AIG Finds the Formula

Operating earnings surpass expectaitons.
Publish date:

Updated from 9:38 a.m.

First-quarter profits at

American International Group

(AIG) - Get Report

, the world's largest insurer, rose 36% from a year ago on a surge in insurance premium revenue.

In the quarter, AIG earned $2.66 billion, or $1.01 a share, compared with earnings of $1.95 billion, or 74 cents a share, in the year-ago period.

On an operating basis, which excludes a capital gains loss and the negative impact of a $181 million accounting change, the New York-based firm earned $1.08 a share. On that basis, the firm, which recently was added to the

Dow Jones Industrial Average

, surpassed the Thomson First Call consensus estimate of $1.06 a share.

Total revenue at AIG rose 25% in the quarter to $23.6 billion.

Net income from new premiums written in the quarter rose 24% to $10.2 billion, as the insurer continued to benefit from increases in insurance rates that it and other firms have imposed on customers the past two years.

"Market conditions continue to be satisfactory," said AIG Chairman and Chief Executive Maurice "Hank" Greenberg, in an earning release. "The substantial price increases over the past two years were very much needed, and in many classes of business, price increases are still necessary."

Operating income in the firm's asset-management group rose 37% to $239 million, as AIG benefited from the revival in the stock market. Revenue from brokerages and mutual fund services rose 27% in the quarter to $60 million.

AIG did suffer some hiccups in the quarter. Its financial services division posted a 1.4% decline in operating income to $523 million. Much of the division's slack was due to weakness in AIG's big aircraft leasing subsidiary,

International Lease Finance Corporation

. Operating income at ILFC slid 8% from a year ago to decline in operating income $160 million.

Going forward, AIG said it expects a rebound in its aircraft leasing business, which is one of the nation's largest. The firm said it expects ILFC's income to grow during the remainder of the year because "lease rates are moving upward and demand is strong."

Shares of AIG, which closed Wednesday at $73.20, are up 11% this year. A week ago, the stock hit a 52-week high when it exceeded the $77 mark, but has fallen back along with other financial stocks on concern about the impact of rising interest rates. Shares were recently down Thursday 30 cents, or 0.41%, to $72.90.