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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