NEW YORK (Bloomberg) — American International Group Inc. and XL Capital Ltd. are among insurers losing employees to smaller companies that expect the defectors to bring customers with them, said Paul Newsome of Sandler O'Neill & Partners.

AIG, XL and Hartford Financial Services Group Inc. have declined more than 70 percent in the past year through yesterday in New York Stock Exchange composite trading on investment losses. They've also lost underwriters to firms including Hanover Insurance Group Inc. and Navigators Group Inc., Newsome said in a note to investors on Monday.

"People are concerned about their jobs and are looking around, so you're finding folks leaving some of the companies that have had financial trouble and looking for positions elsewhere," Newsome said in an interview. "You are seeing a lot of shifting of people around within the industry."

The switch mirrors the movement of traders and investment bankers on Wall Street who are departing the world's largest financial companies for smaller firms. New York-based AIG, which committed more than $1 billion in retention payments to encourage employees to stay while it sells units to repay a $182.5 billion government bailout, has lost more than 40 executives to competing firms.

"We have lost some good people in our management ranks, but the perception has been worse than the impact," Kristian Moor, the president of AIG's property and casualty business, said in a May 7 conference call. Marie Ali, a spokeswoman for AIG's property and casualty business, declined to comment.

"Voluntary turnover in Hartford's property and casualty operations, including among underwriters, is down over the prior year," said Hartford spokeswoman Shannon Lapierre.

Carol Parker Trott, a spokeswoman for Bermuda-based XL, said the firm continues to attract employees. "Staff retention levels remain strong and our voluntary turnover rates are at or below last year's levels," she said. "People come and go to a company at any time."

Rivals have wooed executives with expertise in areas such as aviation, terrorism and liability coverage. Defectors include Kevin Kelley, who left AIG to become chief executive officer of Bermuda-based Ironshore Inc., and Reina Gregorio, formerly of XL, who was named president of the Navigators' professional liability practice in December.

"We are always looking for good talent," said Chris Duca, president of Navigators Pro. "We are building out efforts because of the flight to quality for insurers with higher financial security."

The insurer has hired 14 underwriters in the past five months, Duca said in an interview. Navigators also announced last month a new underwriting office in Pittsburgh to be run by Robin Betza, previously of AIG.

"In the commercial insurance business, the asset is the people," said Shivan Subramaniam, CEO of commercial insurer FM Global, in an interview in April. "At some point in time, if a significant amount of that asset leaves, you can not recover."

FM Global had hired "a few" new employees from competitors in the past year, Subramaniam said, without naming them.

Delphi Financial Group Inc. and First Mercury Financial Corp. have also hired employees from larger rivals, Newsome said.

Seabright Insurance Holdings CEO John Pasqualetto said in a conference call in April that the insurer hired five underwriters from AIG to create a marine insurance unit.

Seabright shares dropped 45 percent in the past 12 months. Navigators slipped 12 percent, Delphi fell 31 percent, Hanover declined 22 percent and First Mercury lost 19 percent. Ironshore isn't publicly traded.