American International Group Inc. (AIG)’s second-quarter profit climbed 13 percent on a gain tied to the sale of an aircraft-leasing unit in the insurer’s final earnings report under Chief Executive Officer Robert Benmosche.
Net income rose to $3.07 billion, or $2.10 a share, from $2.73 billion, or $1.84, a year earlier, the New York-based insurer said today in a statement. Operating profit, which excludes some investing results, was $1.25 a share, beating the $1.06 average estimate of 24 analysts in a Bloomberg survey.
Benmosche, 70, has repaid a U.S. bailout, narrowed AIG’s focus and cut jobs to improve results at the property-casualty unit since taking over in 2009. Peter Hancock, who’s 56 and oversees the property-casualty business, becomes CEO on Sept. 1
Benmosche “did a bunch of great work to bring the company back from the brink, to help shareholders get value,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said by phone before results were announced. “It’s going to be a tall order to fill his shoes, but I think it’s logical that they’re having Peter step in.
AIG gained 2.5 percent to $54 at 5:13 p.m. in extended trading in New York, after results were announced. The stock had gained 3.2 percent this year, compared with the 4.9 percent advance of the Standard & Poor’s 500 Index.
Book value, a measure of assets minus liabilities, climbed to $75.71 per share as of June 30 from $71.77 three months earlier. AIG recorded a gain of $1.4 billion after tax in the quarter on the sale of the plane business, International Lease Finance Corp., to AerCap Holdings NV. ILFC was the last major unit to be divested by AIG following the bailout.
The insurer sold more than $75 billion of assets such as Asian life insurers and a U.S. consumer lender to raise funds, and finished repaying the 2008 rescue in 2012.
The insurer disclosed that it agreed to pay $960 million to investors who said in lawsuits that they suffered losses because of false statements made by AIG about housing-related bets that soured before the bailout. The sum was determined by a mediator, and is subject to court approval, AIG said in a regulatory filing today. The insurer said it has already accrued the settlement amount.
Operating profit rose 25 percent to $1.36 billion at the property-casualty business, which insures commercial property, corporate boards and airplanes. Sales slipped 0.5 percent to $9.21 billion.
AIG paid 99 cents in claims and expenses for every premium dollar it took in, compared with paying $1.03 a year earlier. The unit recorded its first in five quarters.
At the life and retirement unit, operating profit rose 2.5 percent to $1.18 billion. Premiums and deposits climbed to $7.36 billion from $6.77 billion, fueled by annuity sales.
The business, led by Jay Wintrob, generated more than half of the insurer’s profits last year. AIG boosted sales of retirement products such as annuities as rivals including MetLife Inc. retreated.
AIG said net investment income increased 1 percent to $3.88 billion. Realized capital gains were $101 million, compared with $1.59 billion a year earlier.
Returns on hedge funds fell at both of AIG’s main units, while private-equity results improved. Hedge fund income fell 49 percent to $67 million at the property-casualty business and tumbled to $33 million from $263 million at the life operation.
Private-equity bets added $121 million at the P&C business, up from $108 million a year earlier. At the life operation, the figure jumped to $151 million from $112 million. Hedge-fund results are generally delayed by one month, and private-equity figures by three months, AIG said.
Net unrealized gains on bonds available for sale widened to $17.4 billion on June 30, from $13.7 billion three months earlier, led by corporate debt, according to the company’s quarterly report. The figure reflects market fluctuations that aren’t counted toward earnings, and is monitored by investors and ratings firms as a gauge of financial strength.
The company’s $370 billion investment portfolio included $288 billion of bonds on June 30. Most of the securities are classified as available for sale.
AIG’s mortgage insurer, United Guaranty, contributed $210 million to earnings, about three times more than a year earlier. Home-loan guarantors, which cover losses when borrowers default and foreclosures fail to recoup costs, have benefited from a rebound in the housing market.
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