NEW YORK (Bloomberg) — American International Group, the largest commercial insurer in the US and Canada, said first-quarter profit fell 27 percent as claims costs climbed at the property-casualty business. The stock dropped in extended trading.

Net income declined to $1.61 billion, or $1.09 a share, from $2.21 billion, or $1.49, a year earlier, New York-based AIG said yesterday in a statement. Operating profit, which excludes some investing results, was $1.21 a share, beating the $1.07 average estimate from 24 analysts surveyed by Bloomberg.

Chief executive officer Robert Benmosche, 69, is shifting the business mix and cutting jobs as he works to improve results at the property-casualty unit. The CEO has used dividends and repurchases to reward shareholders who’ve helped recapitalise AIG as the company emerged from the US rescue that it repaid at the end of 2012.

“It’s a question of, ‘Can they get back to where they were, the top-tier underwriter?’” Cathy Seifert, an analyst at Standard & Poor’s Capital IQ, said by phone before results were announced. “They basically need to boost margins in the P&C business. They need to show top-line growth.”

AIG slipped 2.3 percent to $51.50 at 4.50pm in New York. The company had advanced 18 percent in the past 12 months, beating the 17 percent gain of the Standard & Poor’s 500 Index. Results were released after the close of regular trading.

Winter weather in the US contributed to an increase in first-quarter claims at some property insurers. Burst pipes, roof collapses and slick roads contributed to $2.6 billion in insured losses industrywide from the winter weather through March, insurance broker Aon Plc said in a report last month.

Operating profit fell 26 percent to $1.16 billion at the property-casualty business, which is overseen by Peter Hancock. The unit, which insures commercial property, corporate boards and airplanes, posted a 1.2 percent decrease in sales to $8.33 billion.

Sales rose 1.9 percent to $5 billion at the commercial operation, while currency fluctuations contributed to a 5.5 percent decline at the consumer segment.

AIG paid out $1.01 in claims and expenses for every premium dollar it took in at the property-casualty division during the first quarter, compared with costs of 97.3 cents a year earlier. The underwriting loss was $97 million. Catastrophes cost AIG $262 million, compared with $41 million a year earlier.

AIG hasn’t posted an underwriting profit at the property-casualty operation since the first quarter of last year. Benmosche announced a plan in February to cut AIG’s staffing by about three percent and has been moving workers to lower-cost locations such as Amarillo, Texas.

The insurer has been working to increase sales to consumers as part of an effort to focus on coverage that’s more profitable. It offers personal coverage in lines from travel insurance to car and home policies.

At the life and retirement unit, operating profit increased to $1.42 billion, from $1.39 billion, as higher sales and assets under management cushioned a decline in investment income. AIG said in January it’s rebranding the American General career-agent sales force as AIG Financial Network and expanding it to 2,000 advisers from 1,400 by 2019. Premiums, deposits and other considerations jumped 28 percent to $7.13 billion.

The insurer got more than half its profit last year from the life and retirement unit, which offers annuities, mutual funds and insurance in the US. AIG has been expanding sales of the retirement products as rivals such as MetLife scaled back. The unit, led by Jay Wintrob, has also benefited from a stock-market rally.

Book value, a measure of assets minus liabilities, rose to $71.77 per share as of March 31 from $68.62 three months earlier. The insurer said it repurchased $867 million of its stock in the quarter.

The United Guaranty mortgage insurer reported earnings of $76 million, compared with $41 million a year earlier. Profit has climbed at home-loan guarantors such as MGIC Investment Corp. as property prices rebound and the jobless rate declines.

AIG lifted its quarterly dividend in February by 25 percent to 12.5 cents a share and authorised $1 billion in buybacks. In November, Benmosche said AIG would stop providing updates on progress toward the company’s so-called aspirational goals for 2015, such as achieving a ten percent return on equity.