Strong first quarter operating profits at American International Group (NYSE: AIG) are leading insurance analysts to say that an eventual government exit now appears to be visible.
Keefe Bruyette and Woods analyst Cliff Gallant said that AIG's current management team has done a "tremendous job rebuilding the AIG franchise."
Gallant added that if financial markets remain favorable, and if AIG can continue to execute operationally, "major asset sales and buybacks could occur in 2012 which could lead to material book value and EPS accretion."
Both KBW and UBS both increased their price target on the stock in a reaction to the results.
UBS' Andrew Kligerman increased his price target to $34 from $29 and Keefe Bruyette and Gallant raised KBW's target from $26 to $29. But both retained their neutral rating on the stock.
Earnings grew 147 percent in the first quarter of 2012 compared to the same period in the prior year, but the gain was mostly from the property and casualty sector.
One of the key factors at the life group was that distributors who severed ties with AIG after the government was forced to take a 79.9 percent ownership stake in September 2008 are continuing to reconnect with the company.
The company said that net income attributable to AIG was $3.2 billion and after-tax operating income was $3.1 billion for the quarter ended March 31.
This compared to net income attributable to AIG of $1.3 billion and after-tax operating income of $2.1 billion for the first quarter of 2011.
In another positive development, SunAmerica Financial Group CEO Jay Wintrob said that individual variable annuity deposits totaled $1.0 billion in the 2012 first quarter, a 38 percent increase over the first quarter of 2011, due to competitive product enhancements and reinstatements during the last year at a number of key broker dealers.
He added that net flows were positive for the fifth consecutive quarter. Retail life insurance sales grew 7 percent during the first quarter of 2012 over the first quarter of 2011 "as product enhancements and efforts to re-engage independent distribution channels continued to produce positive sales results."
