American International Group Inc.'s first quarter results show continued improvement in a difficult environment for insurance pricing and investment returns, according to analysts.

AIG reported a profit of $2.5 billion for the first quarter of 2015 on Thursday, a 56.3% increase over the same period last year, but the bulk of the bulk of the increase — $874 million — was attributable to net realized capital gains. Of that gain, $500 million resulted from the sales of large shareholdings in China's PICC Property & Casualty Co. Ltd.

Commercial property/casualty insurance net written premiums for the quarter rose less than 1% to $5.04 billion.

“Excluding the effects of foreign exchange, net premiums written increased 6% percent compared to the prior-year quarter,” AIG said Thursday in its earnings statement. “This increase was primarily driven by new business growth in financial lines and property, as well as a renewal of a multiyear multinational policy in financial lines which contributed approximately 40% of the growth.”

The increases “were partially offset by the decreases in U.S. casualty, reflecting rate pressure and the effect on renewals from continued discipline in certain classes of business in specialty,” AIG said.

First-quarter 2015 catastrophe losses were $71 million vs. $184 million in the prior-year quarter. The commercial property/casualty operation's combined ratio improved to 97.1% from 98.9% during the same period a year earlier.

Property rates decline

During a conference call with market analysts Friday, John Doyle, AIG's CEO of commercial insurance, said property rates fell 5.4% in the U.S. during the first quarter.

“Our diversified business model and balance sheet deleveraging highlight how we have reduced our overall risk level,” AIG CEO Peter Hancock said in the earnings release.

Analysts said AIG's performance, although not spectacular, demonstrates continued improvement in the insurer's operations.

“AIG is making progress, albeit slow, on its operating initiatives,” said Mark Dwelle, an insurance analyst at RBC Capital Markets, a unit of RBC Dominion Securities Inc. in Richmond, Virginia, in a research note. He noted that the commercial insurance operation's combined ratio was better than expected.

“We would characterize the quarter as showing further signs of operating improvement but in the context of an increasingly difficult environment of low investment yields and more competitive P/C pricing,” said Cliff Gallant, an analyst at Nomura Securities International Inc. in San Francisco, in a research note.

“All in, we view the quarter as in-line,” Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore, said in a research note.