American International (NYSE:AIG)
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5 Years : From May 2011 to May 2016
Profit at American International Group Inc. (AIG) more than doubled, to $3.21 billion in the first quarter, driven by improved results at its core insurance operations and changes in the value of two major holdings.
AIG's operating income of $3.1 billion, or $1.65 a share, beat analysts' view of a $1.12 a share profit. Operating profit excludes some investment results.
Operating results at AIG's domestic life insurance and retirement services business rose 12%, to $1.31 billion before taxes, while the company's property-casualty arm swung to a $1.04 billion profit from a loss of $424 million in the same period a year earlier, the company said in a statement Thursday.
Chief Executive Officer Robert Benmosche has said that improving results at both operations are critical for AIG to meet the "aspirational goals" the company laid out last year. The goals include boosting AIG's return on equity to over 10% by 2015, slashing costs and deploying up to $30 billion in capital on share buybacks, dividends or acquisitions.
"Our profits this quarter illustrate, ultimately, the health of our business," Benmosche said in the statement. The New York-based insurer, which is still 70% owned by the U.S. Treasury as a result of its bailout during the financial crisis, is "keenly focused on building on our successes," he said.
First-quarter results were helped by an increase of more than $1.8 billion in the value of the company's minority stake in Asian life insurer AIA Group Ltd. (AAGIY, AAIGF, 1299.HK), whose Hong Kong-listed shares rose during the quarter.
AIG once owned all of AIA, but now must reflect changes in AIA's stock price in its quarterly results. The company recently sold off more of those holdings, which will reduce the effect of the AIG holding on earnings.
AIG's interest in Maiden Lane III, a bailout-era facility designed to remove some mortgage-linked instruments from the insurer's books, added $1.25 billion to operating profit before taxes. It had added $744 million in the same period a year earlier.
Book value per share was $57.68, a 7.8% increase from the $53.53 book value per share at the end of 2011. The year-end book value was restated after the release of fourth-quarter results to reflect an accounting change.
The combined ratio at Chartis, the property-casualty operation, was 102.1, meaning the company spent $1.02 on claims and expenses for every dollar it collected in premiums. A year ago, the combined ratio was 118.6, reflecting massive losses tied to the devastating earthquake that struck Japan.
At SunAmerica Financial Group, AIG's domestic life insurance and retirement services business, fixed-annuity deposits declined, but the company touted "significant improvements" in its variable annuity, mutual fund and group retirement operations. Rivals have been pulling back on the sale of variable annuities, leaving space for SunAmerica to grow.
AIG's plane-leasing unit, International Lease Finance Corp., had a $119 million operating profit before taxes, a slight increase from $117 million in the same period a year earlier.
AIG's mortgage-insurance operation saw pretax operating income fall 43% to $8 million. New insurance written on domestic first-lien mortgages more than doubled to $6.5 billion as the unit grabbed market share in a sector where some rivals have been forced to stop selling new coverage. While AIG and others are still feeling the effects of policies they sold in the run-up to the housing crisis, industry observers say the new business the remaining players are now selling should prove highly profitable over time.
-By Erik Holm, Dow Jones Newswires; 212-416-2892; email@example.com