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Updated from 10:57 a.m.

First-quarter net income fell slightly at

American International Group

(AIG) - Get American International Group, Inc. Report

, as the insurer warned that its Asian sales operation could be impacted by the spread of severe acute respiratory syndrome, or SARS.

AIG is one of the first big U.S. insurers to report earnings, and Wall Street will be watching to see if other insurers issue similar SARS warnings.

The profit decline and SARS warning pushed down shares of AIG in Thursday trading, and also dragged down shares of other insurance and financial stocks. AIG's stock, in midday trading, was down $3.44, or 5.9%, at $54.83.

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AIG earned $1.95 billion, or 74 cents a share, compared with $1.98 billion, or 75 cents a share, a year earlier. The company attributed much of the earnings slump to a $412 million loss on poorly performing investments it sold.

Excluding the investment losses, AIG earned $2.37 billion, or 90 cents a share, compared with $2.13 billion, or 81 cents, a year ago. AIG attributed the 11% gain in "adjusted" income to a surge in income from underwriting both business and life insurance policies.

Most Wall Street analysts who follow AIG exclude writedowns for investment losses from their earnings calculus and focus on the adjusted income figure. And by that measure, AIG beat the Thomson/First Call consensus estimate by a penny.

The New York-based insurer said general insurance premiums, which include coverage bought by businesses, rose 30% to $8.2 billion from a year ago. Total life insurance premium sales rose 18% to $5.6 billion.

The company said it is benefiting from rising premiums that most insurers began charging commercial customers last year in the wake of the September 11 terror attacks.

In the first quarter, AIG said it hadn't suffered any financial setbacks due to the outbreak of SARS in Asia. But it cautioned that the spread of the potentially deadly pneumonia-like virus in Asia could limit its ability to sell new insurance policies overseas. The company said "SARS may impede agents from freely visiting prospects and will likely have some dampening effect on new sales in certain Asian markets."

Asia is the largest buyer of insurance policies in the company's foreign life division. That unit of AIG generated $3.2 billion in premium sales during the quarter, or just over half of all the premium dollars from AIG's life insurance operation.