American International Group Inc , the largest commercial insurer in the United States and Canada, reported a quarterly operating profit that breezed past analysts` estimates, and boosted its share buyback by up to $5 billion.
Shares of the company, which more than doubled its quarterly dividend, were slightly higher in volatile after-market trading on Monday.
The results were primarily driven by investments in one of China`s biggest insurers and earnings from the insurer`s stake in aircraft lessor AerCap, but lower underwriting at most of its units caused concern.
S&P Capital IQ analyst Cathy Seifert said AIG only beat because of income from a company it had essentially taken off its balance sheet.
AIG, which has been trying to exit AerCap Holdings NV , sold most of its 46 percent stake in the world`s largest independent aircraft leasing company in June.
Pretax earnings from AerCap more than doubled to $127 million in the second quarter ended June, helping push AIG`s operating income after tax to $1.9 billion, or $1.39 per diluted share.
AIG, which traces its roots to a two-room office in Shanghai in 1919, also gained $170 million from investments in the People`s Insurance Group of China Ltd and its subsidiary, PICC Property and Casualty Co Ltd.
Analysts on average had expected earnings of $1.22 per diluted share, according to Thomson Reuters I/B/E/S.
FAIRLY DISAPPOINTING
Underwriting income fell in all of the company`s units, except retirement insurance.
"I found the insurance underwriting results fairly disappointing across the board and I`m hoping they don`t portend a broader-based weakness," analyst Seifert said.
Pretax operating profit fell 4 percent to $1.19 billion at the commercial property and casualty insurance business, traditionally AIG`s forte, as the unit struggled with plummeting rates.
Industry rates for commercial property and casualty insurance fell for the third quarter in a row, according to a survey published last month by the Council of Insurance Agents & Brokers.
AIG also paid out $88 million more in catastrophe losses.
Travelers Cos Inc , which vies with AIG for the title of the biggest U.S. commercial property and casualty insurer, reported a stronger-than-expected quarterly profit as catastrophe losses halved.
The combined ratio at AIG`s property and casualty unit inched up during the quarter to 98.8 percent from 96.5 percent.
A ratio below 100 percent means an insurer earns more in premiums than it pays out in claims.
AIG raised its quarterly dividend to 28 cents per share.
The company`s shares closed at $64.15 on the New York Stock Exchange.