AIG to Buy Back $3.5 Billion of Stock as Profit Gains 53%

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American International Group Inc. said it will repurchase another $3.5 billion in stock after first-quarter profit climbed 53 percent on gains at the unit selling property and casualty insurance to commercial clients.

Net income rose to $2.47 billion, or $1.78 a share, from $1.61 billion, or $1.09, a year earlier, the New York-based insurer said Thursday in a statement. Operating profit, which excludes some investing results, was $1.22 a share, beating the $1.19 average estimate of 21 analysts surveyed by Bloomberg.

Chief Executive Officer Peter Hancock has sought to increase the use of technology in underwriting while limiting sales in volatile lines of commercial coverage to avoid the surprises that hurt AIG in prior periods when reserves proved inadequate. The insurer has also been redeeming high-cost debt and paying a dividend since 2013 after exiting a U.S. bailout the previous year.

“The company should be able to drive an earnings recovery P&C,” Josh Stirling, an analyst with Sanford C. Bernstein & Co., said in an April 16 note. “With the firm making progress on their underwriting, growing in life, buying back stock and paying a dividend, we see the company making clear progress at once again becoming a normal company.”

AIG climbed 0.6 percent to $56.60 in extended trading at 4:40 p.m. in New York. The insurer rose about 5.9 percent in the past year through the close of regular trading, compared with the 11 percent advance of the Standard & Poor’s 500 Index. Results were released after 4 p.m.

Book Value

Book value, a measure of assets minus liabilities, jumped to $80.16 per share as of March 31, from $77.69 at the end of December. The company repurchased about $1.4 billion of stock in the first quarter and another $800 million this month.

Pretax operating income at the commercial insurance operation, led by John Doyle, climbed 2.9 percent from a year earlier to $1.46 billion.

The combined ratio at the property-casualty segment under Doyle improved to 97.1 from 98.9, meaning the business had an underwriting profit of about 3 cents for every premium dollar, after paying claims and expenses. Policy sales rose less than 1 percent to $5.05 billion.

Mortgage Insurance

At the mortgage insurance unit, which guards lenders against borrower defaults, profit jumped 91 percent to $145 million as sales climbed and claims costs fell. Profit slipped 36 percent to $147 million at the institutional markets segment on lower investment returns.

At Kevin Hogan’s consumer operation, operating income dropped 19 percent to $945 million. The contribution from retirement operations fell 13 percent to $800 million on. Life insurance dropped 27 percent to $171 million. Both segments were pressured by lower returns from alternative holdings, which include private-equity and hedge funds. Personal insurance posted a $26 million loss.

AIG’s results were also helped by $174 million of gains from real estate investments and a benefit tied to a holding of AerCap Holdings NV.

Private Equity

Net investment income fell to $3.84 billion from $4.2 billion a year earlier, AIG said in a supplemental document on its website. Returns on private-equity investments fell 24 percent to $278 million. The gain from hedge funds declined 31 percent to $246 million.

Hancock took over in September and reorganized the company into two main divisions, one focusing on commercial clients and the other on consumers. The previous split was between one unit selling property-casualty coverage and another selling life insurance and retirement products.

The CEO has also sought to distinguish AIG by offering products that guard clients against complicated risks, such as a cyber breach. Hancock in September hired Philip Fasano, formerly of Kaiser Permanente, to the newly created position of chief information officer. Fasano this month brought on Michael Brady, also from Kaiser, as the chief technology officer.

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