(Updates shares in the second paragraph.)
May 6 (Bloomberg) -- American International Group Inc., the largest commercial insurer in the U.S. and Canada, posted the biggest decline in the 83-company Standard & Poor’s 500 Financials Index after first-quarter profit dropped on higher claims costs.
AIG slipped 4.1 percent to $50.54 at 4 p.m. in New York, the most since November. The fall erased the stock’s gain for the year.
First-quarter net income slid 27 percent to $1.61 billion, or $1.09 a share, as the property-casualty business posted a $97 million underwriting loss, the New York-based insurer said yesterday after markets closed. AIG said the operation paid out $1.01 in claims and expenses for every premium dollar it took in, compared with costs of 97.3 cents per dollar a year earlier.
“Weaker underwriting results are the key risk for AIG, and seeing them crop up is a setback,” Randy Binner, an analyst at FBR Capital Markets, said in a research note yesterday.
AIG also offers life insurance, retirement products and mortgage guarantees. Operating profit at the life and retirement unit climbed to $1.42 billion from $1.39 billion a year earlier, as assets under management increased and sales rose. The mortgage insurer, United Guaranty Corp., reported an 85 percent increase in earnings to $76 million.
AIG has been shifting the business mix and cutting costs to improve results at the property-casualty unit. Chief Executive Officer Robert Benmosche announced a plan in February to trim AIG’s staffing by about 3 percent and has been moving workers to lower-cost locations such as Amarillo, Texas.
The insurer is saving about $50 million a year by reducing the amount of real estate it occupies in New York City, Benmosche said in a memo sent to staff yesterday.
We are “positioning ourselves to thrive well into the future as we increase operational efficiency and reduce our expenses, invest in technology, and focus on developing our people,” Benmosche said in the memo. “We still have work to do.”