American International Group Inc. (AIG), the world's largest insurer by market value, on Wednesday said fourth-quarter profit rose 11 percent as higher earnings from premiums and investments offset charges from storms and litigation.

AIG, based in New York, also said it finished an internal probe into the possible improper use of fees, and found no further wrongdoing.

Net income rose to $3.02 billion, or $1.15 per share, from $2.71 billion, or $1.03 per share, a year earlier.

Excluding investment losses, profit was $1.17 per share. Analysts polled by Reuters Estimates on average forecast $1.13.

Revenue rose 16 percent to $25.76 billion, fueled in part by a 34 percent surge in operating profit from non-U.S. life insurance and retirement services.

"Operating margins looked strong," said Stuart Quint, an analyst at Gartmore Global Investments, whose $75 billion of assets include AIG shares. "They have benefited from going into higher growth markets, particularly in China, in their life business."

On a conference call, Chairman Maurice "Hank" Greenberg said "the strength of our diversification" helped offset the effects of a volatile global economy and political backdrop, storm losses and regulatory problems.

"Despite the bad headlines, AIG's core franchise has not been impaired," said Cliff Gallant, an analyst at Keefe, Bruyette & Woods Inc. in New York. He rates AIG "outperform" and owns its shares.

AIG rose $1.58, or 2.3 percent, to $69.31 on the New York Stock Exchange. The Standard & Poor's 500 insurance index rose 0.7 percent.

Greenberg has been trying to clean up regulatory probes, even as New York Attorney General Eliot Spitzer's (search) examination of many insurance practices continues.

He said that while industry reforms were needed, some regulators "may have gone too far when you look at foot faults and turn them into a murder charge."

AIG was named but not charged in Spitzer's October lawsuit accusing Marsh & McLennan Cos. (MMC), the world's largest insurance broker, of bid rigging.

Marsh last week agreed to pay $850 million in restitution to settle with Spitzer. Two AIG executives pleaded guilty in October to charges they helped Marsh rig bids. Greenberg's son, Jeffrey, was ousted that month as Marsh's chief executive.

Hank Greenberg said 40 outside lawyers assisted AIG in its internal review, examining more than 850,000 e-mails and 30,000 documents.

He said the main focus of Spitzer's probe of AIG still appears to be one broker relationship at the excess casualty division of AIG's American Home Assurance Co. (search) unit.

"It does not look like regulatory problems ... were as bad as we thought," wrote J. Paul Newsome, an analyst at A.G. Edwards & Sons Inc. in St. Louis. He rates AIG "buy."

Results included a charge of $53 million, or 2 cents per share, to settle U.S. Department of Justice and Securities and Exchange Commission allegations that AIG sold products that helped PNC Financial Services Group Inc. (PNC) and cell phone distributor Brightpoint Inc. (CELL) inflate earnings.

They also included losses of $170.5 million, or 7 cents per share, from December's Indian Ocean tsunami and third-quarter hurricanes and typhoons.

Operating profit from property and casualty insurance fell 1 percent to $1.46 billion, largely because of storm losses, although policy sales rose 16 percent to $10.6 billion, and investment income rose 23 percent to $940.7 million.

Greenberg pledged not to "follow rates down" by matching competitors' low-ball policy rates.

Operating profit rose 24 percent to $2.37 billion in life insurance and retirement services, rose 28 percent in asset management, and fell 16 percent in financial services.