(Bloomberg) — American International Group Inc., the largest commercial insurer in the U.S. and Canada, said profit rose 1 percent in the first report under Chief Executive Officer Peter Hancock.
Net income climbed to $2.19 billion, or $1.52 a share, in the third quarter, from $2.17 billion, or $1.46, a year earlier, New York-based AIG said today in a statement. Operating profit, which excludes some investing results, was $1.21 a share, beating the $1.09 average estimate of 24 analysts surveyed by Bloomberg.
Hancock, 56, took over from Robert Benmosche at the start of September. He’s reshaped management after the departure of life-unit CEO Jay Wintrob, and is also working to improve margins at the property-casualty operation by expanding the use of science in underwriting.
“Peter is bringing a hard-nosed view of data,” Josh Shanker, an analyst at Deutsche Bank AG, said in an interview before results were announced. “Historically, AIG has been criticized, I think correctly, that they’ve been really soft on data.”
AIG rose 0.7 percent to $54.20 in extended trading at 4:48 p.m. in New York, after results were announced. The stock had gained 5.4 percent this year in regular trading, compared with the 9.2 percent advance of the Standard & Poor’s 500 Index.
Book value, a measure of assets minus liabilities, climbed to $77.35 per share as of Sept. 30, from $75.71 three months earlier. AIG said the board authorized a fresh $1.5 billion buyback program on Oct. 31 and that the company repurchased $3.4 billion of stock this year.
Net investment income increased 13 percent to $4.03 billion, as returns jumped from private-equity and hedge funds. Income from alternative holdings more than doubled to a total of $484 million at the insurer’s main units.
Pretax operating profit rose 1.6 percent to $1.1 billion at the property-casualty business, which insures commercial property, corporate boards and airplanes. Sales increased 3.4 percent to $8.95 billion.
AIG paid out 102 cents in claims and expenses for every premium dollar it took in, about the same as a year earlier. Catastrophe costs increased to $284 million in the period from $222 million, and the insurer reported $227 million of costs tied to prior-year claims, worse than the $70 million figure in the third quarter of 2013.
Hancock announced Wintrob’s departure in September and gave Kevin Hogan his main duties. Hogan already oversaw sales of property-casualty products to individuals, so the added assignment put all of AIG’s consumer offerings under one executive for the first time. John Doyle, CEO of AIG’s commercial operation, gained responsibility for some institutional products.
At the life and retirement operation, pretax operating profit jumped to $1.35 billion from $1.14 billion a year earlier. Premiums and deposits jumped 15 percent to $9.66 billion as variable annuity sales increased.
AIG’s life business has benefited in recent periods from climbing sales of retirement products and investments returns. Some rivals such as MetLife Inc. and Prudential Financial Inc. have scaled back from annuities, while AIG has increased sales. The unit, under Wintrob, generated more than half of the company’s profits last year.
AIG’s mortgage insurer posted operating profits of $135 million, compared with $43 million a year earlier, as the business faced fewer claims from soured home loans. The United Guaranty unit, led by Donna DeMaio, wrote coverage on $12.6 billion of home loans, down from $14.2 billion a year earlier.
AIG said its investment in AerCap Holdings NV added $196 million to pretax profit. The insurer acquired the 46 percent stake as part of a deal to sell its plane-lease unit, International Lease Finance Corp., to Schiphol, Netherlands- based AerCap.
Net unrealized gains on bonds available for sale narrowed to $15.9 billion on Sept. 30 from $17.4 billion three months earlier, according to AIG’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.
AIG’s $366.4 billion investment portfolio included $265.8 billion of bonds classified as available for sale on Sept. 30.
Benmosche, 70, started at AIG in August 2009, less than a year after the insurer’s U.S. rescue. He sold units and cut jobs to improve results, repaying the $182.3 billion bailout in late 2012. He’s said he accelerated his departure from AIG amid a worsening prognosis for his cancer. Hancock led AIG’s property- casualty business before taking the top job.
AIG’s bailout has been scrutinized recently in a federal trial tied to ex-CEO Maurice “Hank” Greenberg’s suit against the U.S. over rescue terms. While AIG isn’t directly involved in the case, the insurer could be forced to help the U.S. cover costs if Greenberg prevails. Lawyers for Greenberg’s Starr International Co. finished presenting their case on Oct. 31.