AIG shares fall on investment loss concerns

NEW YORK (Reuters) - Shares of American International Group (AIG.N) fell more than 3 percent on Friday, after a Citigroup analyst said it expected the insurer to be hit by losses on investments linked to subprime mortgages for the third consecutive quarter.

As a result, Citi cut its view for the insurer’s second quarter and 2008 earnings.

AIG shares, which have fallen 64 percent over the last year, fell 3.6 percent to $24.02 on the New York Stock Exchange. U.S. stocks were broadly lower, as investors fretted over the disappointing second-quarter earnings issued by some companies in recent days.

AIG is not due to report earnings until early next month but investors are nervous the company could spill more bad news, after two quarters of record losses.

Citi analyst Joshua Shanker cut his estimate for AIG’s second-quarter net income to 50 cents a share from $2.18, and to $1.29 for the full year from a previous estimate of $2.94 a share.

Analysts on average expect the world’s largest insurer to earn about 94 cents a share in the second quarter, and $2.33 a share for the year, according to Reuters Estimates.

AIG’s last two quarters have been marred by the writedown of assets linked to subprime mortgages. The insurer has since replaced its chief executive and is seeking a new chief financial officer.

“AIG’s management change in mid-June increases the likelihood of accelerated recognition of ...losses by the company as part of a kitchen sink quarter,” said Shanker, in a research note.

Shanker estimated the AIG financial products unit that holds the thorny investments could see a loss of $2.5 billion in the second quarter.

Analysts vary widely on how badly AIG could be stung in the second quarter, with Wachovia earlier this week estimating the financial products units could see as much as $7 billion in second-quarter losses.