Shares of

American International Group

, the giant, government-backed insurer, fell 15 percent yesterday after

Sanford C. Bernstein Research analyst Todd Bault

warned the company faced "an $11 billion shortfall in reserves to pay property-casualty claims."

The shortfall would likely make it more difficult for AIG to repay the billions of dollars it owes taxpayers, as a Bloomberg News report indicated.

Bault said AIG's Chartis insurance group, whose lead regulator is the Pennsylvania Insurance Department, has been "aggressive" in underpricing workers' compensation, executive liability, and other policies.

AIG will have to prove to state insurance regulators it can pay the claims that will be coming in

on those policies for years to come before it will be able to pay back the federal investments that came with the Wall Street meltdown of last year.

Bault's not holding his breath. He cut his AIG price target to $12, from $20.

Joel Ario, the Pennsylvania insurance commissioner, and his state-regulator peers have assured us AIG's insurance businesses are solvent, and carefully regulated, and aren't the reasons for the company's troubles.

They say it was AIG's New York investment office, regulated by the federal Office of Thrift Supervision, not its insurance operations, that lost all the money that brought federal intervention last year.

AIG's biggest Pennsylvania-regulated subsidiary is still solvent, and its surplus increased this year, said Insurance Department spokeswoman Rosanne Placey, citing AIG's most recent report.

So what's the problem?

"AIG can't just take assets from the insurance subsidiaries to pay the federal government back," says veteran Philadelphia-based insurance underwriter Nicholas Economidis.

AIG's insurance units could be adequately reserved for future claims but still not have enough surplus to pass on to its parent company in order to repay taxpayers, without damaging the business, he noted.

The federal government may want to get taxpayers' money back. But to state regulators, "it's all about protecting the policyholders," Economidis said.

Surely AIG's institutional investors knew that when the government rescued the company. Why the big reaction to yesterday's report?

"Analysts frequently question property-casualty insurance companies' reserving practices," Economidis told me. Some analysts correctly predicted the collapse of (Pennsylvania-based) Reliance Insurance Co. But they've been wrong over the years about, for example, Cigna's successful effort to restructure its former property-and-casualty business.

Maybe it's a judgment call, Economidis concludes: "What has more value? The surplus on hand, or the future earnings from ongoing business?" And who gets to decide, in the absence of federal insurance regulation?

AIG spokeswoman Christina Pretto didn't return calls.

Making it up on volume?

"Black Friday is not the biggest shopping day of the year - that honor is held by the days immediately preceding Christmas," notes

Holly Guthrie

, mall-watching retail-stock analyst at

Boenning & Scattergood,

of West Conshohocken, in a note to clients.

Still, Guthrie spent 10 hours Friday hitting her favorite publicly traded chain stores at the King of Prussia shopping complex for an early read on the shopping season.

Her conclusion: With more "early bird" discounts, stores lured more shoppers, but not enough to make up for lower profit margins. Higher sales were canceled by "increased promotions," as many stores boosted advertised discounts from last year's levels.

"The stores that had the most sizable increase from the previous years in traffic were American Eagle and Urban Outfitters," Guthrie said. Those chains, plus Aeropostale, Express, Forever 21, and Guess, also had "long lines" and "more than 50 customers in the store ... during the entire day," she added.

Boenning has an "Outperform" on Urban Outfitters and is "Neutral" on American Eagle.

"The stores that had the most sizable decreases from the prior year in traffic were The Buckle, Fossil, and J Crew," which didn't run promotions. Also weaker, despite promotions: Pacific Sunwear, New York & Co., and Victoria's Secret.