Insurance and financial giant American International Group (NYSE:AIG) was hit with major catastrophe losses in the first quarter, mainly as a result of the COVID-19 pandemic, which cut into its adjusted earnings.

The insurer set aside $419 million for catastrophe losses in the quarter with $272 million of that estimated to be for losses related to COVID-19. 

Net income in the quarter was $1.7 billion, or $1.98 per diluted common share, up from $654 million, or $0.75 per diluted common share, in the prior year's quarter. That rise was attributable to $3.5 billion of pre-tax capital gains related to mark-to-market gains from variable annuity and interest rate hedges, compared to $446 million in net capital losses a year prior.

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But adjusted after-tax income was just $99 million, or $0.11 per diluted share, down from $1.4 billion, or $1.58 per share in Q1 2019. The decline was due to several factors, including lower net investment income, losses on FVO bonds from widening spreads in credit markets, and the impact of the pandemic.

"While we believe COVID-19 will be the single largest CAT [catastrophic] loss the industry has ever seen, the significant body of work our team has undertaken since late 2017 has served us well as we navigate through this evolving situation," said CEO Brian Duperreault.

Adjusted net income in the general insurance business was $501 million, down 60% year over year. Earnings were hurt by $87 million in underwriting losses, compared to $179 million in underwriting profits in Q1 2019. AIG's general insurance combined ratio was 101.5 in the quarter, up from 97.4 the previous year. 

The company declared a quarterly dividend $0.32 of per share to be paid in the second quarter, an identical payout to its last one. However, given the economic uncertainty caused by the COVID-19 pandemic, AIG withdrew its guidance for 2020.