NU Online News Service, may 7, 12:40 p.m. EDT

New York-based insurer American International Group Inc. reported a first-quarter profit of $1.45 billion, but its chief executive cautioned that volatility for the company's future earnings lies ahead.

AIG's reported net income was a turnaround from last year's first-quarter loss of $4.35 billion. Earnings per share stood at $2.16. Last year, the loss per share was $39.67.

First-quarter continuing insurance operations reported net income of $2.22 billion, up from $908 million for the same period last year. Results improved despite $481 million of catastrophe losses resulting from events such as the Chile earthquake. The increase was the result of improvements in investments.

Net premiums earned by Chartis and other AIG property and casualty businesses fell about 8 percent, or $631 million, to $7.64 billion. Income before net realized capital gains grew 24 percent, or $169 million, to $879 million.

Catastrophes pushed the segment's combined ratio up 5.83 points, to 102.51.

On the life side, SunAmerica Financial Group reported income before net realized capital losses of $1.12 billion. That compares with a loss of $160 million reported for the comparable period in 2009.

AIG's foreign life insurance and retirement operations, AIG Star Life Insurance Company Ltd. and AIG Edison Life Insurance Company, reported income before net realized capital losses dropped 39 percent, or $138 million, to $220 million in the quarter.

Robert H. Benmosche, the company's president and chief executive officer, is giving AIG employees credit for the improved financial performance.

"The headline should be, 'Our people continue to make great progress,'" he said during a recorded address.

He said the company remains committed to paying the U.S. government back for loans extended to it in 2008 and keeping the company's remaining assets viable.

"All that said, 2010 will continue to be a transition year for all of us," said Mr. Benmosche. "One in which our total earnings could be somewhat volatile and where we could incur restructuring related charges, including for good-will impairment as well as gains, including gains related to sales."

Repayments to the government will affect future earnings, he added.

Mr. Benmosche said Chartis is doing much better than it was in the recent past, when critics predicted the company would suffer "an enormous erosion of its business." He said the reception of Chartis at the recent Risk and Insurance Management Society meeting in Boston demonstrates that "AIG is back."

"And I can guarantee you that we will work hard on our goal to become the preeminent global property insurer," he said.

The acquisition of majority stock ownership in Fuji, a Japanese insurer, indicates that the company is seeking to grow by making acquisitions while at the same time divesting what it needs to pay back government loans, Mr. Benmosche said.

AIG remains on track to sell American Assurance Company Ltd. and American Life Insurance Company, and the deals should be completed by the end of the year, he said.

Mr. Benmosche also talked about AIG's efforts to repay the Federal Reserve Bank of New York for the aid the New York Fed provided during the financial crisis.

The sale of AIA and ALICO should reduce the loan obligations substantially, Mr. Benmosche said. AIG said its net New York Fed borrowing stands at $21.6 billion, plus interest and fees of $5.8 billion.