AIG Q3 Net Income Rises 1% to $2.19B, More Share Buybacks Planned

Insurer American International Group on Monday reported better-than-expected third quarter earnings, bolstered in part by improved performance at core insurance operations.

After-tax operating income jumped 23 percent from a year earlier. Chief Executive Officer Peter Hancock said the company remains “disciplined in our approach to balancing growth, profitability, and risk and focused on maintaining the strength of our industry-leading balance sheet.”

The company also declared a dividend of 12.5 cents per share as it did in the previous quarter. In addition, AIG’s board authorized a further up to $1.5 billion share buybacks, in addition to the $3.4 billion of AIG stock the insurer has repurchased this year. AIG shares rose 0.43 percent to close at $53.8 on Monday.

“Overall, it was a good quarter,” said S&P Capital IQ equity analyst Cathy Seifert. “I think it was a triple, I don’t think it was a home run.”

Hancock took the reins at the company on Sept. 1, moving from his previous post as head of the company’s property-casualty business.

Hancock succeeded Bob Benmosche, who was widely credited with helping turn the company around after bad bets on derivatives nearly sank the company during the financial crisis.

The company has since focused more closely on its core businesses and reinstated a dividend last year.

“Improvements in AIG’s accident year-loss ratio show management’s underwriting efforts having an impact,” said Sanford C. Bernstein & Co analyst Josh Stirling.

For the third quarter, AIG reported net income of $2.19 billion, or $1.52 per share, compared with net income of $2.17 billion, or $1.46 per share, a year earlier.

After-tax operating income rose to $1.7 billion, or $1.21 per share, in the quarter ended Sept. 30, from $1.4 billion, or $0.96 per share, a year earlier.

Analysts on average had expected earnings of $1.09 per share, according to Thomson Reuters I/B/E/S.

In property casualty, net premiums earned rose about 2 percent to $8.63 billion, and the combined ratio rose to 102.0 from 101.6.

A combined ratio below 100 indicates an underwriting profit, meaning an insurer is receiving more in premiums than it is paying out in claims.

In commercial underwriting, net premiums earned rose about 4 percent to $5.34 billion, and the combined ratio rose to 101.1 from 100.2.

In consumer underwriting, net premiums earned remained flat at about $3.27 billion. The combined ratio fell to 98.8 from 99.9.

Shares of AIG have risen about 5 percent from the end of last year through Friday. The S&P 500 gained about 9 percent over the same time. (Reporting by Luciana Lopez; Editing by Cynthia Osterman and Alan Crosby)

[AIG Property Casualty’s net premiums written for the third quarter were $8.953 billion, up 3 percent compared to $8.660 billion during third quarter of 2013, the company stated.

AIG Property Casualty posted $169 million of underwriting loss for the latest quarter, compared to an underwriting loss of $134 million a year ago.

The net investment income for AIG Property Casualty was $1.265 billion for the quarter, a 4 percent increase from $1.213 billion a year ago. The company said the increase in net investment income was driven by higher returns on alternative investments, which was partially offset by the effects of lower reinvestment yields compared to interest rates on matured or sold investments, and lower income on investments accounted for under the fair value option.

AIG Property Casualty’s pre-tax operating income rose 2 percent to $1.1 billion. The company said higher net investment income, improved loss experience in Consumer Insurance, a lower Commercial Insurance current accident year loss ratio, as adjusted, and reduced severe losses were partially offset by higher net adverse prior year loss reserve development and higher catastrophe losses.

AIG Property Casualty’s catastrophe losses were $284 million for the third quarter, compared to $222 million a year ago. Net adverse prior year loss reserve development was $227 million, primarily in the primary Casualty business, compared to net adverse prior year loss reserve development of $70 million a year ago. These increases were partially offset by a $23 million decrease in Commercial Insurance severe losses to $188 million, the company said.

AIG Property Casualty’s third quarter accident year loss ratio, as adjusted, was 61.3, a decrease of 2.4 points from the prior-year quarter attributable to improved accident year loss experience in Consumer Insurance and Financial Lines in Commercial Insurance, and lower severe losses.]