NU Online News Service, May 04, 11:07 a.m.EDT

Driven by profits in all core business units—especially itsproperty and casualty insurance unit—American International GroupInc.'s first-quarter net income climbed more than 147 percent.

Net income after the first three months at AIG was $3.2 billioncompared to $1.3 billion during the same period in 2011.

AIG benefitted from strong organic growth during the firstquarter and is “well on its way to achieving aspirational goals,”says Robert H. Benmosche, president and chief executive officer,during a conference call today.

One of the goals is a combined ratio in the low-90s by 2015.

Chartis, AIG's property and casualty unit, posted a combinedratio of 102.1 in the first quarter—a big improvement from the118.6 combined ratio recorded during 2011's first quarter.

First-quarter operating income at Chartis was about $1 billion,compared to a net loss of $424 million last year, as catastrophelosses the first three months were $80 million as opposed to $1.7billion booked a year ago.

Benmosche says Chartis continues to improve its loss ratio and“rate is coming in,” but these favorable developments, he warns,“take time to emerge in our financials.”

Property and workers' compensation rate increases of 11 percentand 7 percent, respectively, led an overall average rate increaseof 5.2 percent in the United States and Canada.

Net premiums at Chartis were down 3.7 percent to $8.8 billion asthe unit continues to improve under-performing lines, use ratediscipline and “shed business that doesn't meet our requirements,”says Peter Hancock, CEO of Chartis.

This strategy, as well as a shift to higher-value business, wasoffset by higher expenses for talent and technology—a long-terminvestment for a better franchise at Chartis, says Hancock.

Specialty premiums increased during the first quarter and thecommercial segment continued its expansion to emerging markets. Netoperating income in commercial was $565 million from a loss of $384million in the first quarter of 2011.

Chartis' consumer insurance segment also benefitted frominvestments in direct marketing channels outside the U.S. andCanada, says Hancock. Operating income in this segment was $234million during the first quarter compared to a loss of $255 milliona year ago and the combined ratio improved to a profitable 96.7from 110.2 last year.

SiFi Prep

Chief Financial Officer David Herzog told analysts “a very largeteam” at AIG is preparing for federal oversight. The company saysit's likely it was will be deemed a “SiFi.”

Benmosche says he sees no constraints on the company's capitalmanagement should AIG be officially designated as systemicallysignificant.

He says the key to getting ready for government oversight is,“You better have a very good, well-documented process.” But AIGwon't know about capital constraints “until they [the Fed] gethere.”

“They will decide,” Benmosche says. “We have to go through theirtest. We don't see any constraint.”