 million. It continues to be a large investor in the Chinese company.

AIG is one of three insurance companies that have been designated nonbank "systemically important financial institutions" subject to oversight by the Federal Reserve. However, the capital and other nonbank SIFI rules are yet to be determined, so the designated companies at this point don't have to go through a formal approval process for raising dividends or buying back shares.

Mr. Hancock's tenure is under way as insurers face multiple headwinds. For many quarters, low interest rates have depressed earnings on the bonds typically bought with policyholders' premiums and held until claims are due. AIG cited lower net investment income on both the property-casualty and life-insurance side.

Commercial insurers also face deterioration in prices for many types of policies, and the continued strong dollar means global companies are subject to adverse foreign-exchange rates. AIG said its commercial-insurance net premiums written, the benchmark commonly used by analysts for gauging top-line growth, increased 1% to $5.05 billion compared with the prior-year quarter, and said they increased 6% excluding the effects of foreign exchange.

The commercial-insurance unit's closely watched combined ratio, which is the percentage of each premium dollar spent on claims and expenses, decreased to 97.1% from 98.9% in the year-earlier quarter. The company said the improvement stemmed from lower catastrophe claims among other positive developments, while the year-earlier results were stung by unfavorable adjustments to older loss reserves.

The unit's general expenses decreased slightly, as increased efficiencies were "offset by investments in technology, engineering and analytics," which have been a priority of Mr. Hancock.

Write to Leslie Scism at leslie.scism@wsj.com

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