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.