new york (Bloomberg) — American International Group Inc., the insurer bailed out by the US, had its third-quarter earnings estimate tripled by Credit Suisse Group AG on gains in investments including derivatives and hedge-fund holdings.

AIG will earn $4.50 a share, compared with a prior estimate of $1.40, Credit Suisse's Thomas Gallagher said today in a note to clients on the New York-based insurer. The company climbed 69 cents, or 2.1 percent, to $34.31 in New York Stock Exchange composite trading.

Insurers Lincoln National Corp. and Genworth Financial Inc. benefited from rebounds in fixed-income holdings, including bonds tied to mortgages. Gallagher said AIG will post a gain of about $2.5 billion at the derivatives unit that brought the company to the brink of collapse last year with bets on home loans. Hedge fund and private equity investments probably earned about $700 million in the quarter, he said.

"We would expect to see a strong headline earnings number for the third quarter given the broad-based asset price recovery," Gallagher said in the note. He rates the shares "underperform" and has said there may be little value for shareholders after the insurer repays its debts under the $182.3 billion government bailout.

The insurer's book value per share, a measure of assets minus liabilities, may have increased 73 percent in three months to $38 as of September 30 as previous unrealised investment losses reversed, Gallagher said. Unrealised losses, which don't count against earnings, are monitored by ratings firms, regulators and investors as a measure of financial strength.

AIG held more than $350 billion in bonds as of June 30, with almost 60 percent in corporate debt and residential mortgage-backed securities. Corporate bonds returned 9.58 percent in the third quarter after earning a 13 percent yield in the second, the best quarterly performance, according to Merrill Lynch & Co. data going back to 1997.

Some US home-loan bonds reached prices almost double their March lows after a rally in the third quarter as debt markets recovered. Typical prices for Alt-A securities rose to 60 cents on the dollar from 35 cents in mid-March, according to Barclays Capital data.

A calm hurricane season so far has assisted property-casualty insurers. The third quarter yielded a single US landfall, Tropical Storm Claudette, which struck Florida in August.