NEW YORK (Bloomberg) - American International Group, the world's largest insurer, said third-quarter profit fell 27 percent as the housing recession contributed to losses in its mortgage guarantee and credit protection businesses.

Net income fell to $3.09 billion or $1.19 a share, from $4.22 billion or $1.61, a year earlier. Profit excluding realised investment losses and changes in the value of derivative instruments was $1.35 a share, missing by 27 cents the average estimate of 15 analysts compiled by Bloomberg.

"AIG's sub-prime exposure in the context of its huge balance sheet is manageable," Rob Haines, analyst at CreditSights in New York, said in an interview before results were released.

AIG has fallen 19 percent this year in New York trading on shareholder concerns about possible losses related to subprime mortgages as the worst US housing recession in 16 years deepens. The company has units that originate, insure, and invest in home loans.

Maurice "Hank" Greenberg, the insurer's chief executive officer for 38 years until he was ousted in 2005, started a campaign to shake up AIG management last week.