American International Group Inc., the insurer facing pressure from activist shareholder Carl Icahn for a breakup, posted a third-quarter loss as investment results deteriorated. The company plans to cut as many as 400 senior- level jobs.

The net loss of $231 million, or 18 cents a share, compares with profit of $2.19 billion, or $1.52, a year earlier, the New York-based company said in a statement Monday. Operating income, which excludes some investment results, restructuring costs and expenses tied to the retirement of debt, was 52 cents a share, about half the average estimate of 22 analysts surveyed by Bloomberg.

Icahn told Chief Executive Officer Peter Hancock in a letter last week that AIG should split into three insurers to escape the restrictions imposed on the largest financial firms, though Hancock rejected the idea during AIG’s Nov. 3 conference call. One company would focus on life insurance, the second on property-casualty coverage and the third on mortgage guaranties, under the billionaire’s proposal. Icahn has a stake of about 2 percent, according to people familiar with the holding.

“Given the entry of an activist, for whom disaffected shareholders are a major opportunity, management is going to have to walk a tightrope in coming days to satisfy already skeptical investors,” Josh Stirling, an analyst at Sanford C. Bernstein & Co., said in a note before results were released Monday. AIG is “too large, too complex, too costly and, as a systemically important financial institution, is both financially and strategically disadvantaged.”

Job Cuts

The insurer said restructuring initiatives, which include severance costs and information-technology improvements, will save $400 million to $500 million a year. The 400 cuts would represent about a fifth of the senior-level workforce, according to a person familiar with the plan who asked not to be identified discussing personnel matters.

AIG slipped 1.8 percent to $62.60 in extended trading at 4:49 p.m. in New York. The company had gained 14 percent this year through 4 p.m., beating the 2.2 percent advance of the Standard & Poor’s 500 Index. Still, the company trades for less than its book value, which was $79.40 a share as of Sept. 30, down from $79.74 on June 30. Most large property-casualty insurers trade for more than the measure of assets minus liabilities.

Hancock and other executives are scheduled to discuss results in a call with analysts and investors Tuesday morning. AIG results were released after the close of regular trading. Icahn’s letter included a statement from hedge fund manager John Paulson, another AIG shareholder, saying that AIG could trade for more than $100 a share if it split into three.

Hedge Funds

Net investment income slipped 20 percent to $3.21 billion on results from hedge funds and the decline in the value of AIG’s holdings in People’s Insurance Co. (Group) of China Ltd. and PICC Property & Casualty Co. Travelers Cos. and XL Group Plc are among insurers that have said third-quarter results were pressured by alternative holdings such as real estate partnerships or hedge funds.

Operating return on equity, a figure that Hancock has promised to improve, fell to 3.5 percent in the quarter from 8.5 percent in last year’s third quarter. Icahn has mocked Hancock for being unable to reach 10 percent. AIG said the “normalized” figure in the three months ended Sept. 30, which assumes better returns on some alternative investments and fewer costs tied to reserves, was 5.9 percent.

‘Falling Short’

“Results, while falling short of expectations due to market volatility, show signs that we are making progress to transform AIG,” Hancock said in the statement. “Our strategy focuses on four major objectives: to narrow our focus on business where we can grow profitably, drive for efficiency, grow through innovation and optimizing our data assets, and return excess capital.”

AIG spent about $3.7 billion on share buybacks in the third quarter, and more than $600 million in October, according to the statement.

Hancock has also been cutting jobs to reduce costs. The insurer said it will spend about $300 million in severance and termination benefits, with the plan initially targeting senior levels of management. Further reductions are expected in 2016, according to AIG.

Commercial Insurance

Pretax operating income declined 34 percent from a year earlier to $815 million at the commercial-insurance operation led by John Doyle. The property-casualty segment contributed $569 million, compared with $952 million.

The combined ratio at the P&C unit worsened to 102.7 from 102.1, meaning the business had an underwriting loss of almost 3 cents for every premium dollar earned. Margins were hurt by claims costs on commercial auto coverage and property insurance.

Premium revenue dipped 6.6 percent to $5.01 billion fueled by currency fluctuations and the company’s decision to scale back in some casualty lines to limit risk.

At the mortgage-insurance unit, which guards lenders against borrower defaults, profit rose 20 percent to $162 million. Profit at the institutional-markets segment dropped 45 percent to $84 million.

Consumer Business

At the consumer business run by Kevin Hogan, operating income fell by almost half to $657 million. The contribution from retirement operations decreased 42 percent to $635 million, and the life segment swung to a $40 million loss. Personal insurance contributed $62 million.

Results from alternative holdings, which are divided among the units, swung to a $23 million loss from a $486 million gain a year earlier. Returns from private equity rose 7.5 percent to $229 million, AIG said in a supplementary filing. Hedge funds generated a $324 million loss, compared with a gain of $215 million a year earlier. Hedge-fund results are generally delayed by one month, and private-equity figures by three months, AIG said.

–With assistance from Noah Buhayar in Seattle and Claire Boston in New York.

*This story was updated to link to a follow-up story regarding AIG’s Q3 conference call.