UPDATE: AIG's 1Q Profit More Than Doubles
May 03 2012 - 5:09PM
Dow Jones News
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;
erik.holm@dowjones.com
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