American International Group Inc. (NYSE:AIG) reported after-tax operating income per share of $1.7 billion, or $1.21 per share, up from $1.4 billion last year. That was good enough for a beat -- analysts were expecting overall operating income of just $1.09 per share.

But here's why it's not all sunshine and rainbows.

An unlikely winner
AIG Life and Retirement led the improvement over last year. The segment reported operating income of $1.3 billion in the third quarter, up 18% year over year. Life and Retirement was helped by rising stock prices, which led to a 10% increase in assets under management. It also benefited from an increase in net investment income, despite a small decrease on its average investment yield.

Aig Pc Combined Ratio

Not all segments showed dramatic improvements, however. AIG Property Casualty reported a "very AIG" quarter, reflecting a combined ratio of 102, up 0.4 points from the same period last year. The combined ratio measures loss and operating expenses as a percentage of earned premiums. A ratio below 100 is ideal, because it indicates that the company earns a profit from underwriting, not just income earned by investing its premiums.

Catastrophe losses and adverse prior-year loss reserve development were both higher from this time last year. In other words, AIG underestimated losses on insurance policies written. In this very critical segment, pre-tax operating income improved only 2%, because of a 3% increase in written premiums.

Commercial and consumer
The theme of adverse loss reserve developments continued into AIG Commercial Insurance, where its combined ratio jumped to 101.1, up 0.9 points from the year-ago period. The company had been riding a multi-year tailwind of rising commercial insurance pricing, but it appears that pricing growth stagnated for the second quarter in row.

Consumer insurance showed improvement, however. Its combined ratio came in at 98.8, down 1.1 points from last year. AIG noted that consumer insurance lines were benefiting from increased pricing and lower losses in Japan, while the U.S. warranty business was helped by rate actions and coverage changes compared with last year.

And in what is slowly becoming a trend, the company's mortgage insurance business was again one of the best. It produced impressive operating income of $135 million, helped by favorable prior-year loss developments. Of the $135 million in operating income, $100 million came from underwriting, and $35 million from net investment income.

From top to bottom
This quarter's earnings report was good, but far from spectacular. And while a quarter isn't enough evidence to make a trend, it's becoming clear that underwriting profitability at AIG is a multi-year story. Peter Hancock's job is only beginning.

But there were some hints of good. Book value grew 15% year over year to $77.35, helped by the company's continued share repurchase program. This quarter, AIG repurchased $1.5 billion of stock, and then authorized $1.5 billion in additional repurchases.

And where pricing tailwinds in commercial lines may have come to an end, the company's consumer insurance segment picked up the slack, despite continued spending to integrate its Japanese businesses into the mix. In all, it was neither good nor necessarily bad -- it was just another quarter at AIG.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends, owns shares of, and has options on AIG. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.