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

Chartis, AIG's property and casualty unit, posted a combined ratio of 102.1 in the first quarter—a big improvement from the 118.6 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 catastrophe losses the first three months were $80 million as opposed to $1.7 billion 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 percent and 7 percent, respectively, led an overall average rate increase of 5.2 percent in the United States and Canada.

Net premiums at Chartis were down 3.7 percent to $8.8 billion as the unit continues to improve under-performing lines, use rate discipline 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, was offset by higher expenses for talent and technology—a long-term investment for a better franchise at Chartis, says Hancock.

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

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

SiFi Prep

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

Benmosche says he sees no constraints on the company's capital management should AIG be officially designated as systemically significant.

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

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