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Benmosche Triumphs as AIG Swings to P&C Underwriting Profit (Update 1)

Stocks in this article: AIG ALL TRV CB BRK.B

Updated from 9:42 a.m. ET with very strong morning action for AIG's shares, along with comment from William Blair analyst Adam Klauber.

NEW YORK ( TheStreet) -- "Since mid-2011 the focus of our company has been to get the fundamentals right."

That's how American International Group CEO Robert Benmosche began the company's earnings conference call on Friday morning, after the company late on Thursday reported a first-quarter underwriting profit for its property and casualty insurance business.

The first-quarter results showed an "inflection point" in the company's transformation, according to BernsteinResearch analyst Josh Sterling.

Over the past year, AIG has lagged its major U.S. property and casualty insurance competitors, by continuing to show underwriting losses, because of low premium pricing and higher accident year loss ratios. But both of these areas have been steadily improving under Benmosche's leadership. He also succeeded in moving the company past its epic bailout by the U.S. government at the end of last year, with U.S. taxpayers ending up with a $22 billion profit.

AIG reported first-quarter operating after-tax income of $1.982 billion, or $1.34 a share, compared to $290 million, or 20 cents a share, in the fourth quarter, and $3.046 billion, or $1.62 a share, in the first quarter of 2012. The fourth-quarter results were lowered by $2.0 billion ($1.3 billion after tax) in losses from Superstorm Sandy, while the first quarter 2012 results included $3.3 billion in pretax gains on the sale of several investments.

The first-quarter after-tax operating earnings greatly exceeded the consensus estimate of 87 cents, among analysts polled by Thomson Reuters.

AIG's shares were up 6% in morning trading, to $44.57.

For its Property Casualty insurance segment, AIG reported pretax income of $1.604 billion, compared to a loss of $983 million in the fourth quarter (from Sandy) and $910 million in the first quarter of 2013. Because of Sandy's gross effect on the fourth-quarter numbers, the following will only include year-over-year comparisons.

AIG reported a P&C underwriting profit of $231 million in the first quarter, compared to an underwriting loss of $180 million a year earlier.

AIG has traditionally been known to undercut competitors on pricing in order to gain P&C market share, but this has been changing under Benmosche's leadership. The company said in its earnings release that Property Casualty "improved underwriting margins were driven by a shift in the portfolio mix, the benefits of underwriting improvement initiatives, which are enhancing our risk selection, and increases in pricing."

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