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Higher investment returns, lower costs drive AIG profit

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(Reuters) -- American International Group Inc. reported a profit versus a loss last year, when tumultuous markets gutted returns from its investments.

AIG, which reported higher profits at all but one of its businesses, also said on Wednesday that its board had authorized an additional share buyback program of $3 billion.

The insurer, which has been under pressure from shareholders, including billionaire Carl Icahn, to cut expenses and divest businesses, slashed total adjusted costs by 8.6% to $2.44 billion.

AIG reported net income of $462 million for the third quarter, compared with a net loss of $231 million a year earlier.

Net investment income rose across AIG’s units.

On an operating basis, AIG's earnings jumped 58.8% to $1.1 billion.

The insurer’s operating income included a $622 million loss expense as it padded reserves at a non-core legacy business.

Catastrophe-related losses in AIG’s commercial business more than doubled during the quarter to $253 million from $88 million. The combined ratio at the business inched up to 105.3 percent from 102.3 percent as a result.

Catastrophe modeling firm Kinetic Analysis estimated last month that the insurance industry would sustain about $4 billion in losses from Hurricane Matthew. AIG did not disclose any exposure to Hurricane Matthew in its earnings statement.