* Third-quarter operating earnings $0.96/share vs est. $0.94
* P&C combined ratio 101.6
* Shares down 3 pct in extended trading
Oct 31 (Reuters) - American International Group Inc reported earnings nearly in line with expectations on Thursday, but the stock fell after hours as analysts still saw room for improvement in the insurer, which almost went under during the financial crisis.
AIG, which saw sour derivative bets threaten the company's future five years ago, saw stronger commercial lines business. Analysts said they had expected better results in its consumer lines business.
The company also matched its 10-cent dividend of the second quarter and said that it bought back $192 million in stock in the three months ended Sept. 30.
AIG "is becoming a normal company," Sanford C. Bernstein & Co analyst Josh Stirling said.
"They're making great progress in fixing their underwriting in their commercial lines business, but still have more progress to make in consumer lines. They really need to get margin improvements in both," he said.
Commercial underwriting saw net premiums earned edge down 2 percent to $5.142 billion from the year-ago quarter, but the combined ratio improved to 100.2 from 106.0.
A combined ratio below 100 indicates an underwriting profit, meaning an insurer is receiving more in premiums than it is paying out in claims.
In its consumer underwriting, AIG saw a 6 percent dip in net premiums earned to $3.27 billion. That combined ratio rose to 99.9 from 98.8 in the third quarter of last year.
And the company also benefited from factors beyond its control, such as a favorable tax rate, noted Meyer Shields of Keefe, Bruyette & Woods, Inc.
"I think the stock's going to have a tough day tomorrow," he said.
BMO Capital Markets analyst Charles Sebaski pointed to stalled progress in the property and casualty unit.
"We did not see any meaningful improvement in the P&C underwriting," he said.
Net premiums earned in the company's property casualty unit fell 4 percent to $8.43 billion in the quarter ended Sept. 30, while the combined ratio improved 3.4 points to 101.6, indicating the business is still not booking an underwriting profit.
Shares fell 0.62 percent in the Thursday session to close at 51.65. Shares of the company fell 3 percent in after-hours trading after the results.
The company's dividend in the second quarter was its first since receiving the first portion of a U.S. taxpayer-funded bailout in 2008 that eventually topped $180 billion. AIG finished paying back those funds early this year.
"We continue to remain optimistic about the future," Chief Executive Robert Benmosche said in a statement.
In a separate filing, the company said the sale of its ILFC aircraft leasing unit had not yet closed and that the sale could still be terminated.
"We continue to consider ILFC as a non-core business and we are continuing to pursue other options including an alternative sale or an initial public offering," the company said in the filing.
The U.S. insurer's net income rose 17 percent to $2.17 billion, or $1.46 per share, from $1.86 billion, or $1.13 per share, a year earlier.
On an operating basis, the company earned $1.4 billion, or 96 cents per share.
Analysts on average had expected earnings of 94 cents per share, according to Thomson Reuters I/B/E/S.