The following article, originally published at 5:51 p.m. on Wednesday, Nov. 2, 2016, has been updated with comments from analysts and executives.

Shares of bailed-out insurer AIG  (AIG)  tumbled Thursday as progress toward CEO Peter Hancock's streamlining targets during the third quarter was overshadowed by lower earnings than Wall Street expected.

AIG dropped almost 4.4% to $57.86 in afternoon trading, pushing its year-to-date losses to 6.6%. A day earlier, the New York-based insurer posted after-tax operating profit of $1 a share for the three months through September, lagging behind an average estimate of $1.21 from analysts in a FactSet survey.

"Accepting a reasonable degree of variability in quarterly results is the right business decision, and we have the ability to course-correct as business and market conditions change," Siddhartha Sankaran, AIG chief risk officer & executive vice president, said on an earnings call.

The company had a solid quarter, Hancock added, "despite volatility from our review of our longevity assumptions and certain segments of our commercial business."

AIG recorded a loss of $622 million due to updated mortality assumptions for recipients of long-term personal-injury payments that was eased by a $238 million benefit from changes to actuarial assumptions for its consumer life and retirement business. The company also highlighted a loss of $526 million on asset sales, largely related to a weaker British pound after U.K. voters decided to leave the European Union. 

Hancock, who began a streamlining initiative amid pressure from activists Carl Icahn and John Paulson, has reduced operating expenses by 10%, or $926 million, so far this year. His company has been subjected to heightened scrutiny from shareholders as well as the government since receiving a $182 billion bailout during the 2008 financial crisis.

Icahn and Paulson, who had urged splitting AIG into three parts to avoid some of the regulations, gained more influence on its board this year when their firms were offered seats.

Shareholder profitability appears to be improving, based on a 7.1% return on equity in the third quarter, up from 5.9% a year before.

Further potential expansion in the return as well as gradual margin improvement in the property and casualty business and flexibility for share buybacks support a positive outlook for the company, Jimmy Bhullar, a JPMorgan Chase analyst, said in a note to clients. JPMorgan has a neutral rating on the stock with a price target of $65.

In the past three months, AIG returned $2.6 billion of capital to investors through buybacks and dividends, for a total of $10.8 billion this year. On Wednesday, AIG's board of directors authorized the repurchase of an additional $3 billion in shares.

Hancock's mandate to divest assets have led the insurer to shed United Guaranty, a Turkish insurance operation, a 20% interest in Ascot Underwriting Holdings and a 95.3% interest in NSM Insurance. AIG's liquidity now totals $8.6 billion, above its target range, and has been helped by $900 million from asset sales and $1 billion in excess capital from reinsurance agreements. 

On the whole, AIG's third quarter was "very mixed," Cathy Seifert, an analyst with CFRA Research, said in a phone interview."It's a function of progress on restructuring, offset by some macro headwinds that other carriers are facing."

Seifert maintains her buy rating on the stock, noting that the franchise is trading at a discount to stated book value, and a 12-month price target of $68.  Seifert said that she applauds AIG's reorganization progress, but "eroding commercial lines results" are a concern. 

The accident-year loss rate, measuring payouts against premiums earned, improved to 64.8% during the quarter from 66.7% a year ago, a strength the company touted.

Still, earnings for all insurers have been curbed by low interest rates, which the Federal Reserve has kept below 1% since the 2008 financial crisis. The central bank's monetary policy committee boosted rates 25 basis points last December, the first hike in seven years, and traders are betting the panel will do so again this year.

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