Insurance giant

American International Group

(AIG) - Get Report

said Wednesday that second-quarter earnings fell 29%, adding that declining revenue in the financial services group cut into profits, causing the company to miss analysts' revenue estimates.

In the second quarter, AIG earned $3.19 billion, or $1.21 a share, compared to $4.49 billion, or $1.71 a share, a year earlier.

The company reported an adjusted earnings figure, accounting for changes to interest in unit investment trusts, which added $374 million to income, or 14 cents a share. On an adjusted basis, the company earned $4.16 billion, or $1.58 a share, compared to $3.28 billion, or $1.25 a share, in the same quarter last year. Analysts were expecting the company to earn $1.39 a share, according to Thomson Financial.

Revenues at the company were $26.7 billion, down from $27.9 billion a year ago and significantly lower than the estimated $29.2 billion that analysts expected.

Revenues from all premiums on insurance policies rose 4.5% to $18.3 billion. Net investment income rose 13% to $5.9 billion.

The firm's largest division, general insurance, posted revenue 6.7% higher than the same quarter last year at $12.2 billion vs. $11.4 billion. Revenue in the life insurance and retirement services group also improved slightly to $11.7 billion from $11.5 billion in the same quarter last year.

"AIG had a very good quarter," the company said in the release. "Once again, our performance underscored the strength of AIG's widely diversified business portfolio, both domestically and overseas."

But AIG's financial-services group suffered. Revenue in the division was more than cut in half, to $1.2 billion from nearly $3.8 billion in the same quarter last year. For the quarter, the financial services group posted an operating loss of $548 million.

"Consumer Finance operating income declined as a result of higher borrowing costs, a cooling domestic residential real estate market, higher expenses related to overseas expansion and lower new business volumes in Taiwan in the wake of the industry wide deterioration of consumer credit conditions," the company said.

In after-hours trading, shares of AIG were lower, down 28 cents to $58.21 a share. In regular trading, AIG dropped $1.19, or 2%, to $58.49.