American International Group Inc. (AIG:US), the insurer that repaid a U.S. bailout last year, declared its first dividend since the rescue and authorized the repurchase of $1 billion in stock after profit jumped 17 percent. Shares climbed in extended trading.
Net income (AIG:US) climbed to $2.73 billion, or $1.84 a share, from $2.33 billion, or $1.33, a year earlier, New York-based AIG said yesterday in a statement. The quarterly dividend is 10 cents a share. Operating profit, which excludes some investing results, was $1.12 a share, beating the 86-cent average estimate (AIG:US) of 20 analysts surveyed by Bloomberg.
AIG paid back the $182.3 billion U.S. rescue in December in part by selling more than $60 billion in assets such as Asian insurers and a U.S. consumer lender. Chief Executive Officer Robert Benmosche, 69, is focused on improving profits at the property-casualty operation and struck deals this year to expand in markets including China and Turkey.
“The underlying operational recovery story, you expect to continue to play through,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said by phone before results were announced. “It’s well along the course to becoming a normal company.”
AIG rose 5 percent to $49.41 at 6:17 p.m. in New York yesterday, after results were announced.
Book value (AIG:US), a measure of assets minus liabilities, fell to $66.02 per share at the end of the second quarter from $67.41 three months earlier, as rising interest rates pressured the value of AIG’s bond portfolio. AIG said it realized $1.25 billion of gains on bonds at the life and retirement unit.
Operating profit at the life and retirement unit, led by Jay Wintrob, climbed 23 percent $1.15 billion, as rising asset prices added to fees and investment results improved. Premiums and deposits rose to $6.8 billion from $5.4 billion as variable annuity sales gained.
Hedge funds and private-equity investments added $375 million to profit at the life unit, compared with a contribution of $107 million a year earlier, AIG said in a supplemental filing on its website.
The property-casualty unit, led by Peter Hancock, posted an operating profit of $1.09 billion, up from $936 million a year earlier, as investment income gained. Premium revenue fell 5.4 percent to $8.35 billion.
The business paid out $1.03 in claims and expenses for every premium dollar it collected. The insurer recorded costs of $142 million for claims related to last year’s superstorm Sandy.
AIG said its 10-Q filing with the U.S. Securities and Exchange Commission, which is usually released with earnings, will be delayed until next week after a general release yesterday from the Internal Revenue Service. The release caused AIG to modify the amount of deferred tax valuation allowance that it planned to record for the quarter, the insurer said.
AIG had net deferred tax assets of about $16.7 billion as of Dec. 31, the insurer said in a presentation in February. The assets, which accumulated as the company posted record losses in 2008, have expiration dates from this year into the next two decades, AIG said. Federal law prohibits the IRS from discussing specific taxpayers or situations, Dean Patterson, a spokesman for the agency, said in an interview.
At AIG’s mortgage insurer, operating profit was $73 million, a 70 percent jump from a year earlier. The company sold coverage on $13.8 billion of home loans in the quarter, a 62 percent increase from a year earlier.
Benmosche has reduced debt (AIG:US) at AIG as he seeks to bolster the company’s credit grade. He’s said the company needed to cut leverage before returning capital to shareholders. Debt was $42.6 billion as of June 30, compared with about $48.5 billion at the end of 2012. The figure excludes borrowing at the plane-leasing unit Benmosche is seeking to sell.
AIG said yesterday that the deal to sell the unit to a group of Chinese investors still hasn’t been completed, missing a third deadline. The insurer agreed in December to sell 80 percent of International Lease Finance Corp. for $4.23 billion.
The U.S. Treasury owned as much as 92 percent of AIG after the insurer’s bailout, and still held a majority stake when the company reported results a year ago. AIG repurchased shares from the U.S. to help end the rescue.
AIG last announced a dividend increase on May 8, 2008, raising the payout by 10 percent on the same day that then-CEO Martin Sullivan announced a loss of more than $7 billion. The firm was bailed out in September 2008, as housing bets soured.
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