Sep. 16--American International Group's financial misery could mean more customers and recruitment opportunities for competitors such as Travelers and The Hartford, but their stock prices fell, too, in Monday's market bloodbath.

AIG has suffered billions of dollars in losses stemming from turmoil in the mortgage and credit markets and has had plenty of bad press for it. Reports Monday of machinations to bolster its capital drove its sickly stock down further -- but raised speculation about how competitors might benefit.

"The more duress AIG is under for a long time, the more it will benefit" competitors, said analyst Michael Paisan, a managing director at Stifel Nicolaus in New York.

AIG was downgraded by some rating agencies late Monday, and some industry experts say the company's struggle could make it harder to hold on to some customers and win new ones.

"Certainly AIG does not have the cachet it did before," Paisan said before the downgrades were announced. "The fear is AIG will be unstable for a long time."

Paisan said AIG is likely to lose some insurance underwriters to competitors, just as other financial firms have lost personnel in times of uncertainty. He says a person at an AIG competitor he wouldn't name said he had seen more resumes from AIG staff in the past week than he normally sees over months.

"Business will tend to follow where the underwriters go," Paisan said.

Matt Mosher, senior vice president of property-casualty at rating agency A.M. Best Co., said any time a large insurer has difficulties "it's going to shake the [insurance] market" and cause some customers to look at alternatives.

AIG got permission Monday to use a loan from its subsidiaries to shore up its capital, and the company is expected to sell some businesses. Analysts believe AIG might end up selling its personal insurance business (auto, homeowners), in addition to its aircraft leasing business and its stake in reinsurer Transatlantic Holdings.

AIG owns Hartford Steam Boiler Inspection and Insurance Co., and Paisan doesn't think it would be in the first wave of asset sales because it's a "very high-quality, high-return business" that fits well with AIG's other core businesses.

Other insurers aren't nearly as exposed to the subprime mortgage and credit crunch as AIG is, analysts say. The Hartford Financial Services Group, they've noted, has heavier investments in subprime residential mortgage-backed securities than some other property-casualty insurers but has maintained a strong capital position.

The Travelers Cos. and ACE Ltd., which are major AIG competitors, especially in commercial insurance, "don't have capital issues to deal with" and are among the companies that could benefit from AIG's problems, Paisan said.

The sales prospects lifted the stocks of Travelers, The Hartford, ACE, Allstate and other property-casualty insurers Monday morning despite the overall market plunge on a triple whammy of bad financial news. But in afternoon trading, those insurers fell, too.

Travelers closed down $1.35 at $43.70 a share after trading up as much as 5.4 percent earlier Monday. The Hartford closed down $3.29, or 5.4 percent, at $57.09 a share after trading up as much as 1.8 percent. ACE, a major commercial insurer, closed up 65 cents at $52.77 a share.

AIG's stock withered to $4.76 a share at Monday's close, down $7.38 from Friday.

Contact Diane Levick at dlevick@courant.com.

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