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UPDATE 4-AIG's profit misses estimates on life unit review, catastrophe losses

By Bharath ManjeshR and Suzanne Barlyn

(Updates stock price and adds detail about mass tort reserves)

By Bharath ManjeshR and Suzanne Barlyn

Nov 1 (Reuters) - American International Group Inc missed analysts' estimates for third-quarter profit on Friday after a difficult catastrophe loss period and a review of assumptions it has used to write life insurance policies.

Pre-tax income from AIG's life and retirement business fell 9% to $646 million as it booked a $143 million charge related to a review of its actuarial assumptions.

Many life insurers typically conduct reviews every third quarter of assumptions they made when writing policies many years ago. The process can end with extra cash having to be set aside to cover future claims.

Excluding the impact from AIG's actuarial review, adjusted pre-tax income at the unit fell 3% because of an increase in the number of insured who died and lower alternative investment returns, the company said.

Shares of AIG, one of the largest U.S. insurers, were up 1.5% on Friday.

The insurer posted a profit of 56 cents per share on an adjusted basis, well below analysts' expectations of $1 per share, according to IBES data from Refinitiv.

AIG is in the midst of a turnaround, launched by Chief Executive Brian Duperreault, who took charge in 2017.

His strategy largely involves the insurer's general insurance unit, where Duperreault seeks to improve underwriting practices and reduce exposure to bad risks. He also deployed a reinsurance program to offset catastrophe losses, which he said on Friday "played out as designed."

Some of those changes involve AIG's speciality commercial unit, Lexington Insurance. It reduced total casualty insurance limits by 58% during the quarter while increasing premium rates by more than 30%, AIG Chief Financial Officer Mark Lyons said in a call with analysts on Friday.

AIG has also been building up "meaningful" cash reserves for potential mass tort claims, Lyons said.

AIG's net income attributable to common shareholders was $648 million, or 72 cents per share, in the third quarter, compared with a loss $1.26 billion, or $1.41 per share, a year earlier. https://reut.rs/36r6qzt

AIG's net pre-tax catastrophe loss narrowed to $511 million in the quarter from $1.6 billion a year earlier.

The company also reported a smaller underwriting loss in its general insurance business, $249 million, compared with $1.73 billion last year.

(Reporting by Bharath Manjesh in Bengaluru; Editing by Paul Simao and Steve Orlofsky)