AIG’s second quarter operating profit beat forecast

AIG’s second quarter operating profit beat forecast

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American International Group Inc (NYSE:AIG) increased its common-stock dividend by a hefty 124 percent and boosted its share buyback goal by $5 billion. The move came after the company announced that its second-quarter operating earnings jumped 5.4 percent to $1.89 billion that easily surpassed consensus forecast.

Despite beating operating profit estimates, net income plummeted 41 percent. The global insurer’s bottom line was higher than the same period last year, in which it enjoyed significant gain associated with the sale of an aircraft-leasing segment.

The company’s multi-year restructuring struggle to boost earnings in its key division of selling property and casualty insurance to enterprises faced difficulties during the quarter. Pricing pressures effected few of the segment’s business lines, while strong dollar in a number of countries hurt its revenue growth.

The surge of 5.4 percent in the company’s overall operating earnings was largely due to increase in the value of its remaining stake in the aircraft-leasing division. AIG sold the business to return U.S. taxpayers for its roughly $185 billion bailout, and to make an investment in PICC Group, as well as to cut corporate costs.

A wave of M&A is in progress, with AIG competitor ACE Ltd., decided last month to acquire Chubb Corp. in the largest property-casualty insurance transaction at $28.3 billion.

AIG’s net profit dropped from $3.07 billion to $1.8 billion, with weak capital gains also effecting the year-over-year comparison. Operating earnings jumped 13 percent to $1.39 per share for the quarter. Analysts polled by Thomson Reuters were looking for earnings of $1.22 per share.

The company said that quarterly dividend will increase from 12.5 cents to 28 cents. AIG reported that it has purchased $965 million of shares in the last month.

AIG’s board chairman, Douglas Steenland said in a news release that continued divestiture of noncore assets has helped the company to generate significant cash proceeds and improved its risk profile.

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I am an independent trader currency and commodity with about eight years of experience. I love the financial world because it is like one big puzzle and I hope we help each other out to solve the puzzle to help us realize our dreams. I received my BBA in Accounting (With Honors) - from The University of Texas - San Antonio. Achievements: Beta Alpha Psi National Accounting Honors Fraternity member, Leadership Challenge Participant, Dean's List. I have passed the Series 63, 22, Texas Real Estate exam, and the DRI Business Continuity exam.

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