AIG has reported a net loss of $US231 million ($323 million) for the third quarter, compared with a net profit of $US2.2 billion ($3.08 billion) in the corresponding period last year.

In response, the global insurance giant has announced sweeping structural changes targeting “organisational simplification, operational efficiency and business rationalisation”.

It says the overhaul will result in annualised savings of $US400 million to $US500 million ($560 million to $700 million) when fully implemented.

AIG has also foreshadowed further staff reductions, including up to 400 senior management positions. 

The third-quarter loss is attributed to lower income on hedge fund investments, poor-performing investments and lower-than-expected income from AIG’s holdings in China, including People’s Insurance Company of China (PICC) and PICC Property & Casualty Company.

CEO Peter Hancock admits the third-quarter result is short of expectations “due to market volatility”, but AIG is “showing signs we are making progress to transform [the company] for long-term competitiveness”.

He says AIG will narrow its focus on businesses in which it can grow profitably, and will seek further efficiencies and growth through innovation.

“This quarter’s restructuring actions mark the latest significant, visible steps in our transformation towards becoming more efficient, less complex and able to respond to our clients’ needs with greater agility.”

The streamlining – including divestment of non-core assets – will enable AIG to better focus on “attractive opportunities”, including ageing populations in the US and Japan, international property and travel insurance in China.

When AIG was bailed out by the US Government in 2008 through a $US180 billion rescue package it was considered “too big to fail”.

Ironically, major shareholder Carl Icahn believes the company is too big to succeed, and has called for AIG to be broken up into three companies covering property and casualty, life insurance and mortgage insurance, to “greatly enhance shareholder value”.

But Mr Hancock has rejected the call.

“Management and the board have carefully reviewed such a separation on many occasions, including in the recent past, and have concluded it did not make financial sense,” he said.