More reserve charges could be ahead for American InternationalGroup Inc. (AIG), according to analysts.

“They haven't gotten it right in the best of times,” said PaulHoward, director of research at Solstice Investment Research. “Youlook at their loss triangles. Reserves always get bigger over timeas they learn more. They have a bad track record.”

AIG expects to take a charge of $4.1 billion in the fourthquarter to bolster the loss reserves for its Chartis property andcasualty unit. The decision was made after the company's year-endreview of loss reserves. About 80 percent of the charge will be puttoward adverse development from accident years 2005 and older forfour classes of business: asbestos, excess casualty, excessworkers' compensation and primary workers' compensation, AIGsaid.

The reserve strengthening represents about 6 percent of AIG'stotal general insurance net liability for unpaid claims and claimsadjustment expense as of Sept. 30, 2010. The insurer said Chartis'total net loss and net adjustment reserves as of Sept. 30, 2010were $63.7 million. U.S. statutory surplus as of the same date was$28.9 billion.

Fitch Ratings dropped the financial strength rating of AIG'sdomestic non-life insurance subsidiaries to “A” from “A-plus” asthe agency views AIG's “record of adverse development as asignificant outlier relative to that of the company's largecommercial insurance lines competitors and to the overall non-lifeinsurance market.”

Mark E. Rouck, senior director in Fitch's insurance ratinggroup, said reserves for the classes of business outlined by AIGare harder to set because they are long-tail lines. Additionally,AIG has a large market share in these lines.

The subsidiaries' recent history of missing the mark on claimscosts “raises concerns about the companies' ability to generateconsistent run-rate underwriting results” in line with Fitch'sprevious ratings, the rating agency said.

Speaking at an investor conference recently, William R. Berkley,chief executive officer of W.R. Berkley Corp., an AIG competitor,said that “most people perceived AIG as being not particularly wellreserved for an extended period of time” and that the bailed-outinsurer was “required to be an aggressive competitor” in order tokeep business.

Analysts caution investors to think about AIG's ability toaccurately set reserves as developments for more recent accidentyears come to light.

“You have to think about AIG's history when you buy stock,” saidCliff Gallant, an analyst with Keefe, Bruyette and Woods. “Havethey overstated earnings? You don't hear any noise like this fromcompetitors like Travelers and Chubb.”

AIG's peers have been releasing reserves in recent years.

Mr. Howard said the chaos and disarray at AIG during its nearcollapse and subsequent $182.3 billion government rescue put“enormous pressure” on AIG and they “turned a blind eye atunderwriting.”

“I think they were thinking: Get the cash in the door and worryabout tomorrow, tomorrow,” Mr. Howard said.

Competitors have accused AIG of undercutting the market onpricing commercial policies as it tried to maintain market shareduring the bailout.

The U.S. Government Accountability Office and Pennsylvania'sinsurance commissioner have said there is no evidence AIG engagedin pricing misconduct.

Following the reserve charge, Mr. Berkley said “there will bemore pressure on AIG, not less, and more pressure on the rest ofthe industry to face reality.” The chief executive has said theindustry is pricing business irrationally. AIG will need to raiseprices, he added.

Mr. Berkley said he hopes AIG addresses possible reservedeficiencies in years after 2005 before its public offering. In itsrecapitalization plan to pay back the bailout, AIG has said itwould like to offer stock early this year, subject to marketconditions. AIG will report fourth-quarter earnings on Feb. 24after the market closes.