American International Group Inc. saw profits drop during the third quarter.[@@]

AIG, New York, is reporting $1.7 billion in net income for the third quarter on $26 billion in revenue, compared with $2.7 billion in net income on $25 billion in revenue for the third quarter of 2004.

The recent wave of hurricanes hit AIG hard during the quarter, but improvements in investment income helped increase worldwide life and retirement services operating income to $2.1 billion on $12 billion in revenue, from $1.6 billion on $11 billion in revenue, the company says.

The life results include $12 million in “catastrophe-related losses,” AIG says.

The domestic life and retirement operations are reporting $786 million in operating income for the latest quarter on $1.6 billion in revenue, compared with $788 million in operating income on $1.6 billion in revenue for the comparable quarter in 2004.

At the domestic retirement services operation, premiums, deposits and other consideration fell 15% for variable annuities, to $781 million, and 36% for fixed annuities, to $1.5 billion. Group retirement consideration fell 4.6%, to $1.4 billion