American International Group's property and casualty businesswas able to generate rate increases of 7.3 percent in the U.S. asit shifted its emphasis to high-value businesses, its top officialstold analysts today.

Net income attributable to AIG for the quarter was $2.7 billion,up from $2.3 billion a year ago.

The P&C business “is continuing a strong turnaround, you cansee that in the accident-year losses, the ability to get rate whereit makes sense, we're still growing the top line in a very strongway, and you could see that our reserve is continuing to bemaintained at roughly the levels we think it's necessary,” RobertBenmosche, president and CEO told analysts in opening remarks atthe conference call.

The U.S. casualty business had the highest rate increases, up9.4 percent, Peter Hancock, CEO of AIG Property Casualty,added.

P&C second-quarter operating income was nearly $1.1billion–the seventh consecutive quarter of positive after-taxoperating income attributable to AIG–and included catastrophelosses of $316 million from flooding in Europe and the Americas, aswell as U.S. tornadoes and hailstorms.

AIG took an underwriting loss in the quarter of $225 million,compared to a $217 million underwriting loss a year ago, and theinsurer's combined ratio climbed to 102.6 compared to 102.4 in2012's second quarter.

The company notes that the combined ratio includes catastrophelosses and adverse net prior year development of $154 million, netof premium adjustments, primarily due to a Superstorm Sandy-relatedloss reserve increase of $142 million.

The Sandy losses stemmed from severe damage to a number ofhigh-value properties insured by AIG in the downtown Manhattanarea, Hancock and Benmosche said.

“This was a very serious storm and a very complicated storm todeal with,” Benmosche said in his opening remarks.

Hancock said he is optimistic that the P&C unit of AIG willbe able to maintain its “positive momentum.” Property and financiallines in the U.S. reported positive rate of 5.7 percent and 6.8percent, respectively.

“We saw growth in property from entry lines and specialty whichall benefited from improved retentions, new business and pricing,”Hancock said.

In general, “the second quarter mark continued progress towardsincreasing the intrinsic value of AIG Property Casualty,” Hancocksaid.

“Our shift to high-value business combined with underwriting andclaims practice improvements exemplified how our focus on balancinggrowth, profitability and risk is helping to produce bettermargins,” he said.

“We maintain our commitment to capital efficiency and optimizingour risk profile,” Hancock added.

Benmosche announced AIG would resume paying aquarterly dividend, 10 cents a share, and its board had authorizedthe repurchase of up to $1 billion of shares of AIG common stock.It will be AIG's first dividend since the fall of 2008, when thecompany's involvement in various aspects of the mortgage market,including acquisition of mortgage-backed securities andcollateralized debt obligations backed by packages of MBS, wentsour, forcing the government to step in and provide liquidity toAIG in return for 79.9 percent of its stock.