AIG reports 2013 Q1 net income of $2.2 billion

American International Group, Inc.’s (AIG) financial results for 2013 Q1 compared to 2012 Q1 – which show a significant hike in insurance operating income – offer encouragement to move forward with efforts to achieve the company’s 2015 aspirational goals.

On Thursday, AIG reported net income of $2.2 billion and after-tax operating income of $2 billion for the quarter ended March 31, 2013. The totals were $3.2 billion and $3 billion, respectively, for the prior-year first quarter, notes the company, an international insurance organization whose companies serve commercial, institutional and individual customers in more than 130 countries.

Insurance operating income in the first quarter of 2013 was up 28% from 2012 Q1, notes the AIG statement.

Total insurance operations – which includes AIG Property Casualty, AIG Life and Retirement and Mortgage Guaranty – were $3 billion in the first quarter ended March 31, 2013 compared with approximately $2.4 billion in 2012 Q1, the financial results show. Of that amount, AIG Property Casualty accounted for $1.6 billion in 2013 Q1 compared to about $1 billion in the prior-year first quarter, reflecting increases in both underwriting income and net investment income.

The improved underwriting margins “were driven by a shift in the portfolio mix, the benefits of underwriting improvement initiatives, which are enhancing our risk selection, and increases in pricing,” the statement adds. The first quarter 2013 combined ratio was 97.3 compared to 102.1 for the same quarter in 2012.

With regard to premiums, net premiums written in 2013 Q1 were $8.4 billion, down 4.3% from the first quarter of 2012. The decrease reflects the effects of recognizing ceded premiums written for excess of loss reinsurance agreements at contract inception rather than ratably over the contract period, foreign currency exchange rates and the timing of a catastrophe bond issuance in 2013 Q1.

“Excluding these items, first quarter 2013 net premiums written increased 4% compared to the first quarter of 2012,” AIG points out.

For Commercial Insurance, net premiums written excluding the impact of the previously noted items increased 3.8% compared to the first quarter of 2012, says the company statement. “Growth in higher-value products and geographies was partially offset by continuing efforts to improve risk selection, particularly in U.S. casualty,” AIG adds.

Commercial Insurance reported 2013 Q1 operating income of $1 billion and a combined ratio of 92.2 compared to $645 million and 101.7, respectively, in the first quarter of 2012.

As for Consumer Insurance – which continued to focus on growing higher value lines of business, while expanding direct marketing as part of its multi-distribution channel strategy – net premiums written excluding the aforementioned items increased 4.2% compared to the first quarter of 2012.

In addition, Consumer Insurance reported operating income of $153 million and a combined ratio of 98.4 in 2013 Q1 compared to $234 million and 96.7 for 2012 Q1.

“We are pleased with these results and look to continue to build on our successes, especially as we continue to make progress towards achieving our 2015 aspirational goals,” Robert Benmosche, AIG’s president and CEO, notes in the company statement.

For 2013, the priority is to improve operating fundamentals and reduce costs, Benmosche says. “Whether this means lowering the cost of capital, re-engineering our systems, or focusing on business lines and geographical locations that make strategic sense for our company – reducing expenses and improving operating efficiencies are leading goals of every AIG employee.”

The company sees “the potential for further cost savings as we work to transform the corporate structure to support this leaner business. And, as a global company with half of our people outside the United States, we are exploring the capabilities, expertise and opportunities where we have operations,” Benmosche adds.