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Insurance giant AIG (NYSE:AIG) recently reported it swung to a profit for its third quarter. The company earned after-tax operating income of $1.00 per share, compared to a loss of $1.58 per share during the third quarter of 2011 and consensus estimates of $0.86 per share.

Equally impressive, book value increased 10% sequentially to $61.49 per share. However, the US Treasury's 15.9% stake in the company continues to weigh on the firm's stock price performance, as the timing of share sales remains uncertain. Regardless, AIG's operating performance is far more important to the company's long-term return outlook than US Treasury sales, in our view.

Performance, though relatively strong based on headlines numbers, was a mixed bag. Operating profit at AIG Property Casualty surged 60% year-over-year to $786 million, mostly a result of strong investment performance. Net premiums written grew just 0.6% year-over-year to $8.7 billion, while net premiums earned slipped 3.2% year-over-year to $8.7 billion. Claims and claims adjustment expenses fell 8.6% year-over-year to $6.3 billion, which left the firm with relatively small losses from catastrophes during the period.

Life and Retirement operations were strong during the third quarter, as operating income increased 75% year-over-year to $826 million. Metrics were strong across the board, with policy fees increasing 5% and net investment income growing 13%, as benefits and expenses fell 1.2%. Aircraft leasing operations swung to a profit of $39 million after losing over $1.3 billion during the same period a year ago (the company lapped a $1.5 billion impairment charge).

Though Hurricane Sandy will impact fourth-quarter results, we're still assessing the magnitude at this time. Still, we think the future looks relatively promising, even though the company noted that it prefers to focus on managing debt and paying dividends rather than buying back shares. The company trades at a substantial discount to its book value, and we think negative price action caused by Hurricane Sandy and uncertainty with respect to the Treasury's ownership could create an interesting opportunity. AIG scores an 8 on the Valuentum Buying Index (our stock-selection methodology), so shares look attractive at current levels, in our view.

Source: AIG Beats Estimates, Shares Remain Attractive