UPDATE 3-AIG posts quarterly profit on investment income

* Q1 EPS to company $2.16 vs year-ago loss $39.67

* Investment performance boosts results

* General insurance business appears to have stabilized

* Chartis, SunAmerica premiums decline

* AIG shares up 2 pct in early trade
(Adds analyst comments, details from results, byline)

By Paritosh Bansal

NEW YORK, May 7 (BestGrowthStock) – American International Group
Inc (AIG.N: ) turned a quarterly profit after a year-ago loss as
the bailed-out insurer got a boost from its investments and
general insurance operations appeared to stabilize.

Chartis, the general insurance business, saw net premiums
decline, but AIG said it was still a significant improvement
over the prior four quarters. Combined ratio, a measure of
profitability of the core insurance business, also improved
significantly over the 2009 fourth quarter.

AIG shares rose 2 percent in early trading.

“The external environment has been helpful for AIG in ways
that it can’t take credit for,” Morningstar analyst Bill
Bergman said. “But there are things that they can take credit
for.

“Stabilizing the insurance premium and retaining the
confidence of their customers seems like something they can
point to and be proud of,” Bergman said.

AIG, nearly 80 percent-owned by the U.S. government,
reported a first-quarter profit (Read more your timing to make a profit.) to the company of $1.5 billion,
or $2.16 per share, compared with a loss to the company of $4.4
billion, or $39.67 a share, a year earlier.

Net income attributable to AIG common shareholders was $294
million, compared with a year-ago loss of $5.4 billion.

“We remain focused on further stabilizing and strengthening
our businesses while continuing our restructuring activities,
closing the pending transactions, and developing plans to
address our highly leveraged capital structure,” Chief
Executive Robert Benmosche said in a statement.

Benmosche sees a future for AIG with the general insurance
business, Chartis, and the U.S. life insurance and retirement
services business, SunAmerica Financial Group, forming the
core, as AIG sheds assets to repay the U.S. government after a
$182.3 billion bailout.

Chartis’ profit increased 24 percent in the first quarter
to $879 million as its investment performance improved. The
earnings came despite $481 million of catastrophe losses,
including some due to an earthquake in Chile.

The company paid out 102.51 percent of premium income to
cover claims and expenses, down from 132.46 percent in the 2009
fourth quarter. Excluding significant catastrophe-related
losses, the combined ratio came to 96.22 percent, down from
132.46 percent. A ratio below 100 percent indicates
profitability.

“On the surface it appears to have stabilized, which is
promising,” Bergman said.

PROBLEMS PERSIST

But Chartis’ net premiums written fell 1.1 percent to $7.6
billion, and AIG said net premium writings continue to be
affected by challenging economic conditions.

Profit at SunAmerica also improved largely due to increased
net investment income. But premiums, deposits and other
considerations fell 6.5 percent on a decline in individual
fixed annuities and lower life insurance sales.

“What good news there is seems to be driven by their
investment. And given that forward looking prospects of that
are iffy, it is hard to bank on that,” said Aite Group senior
analyst Clark Troy, who focuses on life insurance.

AIG reported $16.3 billion in revenue for the quarter.

AIG Financial Products, the unit behind the insurer’s
collapse, reduced the notional amount of its derivative
portfolio by 20 percent during the quarter, to $755.4 billion
at March 31. The number of trade positions in its portfolio was
cut 11 percent to about 14,300.

Earlier this year AIG agreed to sell two major foreign life
insurance businesses for a total of about $51 billion.

But one of the deals — the sale of American International
Assurance to Prudential Plc (PRU.L: ) for $35.5 billion — has
hit a rough patch, with the British insurer delaying a massive
rights issue to fund the deal. (For a SCENARIOS article on the
deal, click [ID:nLDE6451DF])

AIG shares have risen more than 22 percent this year. Last
month, Fairholme Capital Management, a respected investment
manager, reported an 11.1 percent stake in AIG.

Money

(Reporting by Paritosh Bansal and Elinor Comlay; editing by
John Wallace)

UPDATE 3-AIG posts quarterly profit on investment income