Global insurer American International Group Inc. (AIG) reported net income of $1.6 billion for the first quarter, a 27 percent drop compared to $2.2 billion for the first quarter of 2013.

After-tax operating income was $1.8 billion for the first quarter of 2014, compared to $2.0 billion for the prior-year quarter.

Property/casualty’s pre-tax operating income decreased to $1.2 billion due to higher catastrophe and severe losses, unfavorable loss reserve development, and a decrease in net investment income.

Catastrophe losses were $262 million, compared to $41 million in the first quarter of 2013. Severe losses for the first quarter of 2014 were $186 million compared to $60 million in the first quarter of 2013.

The overall P/C combined ratio was 101.2, up from 97.3 for last year’s first quarter. AIG lost $97 million on underwriting in the quarter. AIG hasn’t reported a profit on P/C underwriting since the first quarter of last year.

The commercial insurance combined ratio increased 5.5 points to 97.7. The personal lines combined ratio increased 3.5 points to 101.9 due to higher catastrophes and individual severe fire losses, and lower favorable prior year development, partially offset by lower expenses.

In February, AIG said it would trim staffing by about 3 percent. The New York-based company has also been moving some employees to lower-cost locations including Texas.

The company said its commercial insurance unit continues to focus on growing higher value lines of business and rate strengthening, while its personal lines division is focusing on improving underwriting results and targeted growth through multiple distribution channels.

At the life and retirement unit that sells annuities, mutual funds and insurance in the U.S., operating profit increased to $1.42 billion in the first quarter, from $1.39 billion, on higher sales and assets under management. AIG has been expanding sales of the retirement products.

“These results reflect strong operating income across our insurance operations, as well as execution of our capital management strategy,” said Robert H. Benmosche, AIG President and CEO. “We remain diligently focused on increasing operational efficiency, managing our expenses, and investing in technology; we continue to look at ways to simplify and make our organization more efficient to ensure that we are creating a company that will thrive well into the future.

AIG reached an agreement last December to sell its plane- leasing business International Lease Finance Corp to AerCap Holdings NV for about $5 billion.