AIG (NYSE:AIG) reported Q1 numbers yesterday and presented a solid performance mainly driven by its Chartis insurance operation.
Chartis reported operating income of $1.0 billion in the first quarter of 2012, compared to a $424 million operating loss in the first quarter of 2011. First quarter results demonstrated progress toward improving risk-adjusted profitability, the quality of its business portfolio, and the strength of its capital position. Chartis continued to benefit from growth in higher value lines of business and geographies and improving pricing trends. First quarter 2012 results included catastrophe losses of $80 million and modest net prior year reserve development. As part of AIG's ongoing focus on capital management, Chartis paid $1.0 billion in non-cash dividends to AIG Parent during the current quarter.
As expected, Q1 numbers are dominated by the performance of its insurance subsidiaries. Besides good performance for Chartis, which is attributable to low natural catastrophe claims, results were quite flat for SunAmerica and ILFC.
The increase in the market value of AIA's shares let to a gain of $1.8bn and ML III was adjusted upward $1.3bn.
AIG continues to operate profitable insurance subsidiaries. Even though the combined ratios are relatively high relative to peers, Q1 results demonstrate the strength of its underlying franchises and support the arguments I have made in my first AIG article. Due to a $3.1bn gain in after-tax operating income, book value per share now stands at $57.68 marking an impressive 8% increase in the first quarter alone. If AIG continues to show operating strength and lower cost ratios going forward, complemented by its share repurchase program, AIG could hit $100 in 2013/2014.
Disclosure: I am long AIG.