(Bloomberg) -- Shares of American International Group Inc. headed for their biggest drop in 13 months after the world's largest insurer said earnings from overseas life insurance businesses missed analysts' estimates for a second quarter.

The stock dropped $2.77, or 4.2 percent, to $63.77 at 10:56 a.m. in New York Stock Exchange composite trading, the biggest decline since April 1, 2005. First-quarter net income fell 16 percent to $3.2 billion, or $1.22 a share, from $3.8 billion, or $1.45, a year earlier, AIG said after the close of regular trading yesterday.

Pretax earnings from life insurance and retirement savings products outside the U.S. rose 6.3 percent to $1.44 billion, the second slowest quarterly pace in at least two years. AIG, the fifth-biggest life insurer in Japan, blamed the weaker yen and higher-than-expected losses on credit-card loans in Taiwan.

``The most disappointing part of the earnings was foreign life,'' said Gary Ransom, an analyst at Fox-Pitt Kelton Inc. in Hartford, Connecticut who has an ``outperform'' rating on the stock. He had expected the businesses to earn $1.58 billion.

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Jesse Westbrook in Washington at  jwestbrook1@bloomberg.net.

©2006 Bloomberg L.P.