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AIG: Benmosche Transformation Winner

NEW YORK ( TheStreet) -- American International Group (AIG - Get Report) was the financial stock winner on Friday, with shares rising 6% to close at $44.52.

Investors cheered strong first-quarter results that AIG reported after Thursday's market close, which included a return to profitability for the company's property and casualty insurance unit.

Investors were looking for solid operating improvement in the first quarter, after AIG CEO Robert Benmosche successfully led the company out of its epic U.S. government bailout during the fourth quarter. The U.S. Treasury said in December after selling its remaining stake in AIG shares that U.S. taxpayers ended up with a $22 billion profit from the AIG bailout.

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 $$1.3 billion in after-tax 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 soundly beat the consensus estimate of 87 cents, among analysts polled by Thomson Reuters.

Benmosche has repeatedly said that AIG was focusing on improving its P&C underwriting, and the company reported its first underwriting profit for the unit since the second quarter of 2009. The Property Casualty insurance segment's first-quarter underwriting profit was $231 million, compared to an underwriting loss of $180 million a year earlier. The unit's loss ratio -- losses either paid or for which reserves were set aside, divided by premiums earned -- was 63.3% in the first quarter, improving from 68.0% a year earlier.

The P&C combined ratio improved to 97.3% in the first quarter from 102.1% a year earlier. The combined ratio is an insurance unit's losses plus expenses divided by premiums earned. A ratio above 100% indicates an underwriting loss.

First-quarter pretax income for the Property Casualty segment was $1.604 billion, increasing from $910 million in the first quarter of 2012.

Deutsche Bank analyst Joshua Shanker rates American International Group a "buy," and said in a note to clients late on Thursday that "these results--after stripping out good weather, alternative investments and non-core items--are still modestly ahead of our expectations, and we expect incremental margin improvement in P&C as well as debt and stock retirement in 2013 to drive forward-looking EPS higher."
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