American International Group earned a larger-than-expectedprofit during the third quarter, due in part to big gains on itsinvestment holdings.

Questions about the sustainability of those profits, anduncertainty about the timing and structure of the U.S. TreasuryDepartment selling its remaining 16-percent stake in the insurancegiant, contributed to a drop in AIG shares in after-hours trading,analysts said.

“One of the biggest questions that people ask is the timing ofthe next offering of the U.S. government and whether AIG willparticipate in that offering,” said Paul Newsome, an analyst whocovers the firm for Sandler O'Neill Partners.

AIG had received $182.5 billion in bailout money from U.S.taxpayers at the height of the financial crisis and has beenworking to repay the government for the past few years.

The remaining stake pertains to AIG shares the TreasuryDepartment owns in exchange for capital it infused. Last quarter,the Treasury Department sold $26.5 billion worth of AIG shares,including approximately $8 billion purchased by AIG.

The government still holds 234.2 million common shares. Thetiming of future sales, and whether AIG will repurchase stock, isunclear.

AIG reported an overall profit of $1.9 billion, or $1.13 pershare, for the period, compared with a loss of nearly $3 billion,or $2.10 per share, in the year-ago quarter.

Analysts had expected AIG to earn 86 cents per share, onaverage, according to Thomson Reuters.

Because competitors like Travelers Cos. reported even strongerthird-quarter results, it may have set investors' expectations evenhigher for AIG than what analyst figures suggest, Newsome said.

AIG shares fell 2 percent after it reported results. The stockhad closed at $35.20 on the New York Stock Exchange.

Combined net investment income from AIG's P&C and life andretirement divisions rose 15 percent, contributing $505 million toearnings. AIG's sale of certain securities, including a stake informer subsidiary AIA Group Ltd as well as higher values of bondholdings, contributed to those profits.

In AIG's P&C division, net premium earnings fell 3.2 percentduring the quarter. Pricing improved, but AIG has been limitingrisk-taking in the business, the company said.

In its life and retirement division, premiums declined 2.7percent. Policy fees climbed 5 percent, but low interest rates andcosts related to a regulatory probe into death benefits claims alsoweighed on that business.

AIG's other business, aircraft leasing, also reported a smalloperating profit compared with a large loss a year ago. CEO RobertBenmosche, in an interview with CNBC, said he was still waiting formarkets to improve before trying to take that business, ILFCHoldings, public.

It was too early for AIG to provide an estimate of how HurricaneSandy will affect the insurance company's future results, Benmoschesaid in a statement. AIG's headquarters in Lower Manhattan wasaffected by the storm and remains closed because of a poweroutage.