AIG American International Group Inc

By Leslie Scism, Nicole Friedman and Tess Stynes 

American International Group Inc. swung to a quarterly profit but suffered a setback in its turnaround effort for its property-casualty insurance unit, while four other big insurers posted stronger-than-expected operating results for the third quarter.

Analysts at Evercore ISI dubbed Wednesday as "Insurance Super Day" with life insurers MetLife Inc., Prudential Financial Inc. and Lincoln National Corp., along with car and home insurer Allstate Corp. and AIG, reporting results after the closing bell.

The improved results at the three life insurers come despite a tough environment for sales of many of their interest-rate-related products. The property casualty insurers, meanwhile, reported higher catastrophe losses from storms versus an unusually placid hurricane season the prior year.

AIG's shares tumbled 3.4% after hours, while Allstate gained 4.1% and MetLife added 1.3%. The others were unchanged.

MetLife, in one of its last few quarters as the U.S.'s biggest life insurer by assets, said its results were buoyed by a 6% increase in net investment income to $5.2 billion. That gain was driven by strong performance of private-equity holdings and the sale of a real-estate joint venture interest. MetLife is spinning off part of its U.S. retail life-insurance operations into a new company as early as the first quarter.

Prudential, which is set to succeed MetLife as the biggest life insurer, highlighted strength in its international business, along with new business in its retirement and asset management divisions.

Smaller peer Lincoln National Corp. said its operating earnings for the quarter marked a record, citing expense and capital management as factors. And Allstate reported higher property-liability insurance premiums but a big increase in catastrophe losses.

"There's been a lot of different storms," Allstate Chief Executive Tom Wilson said in an interview. But he predicted the company's losses due to Hurricane Matthew in October will likely below its competitors' as Allstate has a lower market share in Florida.

At AIG, results fell below the expectation of Wall Street analysts, though they did top the poor performance of the year-earlier quarter, when the company took a restructuring charge.

"There's volatility here and we expect it going forward, but there is some underlying improvement toward AIG's previously outlined strategic goals and we're encouraged to see that," said Rob Haines, a senior insurance analyst with credit-research firm CreditSights.

AIG posted operating income of $1.1 billion, or $1 a share, up from $691 million, or 52 cents a share, the year before when results fueled activism from billionaire investors Carl Icahn and John Paulson. Mr. Paulson and a deputy to Mr. Icahn were added to AIG's board in May. Analysts expected $1.21 a share in operating earnings.

The latest results were hurt by a charge of $404 million, or 37 cents a share, to recognize losses in a portfolio of "structured settlements" that the company has designated for sale as part of its effort to streamline and return more capital to shareholders.

AIG's setback was a $306 million strengthening of reserves for policies sold to U.S. businesses in years past. AIG, which didn't specify the years, said the strengthening related to casualty and property lines written by managing general agents.

The reserve boost drove AIG's "loss ratio" -- which reflects the percentage of each premium dollar that goes to pay claims and related expenses -- to 77.7%, up from 72.8% the year before. It comes on top of a $3.6 billion pretax strengthening in last year's fourth quarter, as AIG sought then to get reserves in shape.

As part of its turnaround, AIG is committed to returning at least $25 billion to shareholders through buybacks and dividends in 2016 and 2017. It said it has returned $10.8 billion to shareholders year-to-date through Nov. 2. AIG's board authorized an additional increase in repurchase authorization of $3 billion.

Results By Company

   -- At MetLife, operating earnings more than doubled to $1.4 billion, or 
      $1.28 a share, easily beating the $1.14 expected by analysts. It net 
      results, however, included $683 million in mostly mark-to-market 
      derivative losses reflecting changes in interest rates, equity markets 
      and foreign currencies, along with a $223 million write-down tied to 
      Brighthouse Financial, the new name for its life-insurance operations. 
 
   -- Prudential's operating earnings, meanwhile, rose 7.3% to $1.19 billion, 
      or $2.66 a share, above Street expectations for $2.49. 
 
   -- Lincoln Financial's operating earnings rose 53% to $441 million, or $1.89 
      a share. Revenue decreased 5.1% to $3.53 billion. Analysts expected a 
      per-share operating profit of $1.62 and revenue of $3.44 billion. 
      Lincoln's board also approved a 16% increase in the company's quarterly 
      dividend. 
 
   -- At Allstate, operating earnings fell 22% to $474 million, or $1.26 a 
      share. Premiums written increased 2.1% to $8.31 billion. Analysts 
      expected a per-share operating profit of $1.25 and net premiums written 
      of $8.35 billion. Pretax net catastrophe losses increased 78% to $481 
      million, mostly from wind and hail storms. 

Write to Leslie Scism at leslie.scism@wsj.com, Nicole Friedman at nicole.friedman@wsj.com and Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

November 02, 2016 18:28 ET (22:28 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.